As Filed with the Securities and Exchange Commission on July 15, 2020

Registration No. 333-239471

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

AMENDMENT NO. 2 TO

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

ACell, Inc.
(Exact name of Registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		3841 (Primary Standard Industrial Classification Code Number)		04-3496380 (I.R.S. Employer Identification Number)

6640 Eli Whitney Drive
Columbia, Maryland 21046
(800) 826-2926
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

Patrick A. McBrayer
President and Chief Executive Officer
ACell, Inc.
6640 Eli Whitney Drive
Columbia, Maryland 21046
(800) 826-2926
(Name, address, including zip code, and telephone number, including
area code, of agent for service)


Copies to:
Darren DeStefano Christian E. Plaza Katie Kazem Cooley LLP 11951 Freedom Drive Reston, Virginia 20190 (703) 456-8034	Christopher F. Branch Chief Operating Officer and General Counsel ACell, Inc. 6640 Eli Whitney Drive Columbia, Maryland 21046 (800) 826-2926	Benjamin K. Marsh William A. Magioncalda Goodwin Procter LLP The New York Times Building 620 Eighth Avenue New York, New York 10018 (212) 813-8800

Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

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


Large accelerated filer o		Accelerated filer o		Non-accelerated filer ý		Smaller reporting company o Emerging growth company ý

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. o

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Amount to be registered(1)	Proposed maximum offering price per share	Proposed maximum aggregate offering price(1)(2)	Amount of registration fee(2)(3)




Common stock, par value $0.001 per share	5,750,000	$16.00	$92,000,000	$11,941.60

(1): Includes 750,000 shares of common stock that the underwriters have the option to purchase to cover over-allotments, if any.
(2): Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) of the Securities Act of 1933, as amended.
(3): Previously paid.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant will file a further amendment which specifically states that this Registration Statement will thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement will become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, Dated July 15, 2020

5,000,000 Shares

ACell, Inc.

Common Stock

This is the initial public offering of shares of common stock of ACell, Inc. We are offering 5,000,000 shares of common stock.

Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price for our common stock will be between $14.00 and $16.00 per share. We have applied to list our common stock on the Nasdaq Global Market under the symbol "ACLL."

We are an "emerging growth company" as defined under the federal securities laws and, as such, we have elected to comply with certain reduced reporting requirements for this prospectus and may elect to do so in future filings.

Investing in our common stock involves a high degree of risk. Before buying any shares of our common stock, you should carefully read the discussion of material risks of investing in our common stock in "Risk factors" beginning on page 15 of this prospectus.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

	Per share	Total


Initial public offering price	$	$

Underwriting discounts and commissions(1)	$	$

Proceeds, before expenses, to ACell, Inc.	$	$

(1): See "Underwriting" for additional information regarding compensation payable to the underwriters.

The selling stockholders identified in this prospectus have granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase up to 750,000 shares of common stock from them at the initial public offering price, less the underwriting discounts and commissions. We will not receive any of the proceeds from the sale of any common stock by the selling stockholders upon any such exercise.

The underwriters expect to deliver the shares of common stock to purchasers on or about , 2020.


UBS Investment Bank	Barclays	RBC Capital Markets
SunTrust Robinson Humphrey

Prospectus dated , 2020.

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None of us, the selling stockholders or any of the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. None of us, the selling stockholders or any of the underwriters take responsibility for, or can provide any assurance as to the reliability of, any other information that others may give you. We, the selling stockholders and the underwriters are offering to sell, and seeking offers to buy, shares of our common stock only under circumstances and in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.

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		Page

Prospectus summary			1
Risk factors			15
Special note regarding forward-looking statements			54
Market, industry and other data			56
Use of proceeds			57
Dividend policy			58
Capitalization			59
Dilution			62
Selected financial data			65
Management's discussion and analysis of financial condition and results of operations			67
Business			85
Management			119
Executive compensation			126
Certain relationships and related party transactions			140
Principal and selling stockholders			142
Description of capital stock			147
Shares eligible for future sale			151
Material U.S. federal income tax consequences to non-U.S. holders			153
Underwriting			158
Legal matters			166
Experts			166
Where you can find additional information			166
Index to financial statements			F-1

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About this prospectus

For investors outside the United States: None of us, the selling stockholders or any of the underwriters have done anything that would permit this offering or the possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, this offering and the possession and distribution of this prospectus outside of the United States.

Any discrepancies included in this prospectus between totals and the sums of the percentages and dollar amounts presented are due to rounding.

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Prospectus summary

This summary highlights selected information included elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read this entire prospectus carefully, including the sections titled "Risk factors," "Management's discussion and analysis of financial condition and results of operations," "Business," and our financial statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise requires, all references in this prospectus to "ACell," the "company," "we," "our," "us" or similar terms refer to ACell, Inc. We refer to our Series A convertible preferred stock, Series B convertible preferred stock, Series C convertible preferred stock and Series D convertible preferred stock as our "convertible preferred stock" in this prospectus.

BUSINESS OVERVIEW

Our company

We are a leading regenerative medicine company focused on the development, manufacture and sale of products primarily used in acute care settings as part of the treatment and management of moderate to severe wounds and reinforcement of soft tissue surgical defects. Our products utilize our proprietary porcine urinary bladder matrix platform technology, which is designed to enhance the body's ability to restore natural tissue and minimize scarring in the management of traumatic, surgical and chronic wounds, burns, hernias and other conditions requiring the reinforcement of soft tissue. We believe we are at the forefront of advancing the global standard of care for wounds and soft tissue surgical defects by providing solutions that are designed to significantly improve patient outcomes while lowering the overall cost of care. Since our commercial launch in 2009, we have sold over 500,000 units of our urinary bladder matrix, or UBM, products.

