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Item 1A. Risk Factors

2021-03-25 compared with 2020-03-30 · 244 added, 288 removed, 803 unchanged (40% of the section changed)

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The realization of any of these risks could have a material adverse effect on our business, financial condition, results of operations, and our ability to accomplish our strategic objectives.

Risks Related to Our Limited Operating History, Financial Position and Capital Requirements

Risks Related to COVID-19

The COVID-19 pandemic is negatively impacting certain aspects of our business and, depending on the severity and duration beyond current experience, could have a material adverse effect on our business, results of operations and financial condition.

The COVID-19 pandemic has negatively impacted our business, results of operations and financial condition, and we expect the pandemic to continue to negatively impact our business, results of operations and financial condition.

In March 2020, COVID-19 was declared to be a pandemic by the World Health Organization.

Extraordinary actions have been taken by federal, state and local governmental authorities to combat the spread of COVID-19, including issuance of “stay-at-home” directives and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

These measures, while intended to protect human life, have led to reduced economic activity, including the postponement or cancellation of elective surgical procedures.

Furthermore, the recessionary conditions on the global economy caused by the COVID-19 pandemic could have a material adverse effect on our business, as hospitals postpone or reduce capital purchases and overall spending.

Although most segments of the U.S.

economy have reopened, the effects of the COVID-19 pandemic remain intense in many areas of the country, and many public health experts continue to anticipate future surges of COVID-19 in the coming months of 2021.

The rapid development and fluidity of the situation precludes any prediction as to the ultimate impact COVID-19 will have on our business, results of operation and financial condition, which will depend largely on future developments directly or indirectly relating to the duration and scope of the COVID-19 outbreak.

The health of our workforce is our top concern and we have implemented safety protocols in an effort to maintain the health and safety of our employees.

Similar to many other employers in the U.S., we have and continue to require many employees to work remotely.

We have also suspended all non-essential travel for our employees and discourage employee attendance at industry events and in-person work-related meetings, which could negatively affect our business.

Hospitals have reduced and diverted staffing and diverted resources to patients suffering from COVID-19 and have limited hospital access for non-patients, including our sales professionals.

In addition, travel restrictions due to COVID-19 have impacted our sales professionals’ ability to travel to customers.

These circumstances have negatively impacted our sales professionals’ efforts to market to physicians in person, and caused us to develop virtual marketing and sales solutions.

If our sales professionals’ efforts to market to physicians in person continue to be negatively impacted, or our virtual marketing and sales solutions prove to be of limited utility or unsuccessful, the sales and market penetration of our OviTex and OviTex PRS products could be negatively impacted.

In addition, the spread of COVID-19 has had, and may continue to have, an impact on the number of patients seeking and receiving hernia repair, abdominal wall reconstruction or plastic and reconstructive surgeries, as hospitals cancel elective surgeries and patients postpone these procedures due to COVID-19 concerns, which may reduce demand for our OviTex and OviTex PRS products and negatively impact our sales and results of operations.

Even after the pandemic has subsided and/or governmental orders no longer prohibit or recommend against performing such procedures, patients may continue to defer such procedures out of concern of being exposed to COVID-19 or for other reasons.

COVID-19 has and may continue to have an impact on ports and trade globally.

We currently rely on Aroa, which is headquartered in New Zealand, for supply of our products.

While there have been no disruptions to our supply chain, there is a risk that in the future supplies of our products may be significantly delayed or may become unavailable as a result of COVID-19 and the resulting impact on Aroa’s labor force and operations, including as a result of governmental restrictions on business operations and the movement of people and goods in an effort to curtail the spread of the virus.

no assurance that we would be able to timely implement any mitigation plans relating to our supply chain.

Disruptions in our supply chain, whether as a result of restricted travel, quarantine requirements or otherwise, could negatively impact our ability to supply and sell our products.

The continued spread of COVID-19 has also led to severe disruption and volatility in the global credit or financial markets, which could increase our cost of capital and adversely affect our ability to raise additional capital on acceptable terms or at all.

It is possible that the continued spread of COVID-19 could cause a continued economic slowdown or recession or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.

In addition, the COVID-19 pandemic could cause:

● Continued fluctuations in our operational results, revenues, and cash flows which may negatively impact our stock price;

● Continued limitations on our operations due to restrictions associated with “shelter in place” orders and travel restrictions;

● Negative impacts to the financial health of hospitals and other healthcare providers who purchase our products;

● Distraction of management time and focus;

● Increased risk that insurance coverage will not provide protection for all of the COVID-19-related disruption;

● Decreases in the price healthcare providers are willing to pay for our products;

● Delays in obtaining regulatory clearances, approval to market products, quality inspections, or delays to study activity, including our BRAVO study;

● Delays to acquisition plans, increased risks to the operations and financial condition of newly acquired businesses, and increased costs or delays to integration of newly acquired businesses;

● Delays in coverage decisions by private and public health insurers and foreign governmental health systems

The full extent to which the COVID-19 pandemic will, directly or indirectly, impact our business, results of operations and financial condition, including our sales, expenses, manufacturing capability, supply chain integrity, research and development activities, and employee-related matters, including compensation, is currently highly uncertain and cannot be predicted with reasonable accuracy at this time and will depend on future developments that are also highly uncertain and cannot be predicted with reasonable accuracy at this time, including, without limitation:

(a) new information that may emerge concerning COVID-19 (including any new variations or mutations of COVID-19), any resurgence in COVID-19 transmission and infection after the loosening of “shelter-in-place” restrictions or resumption of surgical procedures, as a result of reinfection, as a result of a delay in the emergence of symptoms following infection (or reinfection) by COVID-19, or as a result of its ability to lay dormant following infection (or reinfection); (b) the availability and efficacy of existing and future approved vaccines to slow the spread of COVID-19, and any mutations of COVID-19 which may impact the efficacy of existing and future approved vaccines;

(c) actions required or recommended to contain or treat COVID-19, in light of any or all of the foregoing or other as-yet unanticipated developments, whether related to COVID-19 directly or indirectly; and (d) the direct and indirect economic impact, both domestically and abroad, of COVID-19 as a result of any or all of the foregoing, including actions taken by local, state, national and international governmental agencies, whether such impact affects customers, suppliers, or markets generally.

Information pertaining to the impact of the COVID-19 pandemic and associated economic disruptions on our operations to date can be found in “Management's Discussion and Analysis of Financial Position and Results of Operations” in this Annual Report on Form 10-K.

Risks Related to Achieving or Sustaining Profitability, Financial Position and Capital Requirements

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

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We expect to continue to incur significant sales and marketing, research and clinical development, regulatory and other expenses as we expand our marketing efforts to increase adoption of our products, expand existing relationships with our customers, obtain regulatory clearances or approvals for our planned or future products, conduct clinical trials on our existing and planned or future products and develop new products or add new features to our existing products.

In addition, we expect our general and administrative expenses to increase due to the additional costs associated with being a public company.

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

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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 may cause the market price of our common stock to decline.

We have limited history operating as a commercial company.

We began commercializing our OviTex products in the U.S.

in 2016 and in certain European countries in 2019, and therefore do not have a long history operating as a commercial company.

Since 2016, our revenue has been derived almost entirely from sales of our OviTex products.

In April 2019, Aroa received 510(k) marketing clearance from the FDA, which we hold for our OviTex PRS products.

In May 2019, we commenced a limited launch of OviTex PRS and plan to continue commercializing in a controlled manner, gradually expanding our surgeon network, throughout 2020 and will also evaluate new generation products.

As a result of its recent commercial introduction, our OviTex products have limited product and brand recognition, and demand for our OviTex products may not increase as quickly as we expect, or may decline.

Our limited commercialization experience and limited number of cleared products make it difficult to evaluate our current business and predict future prospects.

Our ability to generate revenue from sales of our OviTex products, OviTex PRS and other products we may seek to develop and commercialize in the future will depend on a number of factors, including our ability to successfully market and commercialize our OviTex and OviTex PRS products in the U.S.

If our assumptions regarding the risks and uncertainties we face, which we use to plan our business, are incorrect or change due to circumstances in our business or our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations and our business could suffer.

Our indebtedness may limit our flexibility in operating our business and adversely affect our financial health and competitive position.

As of December 31, 2019, we had $30.0 million of indebtedness outstanding under our credit facility with OrbiMed Royalty Opportunities II, LP (“OrbiMed”) that matures in November 2023.

As of December 31, 2020, we had $30.0 million of indebtedness outstanding under our credit facility with OrbiMed Royalty Opportunities II, LP (“OrbiMed”) that matures in November 2023.

To service this indebtedness and any additional indebtedness we may incur in the future, we need to generate cash from our operating activities.

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We cannot assure you that our business will be able to generate sufficient cash flow from operations or that future borrowings or other financings will be available to us in an amount sufficient to enable us to service our indebtedness and fund our other liquidity needs.

To the extent we are required to use cash from operations or the proceeds of any future financing to service our indebtedness, we will be less able to plan for, or react to, changes in our business, industry and the economy generally.

