What changed in this filing

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Item 1A. Risk Factors

2025-02-26 compared with 2024-02-28 · 86 added, 78 removed, 436 unchanged (27% of the section changed)

48 unchanged sentences

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

We depend on our senior leadership team and may not be able to retain or replace these employees or recruit additional qualified personnel, which would harm our business, results of operations and financial condition.

Our business and success are materially dependent on attracting and retaining members of our senior leadership team to formulate and execute the Company’s business plans.

Since June 2018, we have made significant changes to our senior leadership team, and hired several new senior leaders, including our CEO and CFO in 2023.

We depend on our senior leadership team and key employees and may not be able to retain or replace these employees or recruit additional qualified personnel, which would harm our business, results of operations and financial condition.

Our business and success are materially dependent on attracting and retaining members of our senior leadership team to formulate and execute the Company’s business plans and our sales team to market our products.

Leadership changes can be inherently difficult to manage and may cause material disruption to our business or management team.

Changes in senior management could also lead to an environment that presents additional challenges in recruiting and retaining employees, which could have an adverse effect on our business, results of operations and financial condition.

Our future success will also depend, in part, upon our ability to attract and retain skilled personnel, including sales, managerial and technical personnel.

There can be no assurance that we will be able to continue to find and attract additional qualified employees to support our expected growth or retain any such personnel.

Recruiting and retaining qualified scientific, clinical, and sales and marketing personnel are critical to our success.

The loss of the services of our executive officers or other key employees could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy.

Furthermore, replacing executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, gain regulatory approval for and commercialize our product candidates.

Competition to hire qualified personnel in our industry is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel.

Furthermore, to the extent our executive officers or key personnel with access to our proprietary or confidential information are hired by our competitors, they may share such information with our competitors requiring us to initiate litigation to prevent any use of such information by our competitors.

For example, in December 2024, MIMEDX filed a lawsuit against Surgenex, LLC in the United States District Court for the District of Arizona.

The complaint asserts that several of Surgenex’s placental allograft products infringe the Company’s patents and seeks permanent injunctive relief and monetary damages.

On the other hand, if we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited or that they have divulged proprietary or other confidential information, or that their former employers own their research output.

Our revenues depend on adequate reimbursement from public and private insurers and health systems and changes to the ways in which our products are reimbursed in various sites of service could adversely impact our financial results.

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Government and other third-party payers attempt to contain healthcare costs by limiting both coverage and the level of reimbursement of medical products, particularly new products.

Therefore, significant uncertainty may exist as to the reimbursement status of new healthcare products by third-party payers.

Therefore, significant

uncertainty may exist as to the reimbursement status of new healthcare products by third-party payers.

Although EPIFIX and EPICORD have coverage with the majority of large payers, a significant number of public and private insurers currently do not cover or reimburse our other products.

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Since 2022, several wide-ranging proposals have been published for public comment, including relating to payment methodology within the physician office, with potential to change how CMS reimburses for skin substitute products at a national level.

At a regional level, three Medicare

Administrative Contractors (MACs) signaled their intent to change coverage guidance by moving Local Coverage Determinations (LCDs) through the process.

While these were ultimately withdrawn, the same MACs signaled their intent to revisit the issue.

If the national reimbursement proposals were to be adopted, it would significantly change Medicare policies governing the reimbursement of skin substitute products principally when used for wound treatment in the private physician office setting.

If MACs proceed to change coverage policies, this could significantly change guidance within the affected regions.

Changes in the coverage and reimbursement environment as described above could result in declines in our revenue that would adversely affect our business, financial condition and results of operation.

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Disruption of our processing facilities could adversely affect our business, financial condition and results of operations.

Our business depends upon the continued operation of our processing facilities in Marietta, Georgia and Kennesaw, Georgia.

Our business depends upon the continued operation of our processing facilities in Marietta, Georgia and Kennesaw, Georgia, located less than ten miles apart.

Risks that could impact our ability to use these facilities include the occurrence of natural and other disasters, the outbreak of pandemics, and the need to comply with the requirements of directives from government agencies, including the FDA.