We manufacture the only commercially available extracellular matrix, or ECM, products that utilize porcine UBM. When applied to a wound or soft tissue surgical defect, our products are typically resorbed over time and replaced with newly formed tissue that replicates uninjured tissue where scarring would normally occur. This capability enables our products to promote durable wound closure and soft tissue defect repair, restore natural tissue function and enhance aesthetic outcomes. Our products are available in sheet and particulate form for wound management, and in multiple layering configurations of various sizes for surgical soft tissue repair, including hernia repair. We market MicroMatrix, a particulate formulation, and Cytal Wound Matrix products, in sheet formulations, for the management of acute, surgical, chronic and tunneling wounds and partial thickness burns. We also market Gentrix Surgical Matrix products, in sheet formulations, for the reinforcement of soft tissue in certain surgical applications, such as for hernia repair. We manufacture our products using our proprietary know-how, trade secrets and patented technology.

Our products address large, underserved and growing markets with significant commercial potential. In addition to the ongoing need to manage traumatic injuries, we believe that long-term demand for our products is increasing due to aging demographics and the growing prevalence of conditions such as diabetes, obesity and vascular disease. We estimate that our total addressable market in the United States for our currently marketed products is over $2 billion, based on estimated 2019 revenues for hernia matrices and biologic skin and dermal substitutes for wound care. We intend to grow our business and market opportunity by further penetrating our current acute care customer accounts, increasing our acute care customer base, selectively expanding the sale of our products into non-acute care settings, expanding our international sales opportunity and enhancing and expanding our product portfolio.

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European Union. We currently sell and market our products in the United States through a dedicated, surgically-focused direct sales force of approximately 160 employees as of April 30, 2020 that sell into hospital operating rooms and intensive care units. To complement our direct sales efforts, we also have established a national accounts team that supports our commercial efforts with group purchasing organizations, or GPOs, integrated delivery networks, or IDNs, and government facilities, including Department of Veterans Affairs and Department of Defense medical facilities. During the year ended December 31, 2019, we sold our products to over 1,900 customers and had contracts with eight GPOs and seven distributors in 11 countries. We also provide medical education programs that offer hands-on and virtual education for all of our products and host symposiums throughout the United States, including at our state-of-the-art surgical learning center in Columbia, Maryland.

We have achieved significant revenue growth since the launch of our first commercial product in 2009. Our revenue increased to $100.8 million for the year ended December 31, 2019 from $89.2 million for the year ended December 31, 2018, an increase of 13.0%. For the years ended December 31, 2019 and 2018, we recorded a gross margin of 81.0% and 81.7%, respectively, and net income of $1.4 million and net loss of $3.1 million, respectively. In the three months ended March 31, 2020 and 2019, we recorded revenue of $23.7 million and $24.2 million, respectively, a gross margin of 80.4% and 81.6%, respectively, and net loss of $2.7 million and net income of $0.1 million, respectively.

Industry background

Worldwide, the epidemiological burden of acute and chronic wounds is significant, driving the need for improved healing and wound management solutions. Acute wounds include traumatic wounds, surgical wounds and moderate to severe burns. Traumatic wounds were estimated to have a global incidence of at least 5.6 million in 2019. In the United States and European Union alone, major surgical wounds were estimated to have an incidence of approximately 12.8 million in 2019. In 2019, medically treated burns were expected to have a global incidence of over 6.3 million, while burns requiring hospitalization were estimated to have a global incidence of approximately 597,000. Chronic wounds include stage 3 and stage 4 pressure ulcers, diabetic ulcers and venous and arterial ulcers, which were estimated to have global incidences in 2019 of approximately 22.6 million, 14.5 million and 13.3 million, respectively. We believe the annual incidence of acute wounds, aging demographics and increased prevalence of systemic comorbidities, including growth of vascular complications and diabetes, are contributing to the growth in wound management procedures and demand for alternative therapies.

Incidence of hernias, a type of soft tissue defect, and the resulting market for hernia repair are increasing. Surgery is the only treatment that can permanently repair a hernia, and synthetic or biologically-derived mesh is used in about 90% of those surgeries to reinforce torn or damaged tissue around hernias. In the United States alone, approximately 1.2 million hernia repairs were estimated to have occurred in 2019. We believe the growth in hernia repair procedures, increased incidence of obesity, aging demographics and incidence and awareness of infection and rejection of synthetic or other biologically-derived meshes, is driving the need for new therapies.

Our UBM platform technology

Our UBM platform technology is built on over 40 years of tissue regeneration and ECM constructs research. Our platform technology is based on an ECM comprised of the two innermost layers of porcine urinary bladder depicted in the image below. The epithelial basement membrane on one side of the ECM is a thin, delicate membrane of proteins that serves as a natural barrier to separate tissue layers. The lamina propria layer on the opposite side is rough and absorptive, serving as a porous scaffold that allows for the body's cells to infiltrate the UBM. Through our proprietary manufacturing process, we retain both of these layers while removing cellular content without the use of harsh and damaging detergents or chemicals. Our ability to retain these two layers differentiates our products from other ECM-based products. Specifically, our products contain a protein composition that

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provides a surface for cellular ingrowth and maturation, with the intent to help restore natural tissue function at the wound or surgical site. In addition, we use a proprietary processing method to remove the cellular content specific to a pig. This decellularization process isolates the ECM of the tissue, resulting in products that are acellular scaffolds appropriate for use in humans. When used to treat a wound or soft tissue surgical defect, these scaffolds provide a platform for the body's cells to populate and differentiate, resulting in biomechanically-functional tissue.