In addition, the agreement governing our credit facility contains certain covenants that limit our ability to engage in certain transactions that may be in our long‑term best interests.

To the extent we are required to use cash from operations or the proceeds of any future financing to service our indebtedness, our ability to plan for, or react to, changes in our business, industry and the economy generally will be limited.

In addition, the OrbiMed credit facility contains 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:

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● the extent to which we acquire or invest in products, technologies and businesses, although we currently have no commitments or agreements relating to any of these types of transactions;

the costs of operating as a public company;

● the cost of filing and prosecuting patent applications and defending and enforcing our patent or other intellectual property rights;

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

We have limited experience marketing and selling our products, and if we are unable to expand, manage and maintain our direct sales and marketing organizations, we may not be able to generate anticipated revenue.

We began selling our OviTex products in the U.S.

As a result, we currently have limited sales and marketing capabilities.

Building the requisite sales, marketing or distribution capabilities to successfully market and sell our products will be expensive and time‑consuming and will require significant attention from our leadership team to manage.

If we are unable to expand, manage and maintain our direct sales and marketing organizations, we may not be able to generate anticipated revenue.

We currently have limited sales and marketing capabilities.

Building the requisite sales, marketing and distribution capabilities to successfully market and sell our products continues to be expensive and time-consuming and requires significant attention from our leadership team to manage.

Any failure or delay in the development of our sales, marketing or distribution capabilities would adversely impact the commercialization of our products.

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If we are unable to enter into such arrangements on acceptable terms or at all, we may not be able to successfully commercialize our products.

As of December 31, 2019, our commercial organization consisted of 60 employees.

As of December 31, 2020, our commercial organization consisted of 64 employees in the U.S.

and 4 employees in Europe.

To generate future revenue growth, we plan to expand the size and geographic scope of our direct sales organization.

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

We may be unable to accurately forecast customer demand and our inventory levels.

Anticipating demand for our products may be challenging as surgeon demand and adoption rates are unpredictable.

In addition, as an increasing number of our products are adopted by surgeons, we anticipate greater fluctuations in demand for our products, which makes demand forecasting more difficult.

We place orders with our supplier based on forecasts of demand and, in some instances, may acquire additional inventory to accommodate anticipated demand.

Our forecasts are based on management’s judgment and assumptions, each of which may introduce error into our estimates.

If we overestimate customer demand, our excess or obsolete inventory may increase significantly, which would reduce our gross margin and adversely affect our financial results.

Conversely, if we underestimate customer demand or if insufficient manufacturing capacity is available, we would miss revenue opportunities and potentially lose market share and damage our customer relationships.

Risks Related to the Commercialization of our Products

To date, substantially all of our revenue has been generated from sales of our OviTex products, and we therefore are highly dependent on their success.

Sales of our OviTex products accounted for 91% of total revenue for the year ended December 31, 2019 and for all of our revenue for the years ended December 31, 2018 and 2017.

To date, substantially all of our revenue has been generated from sales of our OviTex products, and we therefore are highly dependent on the commercial success of OviTex product line.

Sales of our OviTex products accounted for 83% and 91% of total revenue for the years ended December 31, 2020 and 2019, respectively and for all of our revenue for the year ended December 31, 2018.

We first commercialized OviTex products in the U.S.

in 2016 and in the last twelve months, we have introduced our larger sized OviTex products, our OviTex LPR product for use in laparoscopic and robotic‑assisted hernia surgical repairs and sold the initial units of our OviTex PRS products for use in surgery for soft tissue repair or reinforcement in plastic and reconstructive procedures.

We expect that sales of our OviTex products and, once fully commercialized, our OviTex PRS products, will account for all of our revenue for the foreseeable future.

in 2016 and have introduced our larger sized OviTex products, our OviTex LPR product for use in laparoscopic and robotic-assisted hernia surgical repairs and sold units of our OviTex PRS products for use in surgery for soft tissue repair or reinforcement in plastic and reconstructive procedures.

We expect that sales of our OviTex products and our OviTex PRS products, will account for all of our revenue for the foreseeable future.

Our failure to successfully increase sales of these products or any other event impeding our ability to sell these products would result in a material adverse effect on our business, financial condition and results of operations.

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Our future financial success will depend substantially on our ability to effectively and profitably market and sell our products.

Even if we are able to attain significant market acceptance of our products, the commercial success of our products and any of our planned or future products is dependent on a number of additional factors, including the results of clinical trials relating to the use of our products and our ability to obtain and maintain regulatory approval to market our products and maintain compliance with applicable regulatory requirements.

Even if we are able to attain significant market acceptance of our products, the commercial success of our products and any of our planned or future products is dependent on a number of additional factors, including the results of clinical trials relating to the use of our products and our ability to obtain and maintain regulatory approval or clearance to market our products and maintain compliance with applicable regulatory requirements.

Successful growth of our sales and marketing efforts will depend on the strength of our marketing and distribution infrastructure and the effectiveness of our marketing and sales efforts, including our efforts to expand our direct sales force, while our ability to satisfy demand for our products driven by our sales and marketing efforts will be largely dependent on the ability of Aroa to maintain a commercially viable manufacturing process that is compliant with regulatory standards.

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If our products are misused or used with improper technique, we may become subject to costly litigation by our customers or their patients.

Product liability claims could divert management’s attention from our core business, be expensive to defend and result in sizeable damage awards against us that may not be covered by insurance.

In addition, any of the events described above could harm our business.

The products we commercialize have been cleared by the FDA and other regulatory authorities for specific indications.

Our OviTex products are reinforced tissue matrices designed for use as a surgical mesh to reinforce and/or repair soft tissue where weakness exists and indications for use of our OviTex products include the repair of hernia and/or body wall defects which require the use of reinforcing or bridging material to obtain the desired surgical outcome.

Our OviTex products are reinforced tissue matrices designed for use as a surgical mesh to reinforce and/or repair soft tissue where weakness exists and indications for use of our OviTex products include the repair of hernia and/or abdominal wall defects which require the use of reinforcing or bridging material to obtain the desired surgical outcome.

Our OviTex PRS products are reconstructive reinforced tissue matrices designed for implantation to reinforce soft tissue where weakness exists in patients requiring soft tissue repair or reinforcement in plastic and reconstructive surgery.

In connection with the March 2019 meeting of the General and Plastic Surgery Devices Panel of the Medical Devices Advisory Committee, the FDA stated that no surgical mesh device, including OviTex PRS, has been cleared or approved for use in breast surgery, and that to obtain such indication, the product sponsor must obtain an approved PMA.

Our OviTex PRS products are not cleared or approved specifically for breast reconstruction surgery and thus we are prohibited from marketing them for that use.

Our OviTex PRS products are not cleared or approved for breast reconstruction surgery and thus we are prohibited from marketing them for that use.

OviTex PRS or any other product we may develop for use in breast reconstruction surgery will need to be approved specifically for that indication.

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There can be no assurance that we will be able to secure an IDE in a timely manner, or at all.

Any marketing for OviTex PRS or any other product for a use in breast reconstruction surgery would be deemed off‑label promotion of that product if it has been cleared for a general indication of use to reinforce or repair soft tissue and has not received a clearance or approval specifically for use in breast surgery.

We train our marketing personnel and direct sales force to not promote our OviTex or OviTex PRS products for uses outside of the FDA‑cleared indications for use, known as “off‑label uses.”

We cannot, however, prevent a surgeon or medical professional from using our OviTex or OviTex PRS products or other products we may commercialize in the future for off‑label uses.

Any marketing for OviTex PRS or any other product for a use in breast reconstruction surgery would be deemed off-label promotion of that product if it has been cleared for a general indication of use to reinforce or repair soft tissue and has not received an approval specifically for use in breast surgery.

We train our marketing personnel and direct sales force to not promote our OviTex or OviTex PRS products for uses outside of the FDA-cleared indications for use, known as “off-label uses.” We cannot, however, prevent a surgeon or medical professional from using our OviTex or OviTex PRS products or other products we may commercialize in the future for off-label uses.

Although we train our direct sales force not to promote our products for off-label uses, and our instructions for use in all markets specify that our products are not intended for use outside of those indications cleared or approved for use, the FDA or another regulatory authority could conclude that we have engaged in off-label promotion.

If the FDA determines that our promotional or training materials 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.

If the FDA determines that our promotional or training materials constitute promotion of an off-label use, or make claims that are not supported by the available clinical data, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions.

It is also possible that other federal, state or non-U.S.

enforcement authorities might take action under other regulatory authority 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.

enforcement authorities might take action under other regulatory authority if they consider our business activities to constitute promotion of an off-label use, or are otherwise objectionable, 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.

Even if surgeons or medical professionals use our OviTex products only for their approved indications, a failure by such surgeons and medical professionals to use our products in accordance with the processes and procedures established to properly utilize our OviTex products could result in product liability lawsuits, costly investigations and potentially affect our ability to achieve sufficient market penetration for our OviTex products.