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Physicians may be hesitant to change their existing medical treatment practices for the following reasons, among others:

• their lack of experience with advanced therapeutics, such as our placenta-based allografts;

• lack of evidence supporting additional patient benefits of advanced therapeutics, such as our placenta-based allografts, over conventional methods in certain therapeutic applications;

• their lack of experience with advanced therapeutics, such as our placenta-based allografts or xenografts;

• lack of evidence supporting additional patient benefits of advanced therapeutics, such as our placenta-based allografts or xenografts, over conventional methods in certain therapeutic applications;

• perceived liability risks generally associated with the use of new products and procedures;

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While we have had a low product complaint and adverse event rate historically, our business exposes us to the risk of product liability claims that are inherent in the manufacturing, processing and marketing of human tissue products.

We may be subject to such claims if our products cause, or appear to have caused, an injury.

We may be subject

to such claims if our products cause, or appear to have caused, an injury.

Claims may be made by patients, healthcare providers or others selling our products.

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Although we have product liability insurance that we believe is adequate, this insurance is subject to deductibles and coverage limitations, and we may not be able to maintain this insurance at an acceptable cost or on acceptable terms or be able to secure increased coverage (if needed), nor can we be sure that existing or future claims against us will be covered by our product liability insurance.

Moreover, the existing coverage of our insurance or any rights of indemnification and contribution that we

may have may not be sufficient to offset existing or future claims.

Moreover, the existing coverage of our insurance or any rights of indemnification and contribution that we may have may not be sufficient to offset existing or future claims.

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 we underestimate the amount of insurance we need, we could be exposed to significant liabilities, which may harm our business.

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Even if a claim is not successful, defending such claim would be time-consuming and expensive, may damage our reputation in the marketplace, and would likely divert our management’s attention.

The products we process are derived from human tissue and therefore have the potential for disease transmission.

The products we offer are derived from human and animal tissue and therefore have the potential for disease transmission.

The utilization of human tissue creates the potential for transmission of communicable disease, including, without limitation, human immunodeficiency virus, viral hepatitis, syphilis and other viral, fungal or bacterial pathogens.

We are required to comply with federal and state regulations intended to prevent communicable disease transmission.

We and our contract manufacturers are required to comply with federal and state regulations intended to prevent communicable disease transmission.

We maintain strict quality controls designed in accordance wit h CGTP to ensure the safe procurement and processing of our tissue, including terminal sterilization of our products.

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We may expand or contract our business through acquisitions, divestitures, licenses, investments, and other commercial arrangements with other companies or technologies, which may adversely affect our business, results of operations and financial condition.

We periodically evaluate opportunities to acquire companies or divest divisions, technologies, products, and rights through licenses, distribution agreements, investments, and outright acquisitions to grow our business.

In connection with one or more of those transactions, we may, subject to the requirements and limitations set forth in our Citizens Credit Agreement (as defined below in Management’s Discussion and Analysis of Financial Condition and Results of Operations (“ MD&A ”), Liquidity and Capital Resources):

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• be unable to realize the anticipated benefits, such as increased revenues, cost savings, or synergies from additional sales;

• be unable to successfully integrate, operate, maintain, and manage our newly acquired operations;

• divert management’s attention from the existing business;

• acquire unknown liabilities that could subject us to government investigations and/or litigation or other actions that make it impossible to realize the anticipated benefits of the transaction;

• be unable to secure the services of key employees related to the transaction(s).

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Inability to recover our investment, or any write off of such investment, associated goodwill or assets could have an adverse effect on our business, results of operations and financial condition.

In addition, if the benefits of any proposed acquisition do not meet the expectations of investors and analysts, our stock price may decline.

A portion of our revenues and accounts receivable come from government accounts.

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Risks Related to Regulatory Approval of Our Products and Other Government Regulations

The FDA has in the past determined, and may in the future determine, that certain of our products that are, or are derived from, human cells or tissues, do not qualify for regulation solely under Section 361 of the Public Health Service Act (“Section 361”), and may require that we revise our labeling and marketing claims for these products or that we suspend sales of such products until FDA pre-market clearance or approval is obtained, which could adversely affect our business, results of operations, and financial condition.

The products we manufacture and process are derived from human tissue.