In a normal healing process, the body works to close disrupted tissues to prevent infection and further tissue damage, often resulting in the development of fibrous scar tissue and potentially diminishing biomechanical functionality. This process is largely regulated by macrophages in the immune system. There are two main types of macrophages involved in the healing process: M1, or pro-inflammatory macrophages, and M2, or anti-inflammatory macrophages. While pro-inflammatory M1 macrophages play an important role in the early stages of normal wound healing, the ability of the body to transition to a predominately M2 macrophage environment is crucial to promote repair and regeneration of damaged tissues.

The unique structure and composition of UBM is designed to provide an environment in which macrophages are more likely to exhibit an M2-type healing response. While an M1 process often results in increased inflammation and scarring, in an M2 process, the macrophages and other cells break down the UBM as the body naturally generates new proteins, remodeling the scaffold into a tissue that is similar to the native tissue structure and biomechanical function while potentially reducing scarring and resulting in better aesthetic outcomes.

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Our UBM products

The following table summarizes the key indications and attributes of our currently marketed products:

Limitations of competitive biologically-derived and synthetic products

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treatment, including those made from biologic tissue such as human, porcine, bovine and ovine sources and those made from synthetic materials such as polyethylene, polypropylene or polyester. Biologically-derived products include chemically strengthened, or crosslinked, products and cellular, acellular and amniotic products. We believe characteristics of competing products including (i) the type of tissue or synthetic material utilized, (ii) the processing techniques required and (iii) physical attributes including thickness, porosity, pliability and form, can limit the functional healing response of the body.

Specifically, we believe these limitations include:

➤: Risk of foreign body response and inflammation. Use of synthetic and many biologically-derived products can lead to a foreign body response, characterized by chronic inflammation and scarring.
➤: Limited remodeling, formation of scar tissue and infection. Rather than remodel functional tissue, many synthetic and biologically-derived products heal through the formation of scar tissue, thereby limiting the body's healing response and potentially leading to decreased function, prolonged healing times, infection, dehiscence and other surgical complications.
➤: Limited or lack of resorption. The body has difficulty resorbing crosslinked and synthetic products, limiting the body's natural healing process and resulting in complications such as adhesions, fistula formation and product erosion into surrounding tissues and organs.
➤: Limited application versatility. The strength levels and handling characteristics of synthetic and biologically-derived products vary, which can limit their range of applications depending on the needs for strength and conformability for a given type of wound being treated. Furthermore, most synthetic and biologically-derived products come in sheet form and lack alternative configurations, such as a particulate formulation, making the management of wounds or defects with irregular topographies more difficult.
➤: Limited storage flexibility and logistical challenges. Many currently available products have manufacturing and storage limitations that restrict their use and potential range of applications.
➤: Cost-effectiveness concerns. We believe the cost-effectiveness of such products, taking into account both clinical performance and price, is an important consideration for use. While synthetic products can be effective and are typically lower priced, they can lead to costly complications and a higher overall cost of care. Biologically-derived products can be effective when synthetic products fail or are not appropriate, but typically command a higher price.

Key advantages of our products

Our products support the body's natural remodeling process and address many of the limitations of competitive biologically-derived and synthetic products. The advantages of our products include:

➤: Clinically favorable healing with reduced foreign body response and inflammation. Unlike synthetic and many other biologically-derived products, our products are acellular scaffolds that the body recognizes as natural tissue, which facilitates new healthy tissue growth while avoiding foreign body response. Both the non-synthetic and fully resorbable nature of our products allow for rapid cell infiltration in the wound tissue where scarring would typically occur, leading to the restoration of functional tissue with more desirable aesthetic outcomes. Moreover, our products can be placed in challenging defects while avoiding many of the clinical complications associated with chronic inflammation.
➤: Natural, functional tissue remodeling in place of scar tissue. Our products facilitate the body's ability to form tissue that has characteristics similar to natural, uninjured tissue. This feature minimizes encapsulation, related infections and complications associated with the formation of scar tissue and tissue adhesions.

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➤: Non-crosslinked and resorbable. Our products do not require harsh chemicals to decellularize the porcine bladder material. Furthermore, the composition of our products does not require crosslinking to achieve adequate strength. These characteristics allow our products to be highly resorbable by the body, which facilitates the body's natural healing process.
➤: Broad application versatility. The physical properties of our technology combined with our ability to offer our products in a variety of forms enable us to address a wide range of clinical applications. Our products are available as flexible sheets that vary in the number of UBM layers and sizing as well as in a particulate formulation that is especially useful for wounds or defects with irregular topographies. In applications like hernia repair, in which strength is a significant consideration, we manufacture various configurations to enable clinicians to provide the appropriate products to their patients. In addition, our sheet and particulate products are cleared by the FDA for concomitant use in wound management, which we believe enables clinicians to more thoroughly and uniformly address the wound site and differentiates us from our competitors.
➤: Convenience and ease of use. Our products have a two-year shelf life, can be stored at room temperature and do not require special handling. These attributes may provide greater convenience for our customers compared to other biologically-derived products. Moreover, because our products are not human-derived, they are not subject to The American Association of Tissue Banks requirements, which enables ease of access to our products.
➤: Cost-effective alternative. We offer products with high clinical utility as part of the treatment of a broad range of moderate to severe traumatic wounds and the reinforcement of soft tissue surgical defects. We believe that because our products provide durable wound repair and restoration of natural tissue, while avoiding many clinical complications often associated with other biologic and synthetic alternatives, we provide cost-effective solutions.