In those possible events, our reputation could be damaged and adoption of the products would be impaired.

We may also be required to reassess the training, written instructions and product warnings we provide our customers.

We may also be required to reassess the training, written instructions and product warnings or other labeling information we provide our customers.

This process could require us to expend significant time and capital and could have a material adverse effect on our business, financial condition and results of operations and impair our ability to grow our business.

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and coverage and reimbursement can differ significantly from payor to payor.

If third‑party payors reverse or limit their coverage for the procedures using our

currently cleared or approved products in the future, this could have a material adverse effect on our business.

If third-party payors reverse or limit their coverage for the procedures using our currently cleared or approved products in the future, this could have a material adverse effect on our business.

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

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It is important to our business that we continue to enhance our OviTex and OviTex PRS products and develop and introduce new reinforced tissue matrix products.

Developing products is expensive and time‑consuming and could divert management’s attention away from other aspects of our business.

Developing products is expensive and time-consuming and could divert management’s attention away from other aspects of our business.

The success of any new reinforced tissue matrix product offering or product enhancements to our OviTex and OviTex PRS products will depend on several factors, including our ability to:

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The medical device industry is characterized by rapid and significant change.

There can be no assurance that other companies will not succeed in developing or marketing devices and products that are more effective than our reinforced

tissue matrix products or that would render our reinforced tissue matrix products obsolete or noncompetitive.

There can be no assurance that other companies will not succeed in developing or marketing devices and products that are more effective than our reinforced tissue matrix products or that would render our reinforced tissue matrix products obsolete or noncompetitive.

Additionally, new surgical procedures, medications and other therapies could be developed that replace or reduce the importance of our products.

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To successfully market and sell our products in markets outside of the U.S., we must address many international business risks with which we have limited experience.

Approximately 4% and 2% of our revenue for the years ended December 31, 2020 and 2019, respectively, came from sakes in markets outside of the U.S.

We did not have any sales in markets outside of the U.S.

for the years ended December 31, 2018 or 2017 and approximately 2% of our revenue for the year ended December 31, 2019 came from sales in markets outside of the U.S.

for the year ended December 31, 2018.

Part of our sales strategy is to maintain our European presence.

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● difficulties in developing effective marketing campaigns in unfamiliar non-U.S.

the impact of the potential exit of the United Kingdom from the European Union;

● the impact of the exit of the United Kingdom from the European Union;

● customs clearance and shipping delays;

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● political, social, and economic instability abroad, terrorist attacks, and security concerns in general;

● the global impact of the COVID-19 pandemic;

● natural disasters and global pandemics like COVID-19, which result in lock-downs, travel restrictions and other restrictions on our ability to operate internationally;

● preference for locally produced products;

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Aroa is required under the Aroa License to manufacture all of our products at its manufacturing and warehousing facility in Auckland, New Zealand.

The production of all of our products in a single location exposes us to the risk of Aroa’s facility being harmed or rendered inoperable by natural or man‑made disasters or pandemics, which may render it difficult or impossible for Aroa to perform its manufacturing and assembly activities for some time.

The production of all of our products in a single location exposes us to the risk of Aroa’s facility being harmed or rendered inoperable by natural or man-made disasters or pandemics, which may render it difficult or impossible for Aroa to perform its manufacturing and assembly activities for some time.

Although we and Aroa intend to establish redundant production facilities to lessen the risk of production disruptions, we will need to ensure that any manufacturing facility complies with our quality expectations and applicable regulatory requirements.

If we are unable to establish redundant manufacturing facilities in a timely manner, any disruption in the manufacture of our products at Aroa’s manufacturing and warehouse facility, the continued commercialization of our products, the supply of our products to customers and the development of any new reinforced tissue matrix products will be delayed, limited or prevented, which could have material adverse effect on our business, financial condition and results of operations.

Under the Aroa License, Aroa provides all of the raw materials and components used in the manufacture and assembly of our products.

If Aroa is unable to supply the raw materials and components or to manufacture and assemble our products reliably and at the levels we anticipate or that are required by the market, we may be unable to acquire a substitute supply of raw materials and components on a timely basis, if at all.

Under the Aroa License Aroa also holds the FDA clearances under which we commercialize our products, and maintains ultimate responsibility for all regulatory interactions with FDA relating to our products and decisions made with respect to changing or updating those clearances.

Under the Aroa License Aroa also holds the FDA clearances under which we commercialize our products, and maintains ultimate responsibility for all regulatory

interactions with FDA relating to our products and decisions made with respect to changing or updating those clearances.

If Aroa fails to comply with all applicable regulatory requirements and maintain the FDA clearances related to our products, we may be unable to commercialize our products on a timely basis, or at all.

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If Aroa fails to meet demand or notifies us that it believes it will fail to meet demand for our products, we are required under the Aroa License to work with Aroa to cure its supply failure and may, only in certain circumstances and on a temporary basis, engage a replacement contract manufacturer to mitigate a failure by Aroa to meet demand for our products.

As such, we are highly dependent upon Aroa’s continued ability to supply our products at the levels we require and any production shortfall that impairs the supply of our products could have a material adverse effect on our business, financial condition and results of operations and adversely affect our ability to satisfy demand for our products, which could adversely affect our product sales and operating results materially.

We or our partners may experience development, manufacturing problems, capacity constraints, or delays in the production of our products that could limit the potential growth of our revenue or increase our losses.

We may encounter unforeseen situations in Aroa’s manufacturing and assembly of our products that would result in delays or shortfalls in its production.

We, or our partners, may experience development or manufacturing problems, capacity constraints, or delays in the production of our products that could limit the potential growth of our revenue or increase our losses.

We may encounter unforeseen situations in Aroa’s manufacturing and assembly of our products that would result in delays or shortfalls in its production.

For example, Aroa was unable to supply us with our products from September 2017 to December 2017 due to a quality testing process failure identified by Aroa.

Personnel shortages and reduced manufacturing capacity due to the COVID-19 outbreak may also result in a disruption in production.

Personnel shortages and reduced manufacturing capacity due to the COVID-19 pandemic may also result in a disruption in production.

Based upon our current planned market adoption we believe we will reach our capacity limitations in the Aroa facility.

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If we are unable to successfully expand capacity we may not be able to meet the demand for our products.

In addition, Aroa’s production processes and assembly methods may have to change in order to accommodate any significant future expansion of its manufacturing capacity, which may increase our manufacturing costs, delay production of our products and adversely impact our business.

Conversely, if demand for our products shifts such that Aroa’s manufacturing facility is operated below its capacity for an extended period, it may adjust its manufacturing operations to reduce fixed costs, which could lead to uncertainty and delays in manufacturing times and quality during any transition period.

If Aroa’s manufacturing activities are adversely impacted or if it is otherwise unable to keep up with demand for our products by successfully manufacturing, assembling, testing and shipping our products in a timely manner, our revenue could be impaired, market acceptance for our products could be adversely affected and our customers might instead purchase our competitors’

products, which would have a material adverse effect on our business, financial condition and results of operations.

Our supply of ovine rumen for use in manufacturing our products may be vulnerable to disruption due to natural disaster, disease or other events.

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Any disruption in our supply lines could have a material adverse effect on our business, financial condition and results of operations.

Our products contain materials derived from animal sources and may become subject to additional regulation.

Our products are manufactured using ovine rumen.

Products that contain materials derived from animal sources are increasingly subject to scrutiny in the media and by regulatory authorities.

Regulatory authorities are concerned about the potential for the transmission of disease, particularly progressive neurodegenerative disorders, from animals to humans via those materials.

In addition, the COVID-19 pandemic has heightened public awareness of animals and animal products as a disease vector.

Products that contain materials derived from animals, including our products, may become subject to additional regulation, or even be banned in certain countries, because of concern over the potential for the transmission of infectious agents.

Significant new regulation, or a ban of our products, could impair our current business or our ability to expand our business, and in the case of a ban or suspension, could have a material adverse effect on our business, financial condition and results of operations.

Performance issues, service interruptions or price increases by our shipping carriers could adversely affect our business and harm our reputation and ability to provide our products on a timely basis.

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Similarly, strikes, severe weather, natural disasters, disease or other service interruptions affecting delivery services we use would adversely affect our ability to deliver our OviTex and OviTex PRS products (or any other products we commercialize in the future) on a timely basis.

For example, disruptions to transportation infrastructure as a result of the COVID-19 outbreak may impact our ability to provide our products to our customers.

For example, disruptions to transportation infrastructure as a result of the COVID-19 pandemic may impact our ability to provide our products to our customers.

Risks Related to Intellectual Property Matters

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If we do not adequately protect our intellectual property and proprietary technology, competitors may be able to use our technologies or the goodwill we have acquired in the marketplace and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

We own seven issued or allowed U.S.

patents and have six pending U.S.

We own ten issued or allowed U.S.

patents and have eight pending U.S.

patent applications.

As of December 31, 2020, we had rights, whether through ownership or licensing, to twelve issued or allowed U.S.

patents, six pending U.S.

patents, eight pending U.S.

patent applications, two issued non-U.S.