The FDA has in the past determined, and may in the future determine, that certain of our products that are, or are derived from, human cells or tissues, do not qualify for regulation solely under Section 361, and may require that we revise our labeling and marketing claims for these products or that we suspend sales of such products until FDA pre-market clearance or approval is obtained, which could adversely affect our business, results of operations, and financial condition.

Many of the products we manufacture and process are derived from human tissue.

Amniotic and other birth tissue have in the past generally been regulated as HCT/P and were therefore eligible to be subject to regulation solely under Section 361 (“ Section 361 HCT/P ”) depending on whether the specific product at issue and the claims made for it were consistent with the applicable criteria.

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Obtaining FDA pre-market clearance or approval involves significant time and investment by the Company.

In accordance with the FDA Guidance, as discussed above in “ Business – Government Regulation ,” after May 31, 2021, the Company no longer markets or sells its products that were impacted by enforcement discretion in the United States, has requested the return of unused consignment inventory as of that date, and does not intend to sell such products in the United States until the FDA grants pre-market approval.

Our sales of such products for all uses was $0.5 million, $2.4 million, and $17.6 million, respectively, in 2023, 2022, and 2021.

Prior to May 31, 2021, these sales were primarily in the United States.

The loss of our ability to market and sell our micronized products previously had an adverse impact on our revenues, business, financial condition and results of operations.

Also, we are engaged with the FDA regarding the classification of AXIOFILL and certain of our other products.

If the FDA makes a final determination that any of these products do not meet the requirements for regulation solely under Section 361, in order to continue to market the products, we would be required to obtain the appropriate FDA approval or clearance.

The loss of our ability to market and sell these products would have an adverse impact on our revenues, business, financial condition and results of operations.

In March 2024, the FDA issued a determination letter in connection with the RFD process related to AXIOFILL, a human-derived particulate wound dressing.

In the letter, FDA reaffirmed its position that AXIOFILL does not meet the regulatory classification requirements under Section 361.

In response to the RFD determination letter, the Company has filed suit in the U.S.

District Court for the Northern District of Georgia and intends to exhaust all legal options available, given the arbitrary and capricious manner in which FDA is regulating like-kind products.

Notably, while these proceedings are taking place, the Company has been permitted to continue marketing AXIOFILL.

Depending on the outcome of this legal proceeding, we may no longer be able to market AXIOFILL.

The loss of our ability to market and sell this or any other product in our portfolio would have an adverse impact on our revenues, business, financial condition and results of operations.

Any future regulatory changes could also have adverse consequences for us and make it more difficult or expensive for us to conduct our business by requiring pre-market clearance or approval and compliance with additional post-market regulatory requirements with respect to those products.

1 unchanged sentence

Moreover, increased regulatory scrutiny within the industry in which we operate could lead to increased regulation of HCT/Ps, including Section 361 HCT/Ps, which could ultimately increase our costs and adversely impact our business, results of operations and financial condition.

HELIOGEN, our first xenograft product offering, falls into an FDA classification that requires the submission of a Premarket Notification (510(k)) to the FDA.

The 510(k) was obtained and is owned by our contracted manufacturing partner, Regenity Biosciences.

To date, the Company has neither applied for, nor received any 510(k)’s from the FDA, however we have efforts underway to explore our ability to do so with certain of the products in our pipeline.

The 510(k) process requires us to demonstrate that the device to be marketed is at least as safe and effective as, that is, substantially equivalent to, a legally marketed device.

We must submit information that supports our substantial equivalency claims.

Before we can market the new device, we must receive an order from the FDA finding substantial equivalence and clearing the new device for commercial distribution in the U.S.

Obtaining clearances or approvals is time consuming, expensive, and uncertain.

Furthermore, even if we are granted

regulatory clearances or approvals, they may include significant limitations on the indicated uses of the product, which may limit the potential customers for the product.

If we are unable to obtain required FDA clearance or approval for a product or are unduly delayed in doing so, or the uses of that product were limited, our business could suffer.

Obtaining and maintaining the necessary regulatory approvals, including conducting clinical trials, for certain of our products or potential products could be expensive and time consuming .

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may be costly and time consuming, and such clearances or approvals may not be granted on a timely basis, or at all.

The FDA may take the position that some of the products that we currently market require a BLA.