Our growth strategies

We strive to enhance our position as a leading regenerative medicine company focused on the development, manufacture and commercialization of acute care solutions as part of the treatment and management of moderate to severe wounds and reinforcement of soft tissue surgical defects. In order to achieve this goal, we seek to establish our products as standards of care across multiple delivery channels by employing the following strategies:

➤

Increase awareness of our products in the markets in which we compete. We intend to broaden our market presence by further increasing awareness of our differentiated technology, products and brand among hospitals, wound care centers, long-term acute care hospitals, or LTACHs, government facilities, ambulatory surgical centers, physician offices and patient advocates, as well as other key clinical and economic decision-makers.

➤

Continue the development of data supporting the clinical benefits of UBM. We intend to grow the body of clinical evidence supporting the benefits and efficacy of UBM in order to further drive adoption of our products. We are conducting post-market studies which we believe can expand the commercialization potential for our existing portfolio, primarily by broadening clinical differentiation and reimbursement coverage for additional care settings.

➤

Expand and enhance the effectiveness of our U.S. commercial organization to achieve greater market adoption. Through disciplined expansion and development of our sales and marketing teams, we intend to focus our sales and marketing efforts to grow our business by:

-: Further penetrating existing acute care customer accounts. We intend to leverage our established contracts with hospitals, hospital networks, GPOs, IDNs and government facilities to drive further penetration in acute care settings.

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-: Growing our acute care customer base. In addition to our existing acute care accounts, we plan to add new acute care customers, both within the traditional hospital setting, as well as through the targeting of LTACHs and facilities operated by the Department of Veterans Affairs.
-: Selectively expanding the sale of our products into non-acute care facilities. We believe our direct sales force will be able to strategically drive adoption and utilization of our products in some non-acute care facilities, such as outpatient wound management centers and physician's offices, representing a potential opportunity for longer-term growth.

➤

Expand our international sales opportunities. We will continue to work with distributors to attain regulatory approval for our products in additional jurisdictions outside of the United States. We expect to continue to expand our international sales opportunities in the following regions:

-: APAC: China and South Korea represent our most significant opportunities within APAC due to high unmet demand for quality healthcare, increasing initiatives by governments to improve healthcare infrastructure, growing awareness about the clinical benefits of regenerative medicine among end-users and the increasing prevalence of chronic and acute diseases.
-: EMEA: Western Europe represents our most significant opportunity in EMEA due to the increasing incidence of acute and chronic diseases, high awareness of technologically advanced regenerative therapies and the rapidly aging population.
-: Rest of world: The need for treatment and management of moderate to severe wounds and reinforcement of soft tissue surgical defects is a global issue. We plan on selectively entering additional international markets based on varying country-specific factors, including the regulatory environment, awareness and advocacy of regenerative medicine technologies, healthcare infrastructure and economic development.

➤

Expand and enhance our product portfolio, including expanding treatment applications, to grow our addressable markets. We intend to submit additional 510(k) premarket notifications to the FDA in the coming years, as well as actively consider other product opportunities that may require a premarket approval application or biologics license application. We also intend to pursue a number of initiatives, which include adding features and designs to our existing products, as well as expanding treatment applications for these products. If successful, we believe these additional applications may provide opportunities to increase future sales by allowing us to address large, underserved markets.

Effects of the COVID-19 pandemic on our business

With the global spread of the ongoing COVID-19 pandemic, we have implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on our employees, customers and business. For example, we have implemented new safety measures designed to minimize risk for our employees and, ultimately, our customers, such as enacting new employee screening procedures for possible COVID-19 exposure, having certain employees work in two-week rotating shifts and allowing certain employees to work from home. Given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, our business, financial condition, results of operations and growth prospects have been, and we believe are likely in the near-term to continue to be, adversely affected. See the section titled "Risk factors" in this prospectus for more details on the risks we face as a result of the COVID-19 pandemic. We continue to closely monitor the COVID-19 situation as we evolve our business continuity plans and response strategy.

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Recent Developments

We began to observe a decline in procedure volumes in the second half of March 2020, driven by impacts of the COVID-19 pandemic. Factors that specifically impacted our business included limitations on access to hospitals, reduced incidents of trauma driven by restricted mobility and deferrals of elective procedures. However, in April 2020, as hospital access began to resume and restrictions on mobility began to lift in certain areas in the United States, we began to observe a gradual recovery in weekly procedure volumes.

Based on available information to date, for the three months ended June 30, 2020, we estimate that we achieved revenue of $19.4 million to $19.7 million, representing a decrease of approximately 21.2% to 22.4% on a year-over-year basis from $25.0 million for the three months ended June 30, 2019. Our business and revenues gradually began to recover throughout the second quarter of 2020 and while estimated sales during the months of April and May were lower than in the corresponding months in the prior year period, estimated sales in June were higher as compared to June 2019.

These estimates are preliminary and unaudited. In addition, such preliminary revenue data is based on our current expectations and may be adjusted as a result of, among other things, the completion of our quarter-end financial and accounting closing procedures for the quarter ended June 30, 2020 and other developments that may arise between now and the time the financial results for this period are finalized, and should not be viewed as a substitute for full quarterly financial statements prepared in accordance with accounting principles generally accepted in the United States.