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It may be difficult to detect infringers who do not advertise the components that are used in their products.

Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product.

We may not prevail in

any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.

Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product.

We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded if we were to prevail may not be commercially meaningful.

The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner.

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Either outcome could harm our business and competitive position.

Litigation or other proceedings or third‑party claims of intellectual property infringement could require us to spend significant time and money and could prevent us from selling our products or affect our stock price.

Litigation or other proceedings or third-party claims of intellectual property infringement could require us to spend significant time and money, enter into license agreements for disputed intellectual property and could prevent us from selling our products.

Our commercial success will depend in part on not infringing the patents or violating other proprietary rights of others.

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As we continue to commercialize our products in their current or updated forms, launch new products and enter new markets, we expect competitors may claim that one or more of our products infringe their intellectual property rights as a strategy to impede our commercialization and entry into new markets.

The large number of patents, the rapid rate of new patent applications and issuances, the complexities of the technologies involved, and the uncertainty of litigation may increase the risk of business resources and management’s attention being diverted to patent litigation.

The large number of patents, the rapid rate of new patent applications and issuances, the complexities of the technologies involved, and the uncertainty of litigation may

increase the risk of business resources and management’s attention being diverted to patent litigation.

We have received, and we may in the future receive, letters or other threats or claims from third parties inviting us to take licenses under, or alleging that we infringe, their patents.

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Such proceedings could include supplemental examination or contested post-grant proceedings such as review, reexamination, inter partes review, interference or derivation proceedings before the U.S.

Patent and Trademark Office (“USPTO”) and challenges in U.S.

District Courts.

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● lose the opportunity to license our technology to others or to collect royalty payments;

incur significant legal expenses, including, in some cases, the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing;

● incur significant legal expenses, including, in some cases, the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing;

● pay substantial damages (possibly treble damages) or royalties to the party whose intellectual property rights on which we may be found to be infringing;

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If we are found to infringe the intellectual property rights of third parties, we could be required to pay substantial damages (which may be increased up to three times of awarded damages) and/or substantial royalties and could be prevented from selling our products unless we obtain a license or are able to redesign our products to avoid infringement.

In addition, we may choose to seek, or be required to seek, a license from a third party, which may not be available on acceptable terms, if at all.

Even if a license can be obtained on acceptable terms, the rights may be non-exclusive, which could give any competitors access to the same technology or intellectual property rights license to us.

Any such license may not be available on reasonable terms, if at all, and there can be no assurance that we would be able to redesign our products in a technically feasible way that would not infringe the intellectual property rights of others.

We could encounter delays in product introductions while we attempt to develop alternative methods or products.

If we fail to obtain any required licenses or make any necessary changes to our products or technologies, we may have to withdraw existing products from the market or may be unable to commercialize one or more of our products.

If we fail to obtain a required license, the holders of any such patents may be able to block us, our licenses or our collaborators from marketing products based on the disputed technology until such patents expire, which could limit our ability to generate revenue or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations.

Even if we were ultimately to prevail, any of these events could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

Intellectual property litigation, regardless of its outcome, may cause negative publicity, adversely impact prospective customers, cause product shipment delays, or prohibit us from manufacturing, importing, marketing or otherwise commercializing our products, services and technology.

Intellectual property litigation, regardless of its outcome, may cause negative publicity, adversely impact prospective customers, cause product

shipment delays, or prohibit us from manufacturing, importing, marketing or otherwise commercializing our products, services and technology.

In addition, if the breadth or strength of protection provided the patents and patent applications we own or in-license is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future products.

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Filing, prosecuting and defending patents covering our products in all countries throughout the world would be prohibitively expensive, and the laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the U.S.

Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions.

Many companies have encountered significant problems in protecting and defending

intellectual property rights in certain foreign jurisdictions.

This could make it difficult for us to stop infringement of our foreign patents, if obtained, or the misappropriation of our other intellectual property rights.

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Congress, the U.S.

federal courts, and the USPTO, the

laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce patents that we have licensed or that we might obtain in the future.

federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce patents that we have licensed or that we might obtain in the future.

Similarly, changes in patent law and regulations in other countries or jurisdictions, changes in the governmental bodies that enforce them or changes in how the relevant governmental authority enforces patent laws or regulations may weaken our ability to obtain new patents or to enforce patents that we have licensed or that we may obtain in the future.

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While an inadvertent failure to make payment of such fees or to comply with such provisions can in many cases be cured by additional payment of a late fee or by other means in accordance with the applicable rules, there are situations in which non-compliance with such provisions will result in the abandonment or lapse of the patent or patent application, and the partial or complete loss of patent rights in the relevant jurisdiction.

Non‑compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non‑payment of fees and failure to properly legalize and submit formal documents within prescribed time limits.

Non-compliance events that could result in abandonment or lapse of a patent or patent application include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents within prescribed time

If we or our licensors fail to maintain the patents and patent applications covering our product or if we or our licensors otherwise allow our patents or patent applications to be abandoned or lapse, it can create opportunities for competitors to enter the market, which would hurt our competitive position and could impair our ability to successfully commercialize our products.

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We and our products are subject to extensive regulation in the U.S.

and internationally including by the FDA and European Medicines Agency (“EMA”).

The FDA, EMA and other foreign equivalents regulate, among other things, with respect to medical devices:

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recalls and field safety corrective actions;

post‑market surveillance, including

reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury;

post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury;

post-market approval studies;

and product import and export.

The regulations to which we are subject are complex and have become more stringent over time.

The regulations to which we are subject are complex, have become more stringent over time and are subject to further change.

There is additional uncertainty in light of the new Presidential administration in the U.S.

Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as:

warning letters;

untitled letters;

civil penalties;

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An element of our strategy is to continue to add new features and expand the indications and uses for our current products.

In the U.S., before we can market a new medical device, or a new use of, new claim for or significant modification to an existing product, we must first receive either clearance under Section 510(k) of the FDCA or approval of a PMA from the FDA, unless an exemption applies.

to an already legally‑marketed “predicate”

device, which includes a device that has been previously cleared through the 510(k) process, a device that was legally marketed prior to May 28, 1976 (preamendments device), a device that was originally on the U.S.

of a PMA from the FDA, unless an exemption applies.

Our products are cleared with the FDA, through clearances obtained and, with the exception of the clearances relating to our OviTex PRS products, held by Aroa, under Section 510(k) of the FDCA, which permits marketing of a device if it is “substantially equivalent” to an already legally-marketed “predicate” device, which includes a device that has been previously cleared through the 510(k) process, a device that was legally marketed prior to May 28, 1976 (preamendments device), a device that was originally on the U.S.

market pursuant to an approved PMA and later downclassified, or a 510(k)-exempt device.

To be “substantially equivalent,”

the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device.

To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics and not raise different questions of safety or effectiveness than the predicate device.

Clinical data are sometimes required to support substantial equivalence.

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To date, our products have been the subject of cleared 510(k)s, obtained and, with the exception of the clearances relating to our OviTex PRS products, held by Aroa.

For more information regarding the regulation of our products, see “Business —

Government Regulation.”

For more information regarding the regulation of our products, see “Business — Government Regulation.”

Modifications to products that are approved through a PMA application generally require FDA approval.

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Both the PMA approval and the 510(k) clearance process can be expensive, lengthy and uncertain.

The FDA’s 510(k) clearance process usually takes from three to 12 months, but can last longer.

The process of obtaining a PMA is much more costly and uncertain than the 510(k) clearance process and generally takes from one to three years, or even longer, from the time the application is filed with the FDA.

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however, future modifications may be subject to the substantially more costly, time-consuming and uncertain PMA process.

The FDA will require a PMA, rather than a 510(k) clearance for the use if OviTex PRS in breast surgery.

If the FDA requires us to go through a lengthier, more rigorous examination for future products or modifications to existing products than we had expected, product introductions or modifications could be delayed or canceled, which could cause our sales to decline.

The FDA can delay, limit or deny clearance or approval of a device for many reasons, including:

we may not be able to demonstrate to the FDA’s satisfaction that the product or modification is substantially equivalent to the proposed predicate device or safe and effective for its intended use;

● we may not be able to demonstrate to the FDA’s satisfaction that the product or modification is substantially equivalent to the proposed predicate device or safe and effective for its intended use;

● the data from our preclinical studies and clinical trials may be insufficient to support clearance or approval, where required;

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In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our future products under development.

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

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

These proposals include 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.

The FDA also announced that it intends to finalize guidance to establish a premarket review pathway for “manufacturers of certain well‑understood device types”

as an alternative to the 510(k) clearance pathway and that such premarket review pathway would allow manufacturers to rely on objective safety and performance criteria recognized by the FDA to demonstrate substantial equivalence, obviating the need for manufacturers to compare the safety and performance of their medical devices to specific predicate devices in the clearance process.

These proposals have not yet been finalized or adopted, and the FDA announced that it would seek public feedback prior to publication of any such proposals, and 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.