The FDA may take the position that some of the products that we currently market require FDA regulatory clearance or approval.

Some of the future products and enhancements to our current products that we expect to develop or may acquire and market may require marketing clearance or approval from the FDA.

However, clearance or approval may not be granted with respect to any of our products or enhancements and further FDA review may add delays that could adversely affect our ability to market such products or enhancements.

The process of obtaining an approved BLA, including clinical trial development and execution as well as manufacturing processes, requires the expenditure of substantial time, effort and financial resources and may take years to complete, including costs incurred on top of those fees incurred as part of conducting various clinical studies.

The fee for filing a BLA and program fees payable with respect to any establishment that manufactures biologics are substantial.

The FDA may not grant approval on a timely basis, or at all, or we may decide not to pursue a BLA for certain products or indications, or need to conduct additional trials for a given indication.

The process of obtaining formal FDA clearance or approval, such as a 510(k), BLA, or equivalent, including clinical trial development and execution as well as manufacturing processes, requires the expenditure of substantial time, effort and financial resources and may take years to complete, including costs incurred on top of those fees incurred as part of conducting various clinical studies.

The fee for filing such submissions and program fees payable with respect to any establishment that manufactures biologics are substantial.

The FDA may not grant approval on a timely basis, or at all, or we may decide not to pursue this pathway for certain products or indications, or need to conduct additional trials for a given indication.

Additionally, the FDA may limit the indications for use or place other conditions on any approvals that could restrict the commercial application of the products.

If we do receive approval, some types of changes to the approved product, such as adding new indications or doses, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.

Our revenues could be adversely

affected if we fail to obtain BLA approvals on a timely basis or at all, or if the FDA limited the indications for use or required other conditions that restrict the commercial application of our products.

Our revenues could be adversely affected if we fail to obtain approvals and clearances on a timely basis or at all, or if the FDA limited the indications for use or required other conditions that restrict the commercial application of our products.

Additionally, there are significant costs associated with clinical trials that can be difficult to accurately estimate until a BLA is approved.

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Although we have independent third-party appraisals that confirm the reasonableness of the service fees we pay, if we were to be found to have violated NOTA’s prohibition on the sale or transfer of human tissue for valuable consideration, we could potentially be subject to criminal enforcement sanctions, which could adversely affect our results of operations.

Finally, we and other manufacturers of skin substitutes are required to provide average ASP information to CMS on a quarterly basis.

Finally, we and other manufacturers of skin substitutes are required to provide average sales price (“ ASP ”) information to CMS on a quarterly basis.

The Medicare payment rates are updated quarterly based on this ASP information.

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Generally, unless the products are approved by the FDA for alternative uses, the FDA contends that we may not make claims about the safety or effectiveness of our products, or promote them as safe or effective for uses other than those specifically approved by the FDA.

Such limitations present a risk that the FDA or other federal or state law enforcement authorities could determine that the nature and scope of our sales, marketing and support activities, though designed to comply with all FDA requirements, constitute the promotion of our products for an unapproved use in violation of the federal FD&C Act.

We also face the risk that the FDA or other governmental authorities might pursue enforcement based on past activities that we have discontinued or changed, including sales activities, prior marketing materials, arrangements with institutions and doctors, educational and training programs and other activities.

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In addition, as a result of an enforcement action against us or any of our executive officers, we could be excluded from participation in government healthcare programs such as Medicare and Medicaid.

However, under the Guidance, as discussed above in “ Business – Government Regulation ,” after May 31, 2021, the Company no longer markets or sells its products that were impacted by enforcement discretion in the United States, and does not intend to sell such products in the United States until the FDA grants pre-market approval.

We will ultimately only be able to market such products for indications that have been cleared or approved by the FDA.

Nevertheless, while we believe we are fully in compliance with the FDA's Guidance on HCT/Ps, there can be no assurance that we have correctly interpreted the FDA Guidance, or that we will not need to discontinue marketing a product and/or may be subject to fines, penalties, injunctions, and other sanctions if we are deemed to be promoting the use of our products for unapproved uses.

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Many states have similar fraud and abuse laws, imposing substantial penalties for violations.