RISK FACTORS SUMMARY

Investing in our common stock involves substantial risks. The risks described in the section titled "Risk factors" immediately following this prospectus summary may cause us to not realize the full benefits of our strengths or to be unable to successfully execute all or part of our strategy. Some of the more significant risks include the following:

➤: We may not be profitable in the near term or maintain profitability in the future.
➤: We may be unable to successfully execute on our growth strategy.
➤: Our future success will largely depend on our ability to maintain and further grow clinical acceptance and adoption of our products, and we may be unable to adequately educate healthcare practitioners on the use and benefits of our products.
➤: We could be subject to increased monetary penalties and other sanctions, including exclusion from federal healthcare programs, if we fail to comply with the terms of our Federal Settlement Agreement, State Settlement Agreements or Corporate Integrity Agreement.
➤: The global COVID-19 pandemic and related impacts are having a material adverse effect on our operations, financial performance and cash flows. We are unable to predict the extent to which the pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives.
➤: Our results of operations could suffer if we are unable to manage our planned international expansion effectively.
➤: We may be unable to maintain current, and obtain future, contracts with major GPOs and IDNs for our products, and even if we are able to do so, such contracts may not generate sufficient sales of our products.
➤: We may be unable to compete successfully against our existing or future competitors.
➤: We rely on third-party suppliers and providers, some of which are currently the only source for the respective materials or services they provide to us.

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➤: Substantially all of our revenue has been, and we expect that it will continue to be, generated from sales of our UBM products, and we therefore are highly dependent on their success.
➤: We rely heavily on our sales professionals to market and sell our products worldwide. If we are unable to hire, effectively train, manage, improve the productivity of, and retain our sales professionals, our business will be harmed, which would impair our future revenue and profitability.
➤: Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any products we may develop.
➤: If our products are found to be defective or otherwise pose certain safety risks, we may decide, or the FDA could require us, to initiate a recall, and we will be subject to medical device reporting requirements, and we could be subject to agency enforcement actions.
➤: A reclassification of our products by the FDA could significantly increase our regulatory costs, including the time and expense associated with required clinical trials, or may require us to suspend or discontinue sales of our products.
➤: Changes in existing third-party coverage and reimbursement may impact our ability to sell our products.
➤: We may need additional funding beyond the proceeds of this offering and may be unable to raise capital when needed, which would force us to delay, reduce, eliminate or abandon our commercialization efforts or product development programs.
➤: Our core patents with claims directed to our currently marketed products will soon expire and our remaining patents and other intellectual property rights may not adequately protect our products.

OUR CORPORATE INFORMATION

We were incorporated under the laws of the State of Delaware in June 1999. Our principal executive offices are located at 6640 Eli Whitney Drive, Columbia, Maryland 21046, and our telephone number is (800) 826-2926. Our website address is www.acell.com. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus or in deciding to purchase our common stock.

We have proprietary rights to a number of trademarks used in this prospectus which are important to our business. "ACell," "MicroMatrix," "Cytal," "Gentrix" and our other registered and common law trade names, trademarks and service marks are the property of ACell, Inc. Other trade names, trademarks and service marks used in this prospectus are the property of their respective owners. Solely for convenience, the trademarks and trade names in this prospectus may be referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.

IMPLICATIONS OF BEING AN EMERGING GROWTH COMPANY

We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We may take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm under Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until the last day of our fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross

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revenues exceed $1.07 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period. In addition, the JOBS Act provides that an emerging growth company can delay adopting new or revised accounting standards until those standards apply to private companies. We have elected to use the extended transition period under the JOBS Act. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

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The offering


Common stock offered by us		5,000,000 shares
Option to purchase additional shares of common stock offered by the selling stockholders		750,000 shares
Common stock to be outstanding after this offering		22,675,510 shares
Use of proceeds		We estimate that our net proceeds from the sale of our common stock that we are offering will be approximately $67.4 million, assuming an initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares of our common stock by the selling stockholders.
		The principal purposes of this offering are to increase our capitalization and financial flexibility, to create a public market for our common stock and to facilitate our future access to the capital markets. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds we receive from this offering. However, we currently intend to use the net proceeds we receive from this offering to increase awareness of our technology and products, fund clinical trials and post-market studies, grow our sales force, upgrade our Lafayette, Indiana facility, expand our international sales, expand and enhance our product portfolio and for working capital and general corporate purposes.
		See "Use of proceeds" for additional information.
Selling stockholders		Certain selling stockholders have granted the underwriters an option to purchase 750,000 shares of common stock. See "Principal and selling stockholders" for additional information.
Risk factors		You should carefully read the section titled "Risk factors" beginning on page 14 and the other information included in this prospectus for a discussion of facts that you should consider before deciding to invest in shares of our common stock.
Proposed Nasdaq Global Market symbol		"ACLL"

The number of shares of common stock that will be outstanding after this offering is based on 17,675,510 shares, which consists of (i) 4,806,044 shares of common stock outstanding as of March 31, 2020 and (ii) 12,869,466 shares of common stock issuable upon the automatic conversion

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of all outstanding shares of convertible preferred stock, which will occur immediately prior to the completion of this offering. This number excludes:

➤: 2,609,229 shares of common stock issuable on the exercise of outstanding stock options as of March 31, 2020 under our 2002 Stock Option and Incentive Plan, or 2002 Plan, our 2011 Stock Option and Grant Plan, or 2011 Plan, and granted outside of our equity incentive plans, with a weighted average exercise price of $5.13 per share;
➤: 2,206 shares of common stock issuable on the exercise of a common stock warrant at an exercise price of $1.13 per share, which will expire upon the earlier of August 24, 2020 or the completion of this offering;
➤: 4,925,786 shares of common stock reserved for future issuance under our 2020 equity incentive plan, or our 2020 Plan, which will become effective immediately prior to the execution of the underwriting agreement related to this offering, as well as any future increases, including annual automatic evergreen increases, in the number of shares of common stock reserved for issuance thereunder, and any shares underlying outstanding stock awards granted under our 2002 Plan and 2011 Plan that expire or are repurchased, forfeited, cancelled or withheld, as more fully described in the section titled "Executive compensation—Equity Incentive Plans"; and
➤: 282,396 shares of common stock reserved for issuance under our employee stock purchase plan, or our ESPP, which will become effective immediately prior to the execution of the underwriting agreement related to this offering, as well as any future increases, including annual automatic evergreen increases, in the number of shares of common stock reserved for future issuance thereunder.

In addition, unless we specifically state otherwise, the information in this prospectus assumes:

➤: a 1-for-2.8329 reverse stock split of our common stock effected on July 10, 2020;
➤: the filing of our amended and restated certificate of incorporation and the effectiveness of our amended and restated bylaws, each of which will occur immediately prior to the completion of this offering;
➤: no exercise of the underwriters' option to purchase additional shares of common stock from the selling stockholders in this offering; and
➤: no exercise of the outstanding stock options and warrant described above.

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Summary financial data

The summary statements of operations data for the fiscal years ended December 31, 2019 and 2018 have been derived from our audited financial statements included elsewhere in this prospectus. The summary statements of operations data for the three months ended March 31, 2020 and 2019 and the summary balance sheet data as of March 31, 2020 have been derived from our unaudited interim financial statements included elsewhere in this prospectus. You should read the financial data set forth below in conjunction with our financial statements and the accompanying notes and the information in the section titled "Management's discussion and analysis of financial condition and results of operations" included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any period in the future.

	Year ended December 31,						Three months ended March 31,

Statements of operations data:	2019			2018			2020			2019

	(in thousands, except share and per share data)
Revenue	$	100,794		$	89,221		$	23,684		$	24,151
Cost of goods sold		19,111			16,289			4,646			4,434

Gross profit		81,684			72,932			19,038			19,716

Operating expenses:
Selling, general and administrative		72,364			66,977			20,040			17,438
Research and development		7,944			9,020			1,739			2,288

Total operating expenses		80,307			75,997			21,779			19,725

Income (loss) from operations		1,376			(3,065	)		(2,741	)		(9	)

Other income (expense):
Interest expense		(373	)		(303	)		(98	)		(127	)
Interest income		166			180			24			42
Other income		121			9			59			—

Total other expense		(87	)		(115	)		(15	)		(85	)

Income (loss) before income taxes		1,289			(3,180	)		(2,756	)		(94	)
Income taxes benefit		160			49			86			160

Net income (loss)	$	1,449		$	(3,131	)	$	(2,671	)	$	66



Net income (loss) per common share, basic(1)	$	0.08		$	(0.78	)	$	(0.56	)	$	0.00



Net income (loss) per common share, diluted(1)	$	0.08		$	(0.78	)	$	(0.56	)	$	0.00



Weighted average number of common shares outstanding, basic(1)		4,715,669			4,006,027			4,802,342			4,659,219



Weighted average number of common shares outstanding, diluted(1)		5,885,061			4,006,027			4,802,342			5,918,452



Pro forma net income (loss) per common share, basic(1)	$	0.08					$	(0.15	)
Pro forma net income (loss) per common share, diluted(1)	$	0.08					$	(0.15	)
Pro forma weighted average number of common shares outstanding, basic(1)		17,585,135						17,671,808
Pro forma weighted average number of common shares outstanding, diluted(1)		18,754,527						17,671,808

(1): See Note 2 to our financial statements appearing at the end of this prospectus for further details on the calculations of basic and diluted net income (loss) per common share. The pro forma numbers above also give effect to the issuance of 12,869,466 shares of common stock issuable upon the automatic conversion of all outstanding shares of convertible preferred stock, which will occur immediately prior to the completion of this offering.

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	As of March 31, 2020

Balance sheet data:	Actual			Pro forma(1)			Pro forma as adjusted(2)(3)

	(in thousands)
Cash and cash equivalents	$	4,559		$	19,099		$	86,978
Working capital(4)		16,705			31,245			98,551
Total assets		38,976			53,516			120,293
Legal settlement liability, including current portion(5)		12,325			12,325			12,325
Debt		500			15,040			15,040
Total liabilities		22,312			36,852			36,279
Convertible preferred stock		33			—			—
Additional paid-in capital		42,715			42,748			110,080
Accumulated deficit		(26,089	)		(26,089	)		(26,089	)
Total stockholders' equity		16,664			16,664			84,014

(1): The pro forma balance sheet data gives effect to the automatic conversion of all outstanding shares of convertible preferred stock into an aggregate of 12,869,466 shares of common stock, which will occur immediately prior to the completion of this offering, as well as the receipt in April 2020 of (i) $9.0 million as part of the federal Paycheck Protection Program which we refer to as the PPP loan, and (ii) $5.5 million from the SVB line of credit.
(2): The pro forma as adjusted balance sheet data gives effect to (a) the items described in footnote (1) above and (b) our receipt of estimated net proceeds from the sale of 5,000,000 shares of common stock that we are offering at an assumed initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(3): A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) each of cash and cash equivalents, working capital, total assets, and total stockholders' equity by $4.7 million, assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) each of cash and cash equivalents, working capital, total assets, and total stockholders' equity by $14.0 million, assuming the assumed initial public offering price of $15.00 per share of common stock remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
(4): Working capital is defined as current assets less current liabilities.
(5): Represents payment obligations pursuant to settlement agreements with the U.S. federal government and certain states. See "Business—Legal proceedings" for more details regarding these settlement agreements.