For example, in January 2019, the agency finalized guidance outlining the framework for the Safety and Performance Based Pathway.

This option for 510(k) clearance will allow manufacturers to use objective performance criteria established or recognized by the FDA to facilitate demonstration of substantial equivalence of their new products to legally marketed devices.

This new pathway will ensure that the performance characteristics of new devices are evaluated against a set of objective, transparent and well-validated safety and performance metrics.

Devices using this pathway will still have to meet current standards for reasonable assurance of safety and effectiveness before they can be marketed.

Even after we have obtained the proper regulatory clearance or approval to market a product, we have ongoing responsibilities under FDA regulations.

The failure to comply with applicable regulations could jeopardize our ability to sell our reinforced tissue matrix products and result in enforcement actions such as:

warning letters;

● warning letters, untitled letters or Form 483s;

● injunctions;

● civil penalties;

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To sell our products in member countries of the EEA our products must comply with the essential requirements of the EU Medical Devices Directive (Council Directive 93/42/EEC) and the Active Implantable Medical Devices Directive (Council Directive 90/385/EEC).

Compliance with these requirements is a prerequisite to be able to affix the Conformité

Européenne, or CE, mark to our products, without which they cannot be sold or marketed in the EEA.

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

In the EEA, we have obtained the CE mark for our OviTex products.

For more information regarding regulation of our products, see “Business—Government Regulation.”

An element of our strategy is to continue to add new features and expand the indications and uses for our current products.

Any modification to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, design or manufacture, requires a new 510(k) clearance or, possibly, approval of a PMA.

The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision.

The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary.

The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer’s decision.

The FDA may not agree with our decisions regarding whether new clearances

or approvals are necessary.

Such modifications can be expensive and uncertain in time and outcome.

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Our products must be manufactured in accordance with federal and state regulations, and we could be forced to recall our products or terminate production if we fail to comply with these regulations.

The methods used in, and the facilities used for, the manufacture of our products must comply with the FDA’s QSR which is a complex regulatory scheme that covers the procedures and documentation of the design, testing, production, process controls, quality assurance, labeling, packaging, handling, storage, distribution, installation, servicing and shipping of medical devices.

Furthermore, Aroa must maintain facilities, procedures and operations that comply with our quality standards and applicable regulatory requirements.

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administrative or judicially imposed sanctions;

the FDA’s refusal to grant pending or future clearances or

approvals for our products;

the FDA’s refusal to grant pending or future clearances or approvals for our products;

clinical holds;

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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.

We are subject to the FDA’s medical device reporting regulations and similar EU regulations, which require us to report to the FDA when we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, could cause or contribute to a death or serious injury.

We are subject to the FDA’s medical device reporting regulations and similar EU and other foreign regulations, which require us to report to the FDA when we receive or become aware of information that reasonably suggests that one or more of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur, could cause or contribute to a death or serious injury.

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

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

The FDA and EMA 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 must be based on a finding that there is reasonable probability that the device could cause serious injury or death.

The FDA and foreign regulatory agencies 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 must be based on a finding that there is reasonable probability that the device could cause serious injury or death.

We may also choose to voluntarily recall a product if any material deficiency is found.

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Product defects or other errors may occur in the future.

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 or approvals for the device before we may market or distribute the corrected device.

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

Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory

enforcement action, including FDA warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.

Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement action, including FDA warning letters, product seizure, injunctions, administrative penalties or civil or criminal fines.

Companies are required to maintain certain records of recalls and corrections, even if they are not reportable to the FDA.

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From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulation of medical devices, or the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions which may prevent or delay approval or clearance of our future products under development.

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

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.

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or additional record keeping.

The FDA’s and other regulatory authorities’

policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates.

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

There is additional uncertainty in light of the new Presidential administration.

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

For example, certain policies of the Trump administration may impact our business and industry.

Namely, the Trump administration has taken several executive actions, including the issuance of a number of executive orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications.

It is difficult to predict how these executive actions will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority.

If these executive actions impose restrictions on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

It is difficult to predict how these executive actions will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority.

If these executive actions impose restrictions on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

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The Medical Devices Regulation is intended to, among other things, establish a uniform, transparent, predictable and sustainable regulatory framework across the EEA for medical devices and ensure a high level of safety and health while supporting innovation.

The Medical Devices Regulation will become applicable in 2020, and, once applicable, the new regulations will, among other things:

The Medical Devices Regulation will be fully implemented in 2021, and, once applicable, the new regulations will, among other things:

● strengthen the rules on placing devices on the market and reinforce surveillance once they are available;

establish explicit provisions on manufacturers’

responsibilities for the follow‑up of the quality, performance and safety of devices placed on the market;

● establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market;

● improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number;

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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.

There is additional uncertainty in light of the new Presidential administration.

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

For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S.

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.

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These laws impact, among other things, our proposed sales, marketing, support and education programs and constrain our business and financial arrangements and relationships with third-party payors, surgeons and other healthcare professionals.

The laws are described in greater detail in the section below under “Business —

Government Regulation,”

and include, but are not limited to:

The laws are described in greater detail in the section below under “Business — Government Regulation,” and include, but are not limited to:

federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving or paying any remuneration, directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease, order, or arranging for or recommending the purchase, lease or order of, any good or service, for which payment may be made, in whole or in part, under federal healthcare programs such as Medicare and Medicaid.

A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

federal false claims laws, including the civil False Claims Act (which can be enforced through “qui tam,”

or whistleblower actions, by private citizens on behalf of the federal government), which prohibits any person from, among other things, knowingly presenting, or causing to be presented false or fraudulent claims for payment of government funds or knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the U.S.

federal false claims laws, including the civil False Claims Act (which can be enforced through “qui tam,” or whistleblower actions, by private citizens on behalf of the federal government), which prohibits any person from, among other things, knowingly presenting, or causing to be presented false or fraudulent claims for payment of government funds or knowingly making, using or causing to be made or used, a false record or statement material to an obligation to pay money to the government or knowingly and improperly avoiding, decreasing or concealing an obligation to pay money to the U.S.

federal government;

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

the Physician Payments Sunshine Act, implemented as the Open Payments program, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the Centers for Medicare and Medicare Services, or CMS, information related to certain payments made in the preceding calendar year and other transfers of value to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members;

● the Physician Payments Sunshine Act, implemented as the Open Payments program, and its implementing regulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program to report annually to the Centers for Medicare and Medicare Services, or CMS, information related to certain payments made in the preceding calendar year and other transfers of value to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members;

● state laws and regulations, including state anti-kickback and false claims laws, that may apply to our business practices, including but not limited to, research, distribution, sales and marketing arrangements and claims involving healthcare items or services reimbursed by any third-party payor, including private insurers;

state laws that require medical device companies to comply with the medical device industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S.

federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources;

state laws that require medical device companies to comply with the medical device industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the U.S.

federal government, or otherwise restrict payments that may be made to healthcare providers and other potential

referral sources;

and state laws and regulations that require drug and device manufacturers to file reports relating to pricing and marketing information, which requires tracking gifts and other remuneration and items of value provided to healthcare professionals and entities.

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To enforce compliance with healthcare regulatory laws, certain enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry.

Responding to investigations can be time‑ and resource‑consuming and can divert management’s attention from the business.

Responding to investigations can be time- and resource-consuming and can divert management’s attention from the business.

Additionally, as a result of these investigations, healthcare providers and entities may also have to agree to additional compliance and reporting requirements as part of a consent decree or corporate integrity agreement.

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Even an unsuccessful challenge or investigation into our practices could cause adverse publicity and be costly to respond to.

exclusion from government funded healthcare programs, such as Medicare and Medicaid, additional oversight and reporting requirements if we become subject to a corporate integrity agreement to resolve allegations of non‑compliance with these laws and the curtailment or restructuring of our operations.

If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion from government funded healthcare programs, such as Medicare and Medicaid, additional oversight and reporting requirements if we become subject to a corporate integrity agreement to resolve allegations of non-compliance with these laws and the curtailment or restructuring of our operations.

If any of the physicians or other providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to the same criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.

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In addition, the U.K.

Bribery Act of 2010 (“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.

Bribery Act of 2010 (“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.

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Our business processes personal data, including some data related to health.

When conducting clinical trials, we face risks associated with collecting trial participants’

data, especially health data, in a manner consistent with applicable laws and regulations.

When conducting clinical trials, we face risks associated with collecting trial participants’ data, especially health data, in a manner consistent with applicable laws and regulations.

We also face risks inherent in handling large volumes of data and in protecting the security of such data.

We could be subject to attacks on our systems by outside parties or fraudulent or inappropriate behavior by our service providers or employees.

Third parties may also gain access to users’

accounts using stolen or inferred credentials, computer malware, viruses, spamming, phishing attacks or other means, and may use such access to obtain users’

personal data or prevent use of their accounts.

Third parties may also gain access to users’ accounts using stolen or inferred credentials, computer malware, viruses, spamming, phishing attacks or other means, and may use such access to obtain users’ personal data or prevent use of their accounts.