A finding of a violation of one or more of these laws, or even a government investigation or inquiry into the same, would likely result in a material adverse effect on the market price of our Common Stock, as well as on our business, results of operations, and financial condition.

The federal Anti-Kickback Statute (“ AKS ”) is a criminal law that prohibits, among other things, any person from knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in cash or in kind, to induce or reward referrals, purchases or orders or arranging for or recommending the purchase, order or referral of any item or service for which payment may be made in whole or in part by a federal healthcare program, such as the Medicare and Medicaid programs.

The term “remuneration” has been broadly interpreted to include anything of value.

The Patient Protection and Affordable Care Act (the “ PPACA ”) amended the federal AKS to clarify the intent that is required to prove a violation.

Under the federal AKS as amended, a person or entity need not have actual knowledge of this statute or specific intent to violate it.

The PPACA also amended the federal AKS to provide that any claims for items or services resulting from a violation of the federal AKS are considered false or fraudulent for purposes of the federal FCA .

A finding of a violation of one or more

of these laws, or even a government investigation or inquiry into the same, would likely result in a material adverse effect on the market price of our Common Stock, as well as on our business, results of operations, and financial condition.

We are subject to the AKS as amended by the Patient Protection and Affordable Care Act (the “ PPACA ”).

A conviction for violation of the AKS results in criminal fines and requires mandatory exclusion from participation in federal health care programs.

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We have entered into consulting agreements, speaker agreements, research agreements and product development agreements with physicians, including some who may order or recommend our products or make decisions to use them.

In addition, some of these physicians own our stock, which

they purchased in arm’s-length transactions on terms identical to those offered to non-physicians, or received stock awards from us in the past as consideration for services performed by them.

In addition, some of these physicians own our stock, which they purchased in arm’s-length transactions on terms identical to those offered to non-physicians, or received stock awards from us in the past as consideration for services performed by them.

While we believe these transactions generally meet the requirements of applicable laws, including the federal AKS and analogous state laws, it is possible that our arrangements with physicians and other providers may be questioned by regulatory or enforcement authorities under such laws, which could lead us to redesign the arrangements and subject us to significant civil or criminal penalties.

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The FCA also allows a private individual or entity to sue on behalf of the government to recover civil penalties and treble damages as a whistleblower.

FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties of between $11,181 and $22,363 per false claim or statement for penalties assessed after January 29, 2018, with respect to violations occurring after November 2, 2015.

FCA liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties of between $13,946 and $27,894 per false claim or statement for penalties assessed after February 12, 2024, with respect to violations occurring after November 2, 2015.

Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payers if they are deemed to “cause” the submission of false or fraudulent claims.

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Under the HIPAA criminal federal healthcare fraud statute, it is a crime to knowingly and willfully execute, or attempt to execute, a scheme or artifice to defraud any health care benefit program or to obtain, by means of false or fraudulent pretenses, representations or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program, in connection with the delivery of or payment for health care benefits, items or services.

There are federal and state laws requiring detailed reporting of manufacturer interactions with and payments to healthcare providers, such as the federal Physician Payments Sunshine Act (“ Sunshine Act ”).

There are federal and state laws requiring detailed reporting of manufacturer interactions with and payments to healthcare providers, such as the Sunshine Act.

The Sunshine Act requires, among others, “applicable manufacturers” of drugs, devices, biological products, and medical supplies reimbursed under Medicare, Medicaid or the Children’s Health Insurance Program to annually report to CMS information related to payments and other transfers of value provided to “covered recipients.” The term covered recipients includes U.S.-licensed physicians and teaching hospitals, and, for reports submitted on or after January 1, 2022, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives.

There is the risk that CMS or another government agency may take the position that our products are not human cell and tissue products regulated solely under Section 361, and thereby assert that we are currently subject to the Sunshine Act, which could subject us to civil penalties and the administrative burden of having to comply with the law.

Additionally, the Sunshine Act, and its implementing regulations, require that certain manufacturers of drugs, devices, biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) report information related to certain payments or other transfers of value made or distributed to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), certain non-physician practitioners (such as

physician assistants and nurse practitioners), and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals and to report annually to CMS certain ownership and investment interests held by physicians and their immediate family members.

Failure to report accurately could result in penalties.