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Risk factors

An investment in our common stock involves a high degree of risk. You should consider carefully the following risks and other information contained in this prospectus before you decide whether to buy our common stock. If any of the events contemplated by the following discussion of risks should occur, our business, results of operations, financial condition and growth prospects could suffer significantly. As a result, the market price of our common stock could decline, and you may lose all or part of the money you paid to buy our common stock. The risks below are not the only ones we face. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business. Certain statements below are forward-looking statements. See "Special note regarding forward-looking statements" in this prospectus.

RISKS RELATED TO OUR BUSINESS AND GROWTH STRATEGY

We may not be profitable in the near term or maintain profitability in the future.

We reported a net loss of $2.7 million for the three months ended March 31, 2020 and there can be no assurance that we will achieve or maintain profitability in the future. As of March 31, 2020, we had an accumulated deficit of $26.1 million. Our future profitability depends on, among other things, our ability to generate revenue in excess of our costs. We expect to incur significant operating costs in the near term as we conduct or fund research, including clinical trials and post-market studies, seek to expand our product portfolio and the applications for which our products may be used, grow our commercial organization and incur additional expenses related to operating as a public company. In addition, we have significant and continuing fixed costs relating to the maintenance of our assets and business. We may incur significant losses in the future for a number of reasons, including the other risks described in this prospectus and specifically those related to the COVID-19 pandemic, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown events.

We may be unable to successfully execute on our growth strategy.

We intend to grow our business and market opportunity by further penetrating our current acute care customer accounts, growing our acute care customer base, selectively expanding the sale of our products into non-acute care settings, expanding our international sales opportunity and enhancing and expanding our product portfolio. Each of these growth strategies will require considerable time and resources, and we may not be successful in executing on any or all of these strategies. Furthermore, the continued impact of the COVID-19 pandemic may delay our ability to execute on our strategy.

A primary component of our growth strategy is to increase awareness of our products in the markets in which we compete. We may be unable to increase awareness cost-efficiently, on a timely basis or at all among hospitals, wound care centers, long-term acute care hospitals, or LTACHs, government facilities, ambulatory surgical centers, physician offices and patient advocates, as well as other key clinical and economic decision-makers. A significant part of our strategy to increase awareness is to continue the development of data supporting the clinical benefits of porcine urinary bladder matrix, or UBM. In order to do so, we will be required to invest significant time, resources and money in conducting or sponsoring research, including clinical trials and post-market studies, which could divert our resources from other parts of our business and growth strategy. Even if we are able to develop additional data on UBM and our products, there is no guarantee that the data will support the efficacy, cost-effectiveness and other benefits of our products at all or to the extent we expect. If the outcomes of such studies and trials are not positive or do not show statistically significant benefits of UBM, our technology platform or our products, we may suffer setbacks in increasing awareness and adoption of our products despite making these significant investments.

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Another component of our growth strategy is to expand and enhance our product portfolio, including expanding treatment applications for our current products. We intend to submit additional 510(k) premarket notifications in the coming years to pursue a number of initiatives, which include adding features and designs to our existing products as well as expanding treatment applications for these products. We may not be successful in obtaining the regulatory clearances that we seek, which could limit our market opportunities for our products. In addition, we are actively considering other product opportunities for which the U.S. Food and Drug Administration, or the FDA, may require a premarket approval application, or PMA, or biologics license application, or BLA, to commercialize. We have no experience applying for or receiving approval of a PMA or BLA and may not be successful in these efforts.

Our growth strategy also involves expanding our international operations. In addition to risks associated with international operations in general, we will also need to navigate complex foreign regulatory requirements with which we may not be familiar or have experience. To obtain regulatory approval in other countries, we must comply with numerous and varying regulatory requirements of such countries regarding safety, efficacy, manufacturing, clinical trials, commercial sales, pricing and distribution of our products. Although we have received regulatory clearance for our products in the United States and some other countries, we cannot ensure that we will obtain regulatory clearance or approval in other countries. If we fail to obtain regulatory clearance approval in any jurisdiction, the geographic market for our products could be limited.

There are several aspects of our growth strategy and opportunities to grow our sales and product portfolio. However, we have limited financial and managerial resources, and we may forego or delay pursuit of growth opportunities that later prove to have greater value to our business. Our resource allocation decisions may cause us to fail to capitalize on viable opportunities, and we could spend resources on strategies that are not ultimately successful.

Our future success will largely depend on our ability to maintain and further grow clinical acceptance and adoption of our products, and we may be unable to adequately educate healthcare practitioners on the use and benefits of our products.

Healthcare practitioners play a significant role in determining the course of a patient's treatment and, ultimately, the type of product that will be used to treat the patient. As a result, our commercial success is heavily dependent on our ability to educate these practitioners on the use of our products in surgical soft tissue repair procedures and complex wound management. Acceptance and adoption of our products in our markets depends on educating healthcare practitioners as to the distinctive characteristics, benefits, safety, clinical efficacy and cost-effectiveness of our products, including potential comparisons to our competitors' products, and on training healthcare practitioners in the proper application of our products. If we are not successful in convincing healthcare practitioners of the merits and advantages of our products compared to our competitors' products, they may not use our products and we will be unable to increase our sales and sustain growth or profitability.