Data breaches could result in a violation of applicable U.S.

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The CCPA may increase our compliance costs and potential liability, and many similar laws have been proposed at the federal level and in other states.

In the event that we are subject to or affected by HIPAA, the CCPA 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.

In the event that we are subject to or affected by HIPAA, the CCPA 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.

This risk is enhanced in certain jurisdictions and, as we expand our operations domestically and internationally, we may be subject to additional laws in other jurisdictions.

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These proceedings or actions may subject us to significant penalties and negative publicity, require us to change our business practices, increase our costs and severely disrupt our business.

The EU’s General Data Protection Regulation, or GDPR, became effective in May 2018.

The GDPR applies extraterritorially and imposes several stringent requirements for controllers and processors of personal data, 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 of information, increased requirements pertaining to special categories of personal 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 provides that EU member states may make their own laws and regulations limiting the processing of personal data, including special categories of data (e.g., racial or ethnic origin, political opinions, religious or philosophical beliefs) and profiling and automated individual decision-making of individuals, which could limit our ability to use and share personal data or other data and could cause our costs to increase, harming our business and financial condition.

Non‑compliance with GDPR is subject to significant penalties, including fines of up to €20.0 million or 4% of total worldwide revenue, whichever is greater.

Non-compliance with GDPR is subject to significant penalties, including fines of up to €20.0 million or 4% of total worldwide revenue, whichever is greater.

The implementation and enforcement of the GDPR may subject us to enforcement risk and requirements to change certain of our data collection, processing and other policies and practices.

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This could adversely affect the manner in which we provide our services and thus materially affect our operations and financial results.

Healthcare policy changes, including recently enacted legislation reforming the U.S.

healthcare system, could harm our business, financial condition and results of operations.

In the U.S., there have been and continue to be a number of legislative initiatives to contain healthcare costs.

In March 2010, the PPACA was enacted in the U.S., 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 affect our business, the PPACA:

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 healthcare providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models;

expanded the eligibility criteria for Medicaid programs.

We do not yet know the full impact that the PPACA will have on our business.

Since its enactment, there have been judicial and Congressional challenges to certain aspects of the PPACA, and we expect there will be additional challenges and amendments to the PPACA in the future.

On March 2, 2020, the United States Supreme Court announced that it will hear House of Representatives v.

Texas , a case in which certain states have challenged the constitutionality of the PPACA’s individual mandate and whether, if the individual mandate is unconstitutional, if the individual mandate is

severable from the remainder of the PPACA.

If the Supreme Court rules that the individual mandate is unconstitutional and unable to be severed from the remainder of the PPACA, the remaining provisions of the PPACA would be invalid.

It is unclear how this case, along with other efforts to repeal and replace the PPACA will impact the PPACA and our business.

In addition, other legislative changes have been proposed and adopted since the PPACA was enacted.

On August 2, 2011, the Budget Control Act of 2011 was signed into law, which, among other things, reduced Medicare payments to providers by 2% per fiscal year, effective on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2027 unless additional Congressional action is taken.

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.

The Medicare Access and CHIP Reauthorization Act of 2015, (“MACRA”) enacted on April 16, 2015, repealed the formula by which Medicare made annual payment adjustments to physicians and implemented fixed annual updates and a new system of incentive payments that began in 2019 that are based on various performance measures and physicians’

participation in alternative payment models such as accountable care organizations.

It is unclear what effect new quality and payment programs, such as MACRA, may have on our business, financial condition, results of operations or cash flows.

We expect additional state and federal healthcare policies and reform measures to be adopted in the future, any of which could limit reimbursement for healthcare products and services or otherwise result in reduced demand for our products or other products we may commercialize in the future or additional pricing pressure and have a material adverse effect on our industry generally and on our customers.

Any changes of, or uncertainty with respect to, future coverage or reimbursement rates could affect demand for our products or other products we may commercialize in the future, which in turn could impact our ability to successfully commercialize our products or other products we may commercialize in the future and could have a material adverse effect on our business, financial condition and results of operations.

The Affordable Care Act and any changes in healthcare law may increase the difficulty and cost for us to successfully commercialize our products and affect the prices we may obtain.

In the United States, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively the Affordable Care Act, substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacts the healthcare industry.

The Affordable Care Act is intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against healthcare fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on pharmaceutical and medical device manufacturers, and impose additional health policy reforms.

Since its enactment, there have been numerous judicial, administrative, executive and legislative challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future.

Further legislative and regulatory changes under the Affordable Care Act remain possible, although the new Presidential administration has signaled that it plans to build on the Affordable Care Act and expand the number of people who are eligible for subsidies under it.

President Biden indicated that he intends to use executive orders to undo changes to the Affordable Care Act made by the Trump administration and would advocate for legislation to build on the Affordable Care Act.

It is unknown what form any such changes or any law would take, and how or whether it may affect our business in the future.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control healthcare costs, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We expect that additional federal, state and foreign healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in limited coverage and reimbursement and reduced demand for our products, once approved, or additional pricing pressures.

and could seriously harm our future revenues.

Any reduction in reimbursement from Medicare, Medicaid, or other government programs may result in a similar reduction in payments from private payers.

The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain and maintain profitability of our product and product candidates, if approved.

Our business involves the use of hazardous materials and we and Aroa must comply with environmental laws and regulations, which may be expensive and restrict how we do business.

Aroa’s activities in manufacturing our products may involve the controlled storage, use and disposal of hazardous materials.

Aroa is or may be subject to federal, state, local and non-U.S.

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We currently carry no insurance specifically covering environmental claims relating to the use of hazardous materials.

Although we believe that Aroa’s safety procedures for handling and disposing of these materials and waste products comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, storage, handling or disposal of hazardous materials.

In the event of an accident, federal, state or other applicable authorities may curtail Aroa’s use of these materials and interrupt their business operations which could adversely affect our business.

Compliance with environmental laws and regulations may be expensive and non-compliance could result in substantial liabilities, fines and penalties, personal injury and third party property damage claims and substantial investigation and remediation costs.

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● recalls or other field safety corrective actions by Aroa;

business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters such as earthquakes, floods or public health emergencies such as the recent COVID-19 pandemic;

● business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters such as earthquakes, floods or public health emergencies such as the COVID-19 pandemic;

● positive or negative coverage in the media or clinical publications of our products or products of our competitors or our industry.

Because our quarterly and annual results may fluctuate, period-to-period comparisons may not be the best indication of the underlying results of our business.

In particular, we cannot predict at this time the extent of the impact that the recent COVID-19 pandemic will have on our sales and financial results.

In particular, we cannot predict at this time the extent of the impact that the COVID-19 pandemic will have on our sales and financial results.

These fluctuations may also increase the likelihood that we will not meet our forecasted performance, which could negatively affect the market price for our common stock.

The recent outbreak of the COVID-19 may negatively impact our commercialization strategy and the sales of OviTex and OviTex PRS.

In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China.

As of March 2020, COVID-19 has spread to other countries, including the United States, and has been declared to be a pandemic by the World Health Organization.

Efforts to contain the spread of COVID-19 have intensified and the U.S., Europe and Asia have implemented severe travel restrictions, social distancing and delays or cancellations of elective surgeries.

The outbreak of COVID-19 poses the risk that we or our employees, contractors, suppliers, and other partners

may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities.

Hospitals have begun to reduce and divert staffing, divert resources to patients suffering from the infectious disease and limit hospital access for non-patients, including our sales professionals.

In addition, travel restrictions due to COVID-19 have impacted our sales professionals’

ability to travel to customers.

These circumstances have negatively impacted the ability of our sales professionals to effectively market to physicians, which will have a negative impact on our sales and the market penetration of our OviTex and OviTex PRS products.

COVID-19 has and will continue to have an impact on ports and trade globally.

We currently rely on Aroa, which is headquartered in New Zealand, for supply of our products.

There is a risk that supplies of our products may be significantly delayed or may become unavailable as a result of COVID-19 and the resulting impact on Aroa’s labor force and operations, including as a result of governmental restrictions on business operations and the movement of people and goods in an effort to curtail the spread of the virus.

There can be no assurance that we would be able to timely implement any mitigation plans.

Disruptions in our supply chain, whether as a result of restricted travel, quarantine requirements or otherwise, could negatively impact our ability to supply and sell our products.

The continued spread of COVID-19 has also led to severe disruption and volatility in the global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets.

It is possible that the continued spread of COVID-19 could cause an economic slowdown or recession or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.

The extent to which COVID-19 impacts our financial results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 outbreak and the actions to contain the outbreak or treat its impact, among others.

Moreover, the COVID-19 outbreak has begun to have indeterminable adverse effects on general commercial activity and the world economy, and our business and results of operations could be adversely affected to the extent that COVID-19 or any other pandemic harms the global economy generally.

We may be unable to compete successfully with larger competitors in our highly competitive industry.