In addition, many states also govern the reporting of payments or other transfers of value, many which differ from each other in significant ways, are often not pre-empted, and may have a more prohibitive effect than the Sunshine Act, thus further complicating compliance efforts.

There are state law equivalents to the AKS and FCA.

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healthcare system.

In the U.S., the PPACA was enacted in 2010 with a goal of reducing the cost of healthcare and substantially changing the way healthcare is financed by both government and private insurers.

In addition, other legislative changes have been proposed and adopted in the U.S.

since the PPACA was enacted.

The Budget Control Act of 2011 created measures for spending reductions by Congress.

A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs.

This included aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013.

In January 2013, the American Taxpayer Relief Act was signed into law, which, among other things, further reduced Medicare payments to several provider types, including hospitals.

In addition to the ACA, the Medicare Access and CHIP Reauthorization Act of 2015 (“ MACRA ”) repealed the Sustainable Growth Rate formula used to calculate Medicare payment updates for physicians providing services to Medicare beneficiaries.

In its place, MACRA introduced the Quality Payment Program (“ QPP ”), which is a value-based program that focuses on quality and outcomes as a metric for physician reimbursement.

The Centers for Medicare and Medicaid Services released its final rules for the QPP in October 2016.

The QPP, which impacts more than 600,000 physicians and other practice-based clinicians, represents a fundamental change in physician reimbursement, transitioning from a system that solely rewards volume of care to one that also rewards quality and value of care.

The rule may have an impact on our revenue in the future.

The program’s increased emphasis on quality and cost of care may encourage physicians to merge practices or seek direct employment with hospitals.

In addition, the ACA encourages hospitals and physicians to work collaboratively through shared savings programs as well as other bundled payment initiatives.

These shifts could lead to a consolidation of hospital providers into larger delivery networks with increased price negotiation strength resulting in downward pressure on our selling prices.

Although we believe that we are well positioned to minimize any such impact on our business, our inability to address the consolidation trend could materially and adversely affect our business and results of operations.

There is uncertainty with respect to the impact the U.S.

Administration, the executive order, and the attempted legislation may have, if any, and any changes will likely take time to unfold and could have an impact on coverage and reimbursement for healthcare items and services, including our products.

We believe that substantial uncertainty remains regarding the net effect of the PPACA, or its repeal and potential replacement, on our business, including uncertainty over how benefit plans purchased on exchanges will cover our products, how the expansion or contraction of the Medicaid program will affect access to our products, the effect of risk-sharing payment models such as Accountable Care Organizations and other value-based purchasing programs on coverage for our product, and the effect of the general increase or decrease in federal oversight of healthcare payers.

Notably, the COVID-19 pandemic had a significant impact on the nation’s health sector expenditures, beginning in 2020, primarily driven by increased federal spending, including financial assistance to providers to make up for lost revenue through the Provider Relief Fund, the Paycheck Protection Program, and increased federal public health spending such as spending for vaccine development, COVID testing, and health facility preparedness.

As a result, growth in federal government spending on healthcare increased 36% in 2020.

Within our industry, Medicare expenditures on skin substitute products have increased dramatically from 2019, when annual spending on these products administered in private physician offices and associated care settings was approximately $0.5 billion.

By 2023, annual expenditures for this class of products totaled over $4 billion, and more recently, spending by Medicare has reached an excess of $1 billion per month in the category.

As a result, CMS”) and the MACs have sought ways to implement coverage and payment reform in order to curb the dramatically increasing expenditures in our industry.

CMS could alter the reimbursement dynamics in outpatient care settings through the Physician Fee Schedule (“PFS”), which is published on an annual basis and regulates payments to healthcare providers for services furnished in these settings.

In 2022, CMS, through its publication of the PFS proposals for CY 2023, indicated that it was considering a revision of the payment system for skin substitutes.

Specifically, CMS proposed to change the terminology of skin substitutes to ‘wound care management products’, and to treat and pay for these products as incident to supplies under the PFS beginning on January 1, 2024.

Ultimately, CMS decided to provide interested parties with more opportunities to comment on the specific details of changes in coding and payment mechanisms prior to finalizing any changes.

To date, CMS has not altered the existing policies.