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Because of the complex and technical nature of our products and the dynamic market in which we compete, any failure to attract and retain a sufficient number of qualified employees could materially harm our ability to develop and commercialize our products, which would have a material adverse effect on our business, financial condition and results of operations.

In the U.S., we currently compete with LifeCell Corporation, an affiliate of Allergan plc, and Davol Inc., a subsidiary of C.R.

which produce, among other things, soft tissue reconstruction surgery products, including Strattice and Phasix, respectively.

In the EEA, we compete with C.R.

who produces other soft tissue reinforcement products.

In the U.S., we currently compete with LifeCell Corporation, an affiliate of Allergan plc, and Davol Inc., a subsidiary of Becton, Dickinson and Company, which produce, among other things, soft tissue reconstruction surgery products, including Strattice and Phasix, respectively.

In the EEA, we compete with Bard, a subsidiary of Becton, Dickinson and Company, who produces other soft tissue reinforcement products.

Many of these competitors are large, well-capitalized companies with significantly greater market share and resources than us.

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Even if we are the sole contracted supplier of a GPO or IDN for our product category, members of the GPO or IDN generally are free to purchase from other suppliers.

Furthermore, GPO and IDN contracts typically are terminable without cause upon 60 to 90 days’

We face the risk of product liability claims that could be expensive, divert management’s attention and harm our reputation and business.

Furthermore, GPO and IDN contracts typically are terminable without cause upon 60 to 90 days’ notice.

We face the risk of product liability claims that could be expensive, divert management’s attention and harm our reputation and business.

Our business exposes us to the risk of product liability claims that are inherent in the testing, manufacturing and marketing of medical devices.

This risk exists even if a product is cleared or approved for commercial sale by the FDA or EMA, and manufactured in facilities licensed and regulated by the FDA or EMA.

This risk exists even if a product is cleared or approved for commercial sale by the FDA

or EMA, and manufactured in facilities licensed and regulated by the FDA or EMA.

Any side effects, manufacturing defects or misuse associated with our products could result in patient injury or death.

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If we cannot maintain our strong working relationships with these professionals and continue to receive their advice and input, the development and marketing of our products could suffer, which could have a material adverse effect on our business, financial condition and results of operations.

At the same time, the medical device industry’s relationship with surgeons is under increasing scrutiny by the U.S.

Department of Health and Human Services Office of Inspector General (“OIG”), the U.S.

Department of Justice (“DOJ”), the state attorneys general and other foreign and domestic government agencies.

Our failure to comply with requirements governing the industry’s relationships with surgeons or an investigation into our compliance by the OIG, the DOJ, state attorneys general and other government agencies, could have a material adverse effect on our business, financial condition and results of operations.

Additional information regarding the laws impacting our relationships with surgeons and other healthcare professionals can be found above under “Risks Related to Government Regulation.”

At the same time, the medical device industry’s relationship with surgeons is under increasing scrutiny by the U.S.

Department of Health and Human Services Office of Inspector General (“OIG”), the U.S.

Department of Justice (“DOJ”), the state attorneys general and other foreign and domestic government agencies.

Additional information regarding the laws impacting our relationships with surgeons and other healthcare professionals can be found above under “Risks Related to Government Regulation.”

We have limited data and experience regarding the safety and efficacy of our products.

Results of earlier studies may not be predictive of future clinical trial results, or the safety or efficacy profile for such products.

We currently have 91 patients enrolled in our ongoing prospective, single arm multicenter post‑market clinical study, or our BRAVO study, which we are conducting to support the marketing of our OviTex products for their cleared indicated uses, and do not currently have any clinical data for use of our OviTex PRS products in patients.

Our ongoing prospective, single arm multicenter post-market clinical study, which we refer to as our BRAVO study, was fully enrolled at 92 patients.

We are conducting this study to support the marketing of our OviTex products for their cleared indicated uses, and do not currently have any clinical data for use of our OviTex PRS products in patients.

The long-term effects of using our products in a large number of patients have not been studied and the results of short-term clinical use of such products do not necessarily predict long-term clinical benefits or reveal long-term adverse effects.

The results of preclinical studies and clinical studies of our products conducted to date and ongoing or future studies and trials of our current, planned or future products may not be predictive of the results of later clinical trials, and interim results of a clinical trial do not necessarily predict final results.

The results of preclinical studies and clinical studies of our products conducted to date and ongoing or future studies and

trials of our current, planned or future products may not be predictive of the results of later clinical trials, and interim results of a clinical trial do not necessarily predict final results.

Our interpretation of data and results from our clinical trials do not ensure that we will achieve similar results in future clinical trials in other patient populations.

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As a result, the interim results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated.

Interim or preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we

previously published.

Interim or preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published.

As a result, interim or preliminary data should be viewed with caution until the final data are available.

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In addition, if we experience a significant increase in demand, 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, or Aroa may not be able to allocate sufficient capacity to meet our increased requirements, which could have an adverse effect on our ability to meet customer demand for our products and our results of operations.

Our ability to maintain our competitive position depends on our ability to attract and retain senior management and other highly qualified personnel.

We are highly dependent on our senior management and other key personnel.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified senior management and attract, retain and motivate qualified employees, including sales and marketing professionals, clinical specialists and other highly skilled personnel.

Competition for skilled personnel in our market is intense and may limit our ability to hire and retain highly qualified personnel on acceptable terms, or at all.

If we are not successful in attracting and retaining highly qualified personnel, it would have a material adverse effect on our business, financial condition and results of operations.

The loss of highly qualified employees could result in delays in product development and commercialization and harm our business

Although we have entered into employment agreements with all of our executive officers, each of them may terminate their employment with us at any time.

The replacement of any of our key personnel likely would involve significant time and costs and may significantly delay or prevent the achievement of our business objectives and could therefore have an adverse effect on our business.

We also do not maintain “key man”

insurance policies on the lives of these individuals or the lives of any of our other employees.

We rely on our own direct sales force for our products, which may result in higher fixed costs than our competitors and may slow our ability to reduce costs.

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(iii) healthcare fraud and abuse laws in the U.S.

and similar foreign fraudulent misconduct laws;

foreign fraudulent misconduct laws;

(iv) data privacy laws and other similar non-U.S.

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It is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent these activities may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.

In addition, we are subject to the risk that a person or government could allege

such fraud or other misconduct, even if none occurred.

In addition, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred.

If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant fines or other sanctions, including the imposition of civil, criminal and administrative penalties, additional integrity reporting and oversight obligations and possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, any of which could adversely affect our ability to operate our business and our results of operations.

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These systems affect, among other things, ordering and managing products, shipping products to customers, processing transactions, summarizing and reporting results of operations, complying with regulatory, legal and tax requirements, data security and other processes necessary to manage our business.

Our information systems require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving systems and regulatory standards, the increasing need to protect patient and customer information, and changing customer patterns.

If our systems are damaged or cease to function properly due to any number of causes, ranging from catastrophic events to power outages to security breaches, and our business continuity plans do not effectively compensate on a timely basis, we may experience interruptions in our operations, which could have an adverse effect on our business.

If we fail to maintain or protect our information systems and data integrity effectively, we could lose existing customers, have difficulty attracting new customers, suffer backlash from negative public relations, have regulatory sanctions or penalties imposed, have increases in operating expenses, incur expenses or lose revenues as a result of a data privacy breach, or suffer other adverse consequences.

Furthermore, any breach in our information technology systems could lead to the unauthorized access, disclosure and use of non-public information from our patient registry or other patient information which is protected by HIPAA and other laws.

Any such access, disclosure, or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information and damage to our reputation.

Economic conditions may adversely affect our business.

Adverse worldwide economic conditions may negatively impact our business.

Our general business strategy may be adversely affected by such economic conditions or the presence of a volatile business environment or unpredictable and unstable market conditions, such as the economic turmoil resulting from the spread of the COVID-19 outbreak.

Adverse worldwide economic conditions may also adversely impact our suppliers’

ability to provide us with materials and components, which could have a material adverse effect on our business, financial condition and results of operations.

If we become profitable, our ability to use our net operating loss carryforwards and other tax attributes to offset future taxable income or taxes may be subject to limitations.

As described under “—Risks Related to Our Limited Operating History, Financial Position and Capital Requirements,”

we have incurred net losses since our inception, and expect to continue to incur operating losses for the foreseeable future.

If we become profitable in the future, our ability to use net operating loss carryforwards (“NOLs”) and other tax attributes to offset future taxable income or reduce taxes may be subject to limitations.

In general, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, a corporation that undergoes an “ownership change”

(generally defined as a greater than 50% cumulative change by value in its equity ownership of certain

stockholders over a rolling three‑year period) is subject to an annual limitation on its ability to utilize its pre‑change NOLs and other tax attributes (including any research and development credit carryforwards).

Similar provisions of state tax law may also apply to limit the use of our state NOLs and other tax attributes.

We have not performed an analysis to determine whether our past issuances of stock and other changes in our stock ownership may have resulted in one or more ownership changes within the meaning of Sections 382 and 383 of the Code.

In addition, we may experience an ownership change in the future as a result of subsequent changes in our stock ownership, some of which are outside our control.

If an ownership change has occurred in the past or occurs in the future, we may not be able to use a material portion of our NOLs and other tax attributes to offset future taxable income or taxes if we attain profitability.

In addition to any limitation imposed by Section 382 of Code, the use of NOLs arising after December 31, 2017 generally is limited to a deduction of 80% of taxable income for the corresponding taxable year.

NOLs arising after December 31, 2017 may not be carried back to previous taxable years, but may be carried forward indefinitely.

As of December 31, 2020, we had federal and state net operating loss carry forwards (“NOLs”) of approximately $150.6 million and $128.9 million, respectively.

The federal carry forwards for losses incurred prior to 2017 will begin expiring in 2032 for federal purposes.

Federal net operating losses incurred in 2018 and onward have an indefinite expiration under the 2017 Tax Cut & Jobs Act.

The state carry forwards will begin expiring in 2026.

A full allowance for the value of the NOLs is provided for in our audited financial statements for the year of December 31, 2020 included in this Annual Report on Form 10-K.

We cannot guarantee what the ultimate outcome or amount of the benefit we may receive from the NOLs, if any, will be.

If we become profitable in the future, our ability to use net operating loss carryforwards and other tax attributes to offset future taxable income or reduce taxes may be subject to limitations.

Risks Related to Our Securities

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The price of our common stock has been and may continue to be volatile.

Even though our common stock is now listed on the Nasdaq Global Market, (“Nasdaq”) an active trading market for our common stock may not be sustained.

Even though our common stock is listed on Nasdaq, an active trading market for our common stock may not be sustained.

The lack of an active trading market may impair the value of your shares and your ability to sell your shares at the time you wish to sell them.

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

disputes or other developments with respect to our or others’

intellectual property rights;

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

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

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● changes in earnings estimates or recommendations by securities analysts;

general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors, including any economic downturn as a result of the COVID-19 outbreak.

● general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors, including any economic downturn as a result of the COVID-19 pandemic.

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.

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In addition, in the past, class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price.

Securities litigation brought against us following volatility in our stock price, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and operating results and divert management’s attention and resources from our business.

We do not intend to pay cash dividends on our common stock for the foreseeable future.

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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, even if such change in control would benefit our other stockholders, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our capital stock or our assets, and might affect the prevailing market price of our common stock due to investors’

perceptions that conflicts of interest may exist or arise.

As a result, this concentration of ownership may not be in the best interests of our other stockholders.

A significant portion of our outstanding shares of common stock are restricted from immediate resale but may be sold into the market in the near future.

This could cause the market price of our 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 could occur at any time.

These sales, or the perception in the market that these sales may occur, could result in a decrease in the market price of our common stock.

In connection with the IPO, approximately 6.6 million shares of common stock are restricted from sale as a result of securities laws or 180‑day lock‑up agreements but will generally be able to be sold beginning in May 2020.

Moreover, holders of an aggregate of up to 6.3 million shares of our common stock, have rights, subject to certain conditions, 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.

We also intend to register all shares of 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, subject to volume limitations applicable to affiliates and the lockup agreements referred to above.

We are an emerging growth company and the reduced disclosure requirements applicable to emerging growth companies may make our common stock less attractive to investors.

In particular, while we are an “emerging growth company”

(i) we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes‑Oxley Act, (ii) we will be exempt from any

rules that could be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements, (iii) we will be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (iv) we will not be required to hold nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments not previously approved.

We may remain an emerging growth company until as late as December 31, 2024, the fiscal year‑end following the fifth anniversary of the completion of our IPO, though we may cease to be an “emerging growth company”

earlier under certain circumstances, including if (i) we have more than $1.07 billion in annual revenue in any fiscal year, (ii) the market value of our common stock that is held by non‑affiliates exceeds $700 million as of any June 30 or (iii) we issue more than $1.0 billion of non‑convertible debt over a three‑year period.

We are an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” In particular, while we are an “emerging growth company” (i) we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (ii) we will be exempt from any rules that could be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements, (iii) we will be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (iv) we will not be required to hold nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments not previously approved.

We may remain an emerging growth company until as late as December 31, 2024, the fiscal year-end following the fifth anniversary of the completion of our IPO, though we may cease to be an “emerging growth company” earlier under certain circumstances, including if (i) we have more than $1.07 billion in annual revenue in any fiscal year, (ii) the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 or (iii) we issue more than $1.0 billion of non-convertible debt over a three-year period.

The exact implications of the JOBS Act are still subject to interpretations and guidance by the SEC and other regulatory agencies, and we cannot assure you that we will be able to take advantage of all of the benefits of the JOBS Act.

In addition, investors may find our common stock less attractive to the extent we rely on the exemptions and relief granted by the JOBS Act.

addition, investors may find our common stock less attractive to the extent we rely on the exemptions and relief granted by the JOBS Act.

If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may decline or become more volatile.

We expect to incur significant additional costs as a result of being a public company.

We expect to incur costs associated with corporate governance requirements applicable to us as a public company, including rules and regulations of the SEC, under the Sarbanes‑Oxley Act, the Dodd‑Frank Wall Street Reform and Consumer Protection Act of 2010, and the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as well as the rules of Nasdaq.

These rules and regulations are expected to significantly increase our accounting, legal and financial compliance costs and make some activities more time‑consuming.

These rules and regulations make it more expensive for us to secure and maintain directors’

and officers’

liability insurance at adequate coverage amounts.

Accordingly, increases in costs incurred as a result of becoming a publicly traded company may adversely affect our business, financial condition and results of operations.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are subject to the periodic reporting requirements of the Exchange Act.

We designed our disclosure controls and procedures to provide reasonable assurance that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

We believe that any disclosure controls and procedures, no matter how well those controls and procedures are conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision‑making can be faulty, and that breakdowns can occur because of simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls.

Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

We are at risk of securities class action litigation.

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This risk is especially relevant for us because medical device companies have experienced significant stock price volatility in recent years.

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.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

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● the approval of the holders of at least two-thirds of our shares entitled to vote at an election of our board of directors is required to adopt, amend or repeal our second amended and restated bylaws or repeal the provisions of our fourth amended and restated certificate of incorporation regarding the election and removal of directors;

stockholders must provide advance notice and additional disclosures to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’

meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain voting control of our shares;

● stockholders must provide advance notice and additional disclosures to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain voting control of our shares;

● our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware (“DGCL”) which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Our fourth amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’

ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our fourth amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the United State District Court for the District of Delaware) is the exclusive forum, to the fullest extent permitted by law, for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or our fourth amended and restated certificate of incorporation or second amended and restated bylaws or (iv) any action asserting a claim governed by the internal affairs doctrine, except, in each case, (A) any claim as to which such court determines that there is an indispensable party not subject to the jurisdiction of such court (and the indispensable party does not consent to the personal jurisdiction of such court within 10 days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than such court, or (C) for which such court does not have subject matter jurisdiction, in all cases subject to the courts having jurisdiction over indispensable parties named as defendants.

This provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.

For example, stockholders who do bring a claim in the Court of Chancery could face additional litigations costs in pursuing any such claim, particularly if they do not reside in or near the State of Delaware.

The Court of Chancery may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders.

The enforceability of similar choice of forum provisions in other companies’

certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our fourth amended and restated certificate of incorporation to be inapplicable or unenforceable in such action.

Alternatively, if a court were to find the choice of forum provision contained in our fourth amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our fourth amended and restated certificate of incorporation to be inapplicable or unenforceable in such action.

Alternatively, if a court were to find the choice of forum provision contained in our fourth amended and restated certificate of incorporation to be inapplicable or unenforceable in an

action, we may incur additional costs associated with resolving such action in other jurisdictions.

This provision will not apply to actions arising under the Securities Act or Exchange Act.

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Accordingly, there is uncertainty as to whether a court would enforce such a forum selection provision as written in connection with claims arising under the Securities Act.

General Risk Factors

Economic conditions may adversely affect our business.

Adverse worldwide economic conditions may negatively impact our business.

Adverse worldwide economic conditions may also adversely impact our suppliers’ ability to provide us with materials and components, which could have a material adverse effect on our business, financial condition and results of operations.

Our ability to maintain our competitive position depends on our ability to attract and retain senior management and other highly qualified personnel.

We are highly dependent on our senior management and other key personnel.

Competition for skilled personnel in our market is intense and may limit our ability to hire and retain highly qualified personnel on acceptable terms, or at all.

If we are not successful in attracting and retaining highly qualified personnel, it would have a material adverse effect on our business, financial condition and results of operations.

The loss of highly qualified employees could result in delays in product development and commercialization and harm our business

Although we have entered into employment agreements with all of our executive officers, each of them may terminate their employment with us at any time.

We also do not maintain “key man” insurance policies on the lives of these individuals or the lives of any of our other employees.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are subject to the periodic reporting requirements of the Exchange Act.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls.

Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

UNRESOLVED STAFF COMMENTS

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