In August 2023, three MACs issued updated LCDs entitled:

“Skin Substitute Grafts/Cellular and/or Tissue-Based Products for the Treatment of Diabetic Foot Ulcers and Venous Leg Ulcers,” which would regulate our products’ Medicare coverage in the private physician office and associated care settings.

Following a comment period and lengthy discussions with industry and clinician stakeholders, these LCDs were ultimately withdrawn ahead of their scheduled effective date.

In November 2024, all seven MACs proposed revised LCDs in unison with support from CMS, which took into consideration many of the findings and commentary from the withdrawn 2023 LCDs.

These LCDs are scheduled to become effective on April 13, 2025.

In the past, LCDs have been delayed or terminated.

If these LCDs were to be delayed or terminated, they may not go into effect in April 2025.

Changes to the manner and amounts Medicare reimburses for our products could have an impact on their utilization.

We believe that substantial uncertainty remains regarding the specific reform measures and proposed legislation that could impact our industry.

Any changes will likely take time to unfold and could have an impact on coverage and reimbursement for healthcare items and services, including our products.

Furthermore, we believe that substantial uncertainty remains regarding the net effect of the PPACA, or its repeal and potential replacement, on our business, including uncertainty over how benefit plans purchased on exchanges will cover our products, how the expansion or contraction of the Medicaid program will affect access to our products, the effect of risk-sharing payment models such as Accountable Care Organizations and other value-based purchasing programs on coverage for our

products, and the effect of the general increase or decrease in federal oversight of healthcare payers.

The taxes imposed and the expansion in government’s role in the U.S.

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• federal and state laws regulating the conduct of research with human subjects.

The California Consumer Protection Act (“ CCPA ”), which became effective on January 1, 2020, is a privacy law that requires certain companies doing business in California to disclose information regarding the collection and use of a consumer’s personal data and to delete a consumer’s data upon request.

The Act also permits the imposition of civil penalties and expands existing state security laws by providing a private right of action for consumers in certain circumstances where consumer data is subject to a breach.

We are still evaluating whether and how this rule will impact our U.S.

operations and/or limit the ways in which we can provide services or use personal data collected while providing services.

As part of our business operations, including our medical record keeping, third-party billing and reimbursement and research and development activities, we collect and maintain protected health information in paper and electronic format.

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The failure to obtain and maintain patents or protect our intellectual property rights could have an adverse effect on our business, results of operations, and financial condition.

Whether a patent claim is valid is a complex matter of science, facts and law, and therefore we cannot be certain that, if challenged in a court of law, or through an administrative proceeding, our

patent claims would be upheld.

Whether a patent claim is valid is a complex matter of science, facts and law, and therefore we cannot be certain that, if challenged in a court of law, or through an administrative proceeding, our patent claims would be upheld.

If any of those patent claims are invalidated or determined to be unenforceable, our competitive advantage may be reduced or eliminated.

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We may also hire additional employees who are currently employed at other medical device, pharmaceutical or tissue companies, including our competitors.

Additionally, consultants or other independent agents with which we may contract may be or have been in a

contractual arrangement with one or more of our competitors.

Additionally, consultants or other independent agents with which we may contract may be or have been in a contractual arrangement with one or more of our competitors.

Although no claims are currently pending, we may be subject to claims that we, our employees, or our independent contractors have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of these former employers or competitors.

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If we fail to maintain adequate internal control over financial reporting in the future, this could adversely affect our business, financial condition and operating results.

We have in the past reported material weaknesses in our internal control over financial reporting which we have since remediated.

If material weaknesses or deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements might contain material misstatements and we could be required to restate our financial results.

4 unchanged sentences

Our indebtedness may adversely affect our financial health.

As of January 2024, the Company had aggregate borrowings outstanding of $30.0 million under its Revolving Credit Facility and $20.0 million under its Term Loan Facility, all pursuant to its Citizens Credit Agreement (as defined below in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations ).

As of December 2024, the Company had aggregate borrowings outstanding of $19.0 million under its Term Loan Facility, pursuant to its Citizens Credit Agreement (as defined below in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations ).

Our outstanding debt may limit our ability to borrow additional funds or may adversely affect the terms on which such additional funds may be available.

74 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