Convincing healthcare practitioners to dedicate the time and energy necessary to properly train to use new products and techniques is challenging, and we may not be successful in these efforts. In particular, as healthcare resources are strained due to the ongoing COVID-19 pandemic, it may be more difficult to convince healthcare practitioners to commit their time and resources to learning to use a new product. If healthcare practitioners are not properly trained, they may use our products ineffectively, resulting in unsatisfactory patient outcomes, patient injury, negative publicity or lawsuits against us. Accordingly, even if our products show superior benefits, safety or efficacy, based on head-to-head clinical trials, in comparison to alternative treatments, our success will depend on our ability to gain and maintain market acceptance for our products. If we fail to do so, our sales will not

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grow and our business, financial condition and results of operations will be adversely affected. We may not have adequate resources to effectively educate the medical community and our efforts may not be successful due to physician resistance or negative perceptions regarding our products.

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

➤: lack of experience with extracellular matrix and UBM technologies or other biologically-derived regenerative products;
➤: lack or perceived lack of evidence supporting additional patient benefits;
➤: perceived liability risks generally associated with the use of new products and procedures;
➤: limited or lack of availability of coverage and reimbursement within healthcare payment systems;
➤: existing sole-source supply contracts with purchasing entities, such as hospital systems and group purchasing organizations, or GPOs, that do not use our products;
➤: limited or lack of available published clinical data;
➤: pressure to contain costs and use lower cost alternatives to our products;
➤: costs associated with the purchase of new products; and
➤: the time commitment that may be required for training to use new products or technologies.

In addition, we believe recommendations and support of our products by key opinion leaders are essential for market acceptance and adoption. If we do not receive support from such key opinion leaders or if long-term clinical data does not show the benefits of using our products, we may not achieve adequate commercial acceptance of our products.

We could be subject to increased monetary penalties and other sanctions, including exclusion from federal healthcare programs, if we fail to comply with the terms of our Federal Settlement Agreement, State Settlement Agreements or Corporate Integrity Agreement.

On May 14, 2019, we entered into a civil False Claims Act settlement with the United States, acting through the United States Department of Justice and on behalf of the Office of Inspector General of the Department of Health and Human Services, or OIG-HHS, the Defense Health Agency, acting on behalf of the TRICARE Program and the United States Department of Veteran Affairs, which is referred to herein as the Federal Settlement Agreement. As contemplated by the Federal Settlement Agreement, the United States Attorney's Office for the District of Maryland, or USAO, filed an Information against us on June 6, 2019, in a case captioned United States of America v. ACell, Inc., Action No. ELH-19-0282 in the United States District Court for the District of Maryland, and, on June 11, 2019, we entered into a plea agreement with the USAO on behalf of the Department of Justice and pled guilty to one misdemeanor count of failure to report a medical device removal. In connection with the plea agreement, we also agreed to pay a criminal fine of $3.0 million and establish and maintain a compliance and ethics program. On May 14, 2019, we also entered into civil False Claims Act settlement agreements with the states of Maryland, Wisconsin, and Florida, which are referred to collectively herein as the State Settlement Agreements, on the basis of the same conduct that was the subject of the Federal Settlement Agreement.

Under the terms of the Federal Settlement Agreement and the State Settlement Agreements, we have agreed to pay to the Department of Justice and the states of Maryland, Wisconsin, and Florida a total

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of $12.8 million, plus interest at a rate of 2.875%, referred to herein as the Settlement Amount, over the course of five years, and a total amount of $222,500 in attorneys' fees and costs for plaintiffs' counsel in the two qui tam complaints. Subject to our payment of the Settlement Amount, the United States has released us from any civil or administrative monetary claim the United States has under the False Claims Act and certain other statutes and common law theories of liability arising from the conduct that was the subject of the Federal Settlement Agreement, and the states of Maryland, Wisconsin and Florida have released us from any civil or administrative monetary cause of action that the state had for any claims submitted or caused to be submitted to the state's Medicaid Programs as a result of the conduct covered by the State Settlement Agreements. Likewise, in consideration of the obligations in the Federal Settlement Agreement and the Corporate Integrity Agreement, as described below, OIG-HHS agreed to release and refrain from instituting, directing or maintaining any administrative action seeking to exclude us from Medicare, Medicaid and other Federal health care programs.

If we violate the terms of the Federal Settlement Agreement or State Settlement Agreements, consequences could include accelerated settlement payments, rescission of the agreements and/or exclusion or disbarment from participation in all federal health care programs. A breach of the terms of our plea agreement could result in the rescission of the plea agreement and monetary penalties.

On May 13, 2019, we entered into a Corporate Integrity Agreement with the OIG-HHS. The Corporate Integrity Agreement has a term of five years and contains various compliance obligations designed to help ensure our ongoing compliance with federal health care program requirements. The terms of the Corporate Integrity Agreement include internal monitoring requirements, compliance training, certification obligations by our Board of Directors and certain employees, reporting requirements to OIG-HHS, and the engagement of an independent review organization to review and prepare written reports regarding reviews of certain of our systems and transactions.

If we fail to comply with the terms of the Corporate Integrity Agreement, we may be required to pay certain monetary penalties. Furthermore, material, uncorrected violations of the Corporate Integrity Agreement could lead to our exclusion or disbarment from participation in Medicare, Medicaid and other federal and state healthcare programs and subject us to repayment obligations. Any such exclusion or disbarment would result in the revocation or termination of certain government contracts and potentially have a material adverse effect on our results of operations. In addition, the Corporate Integrity Agreement increases the amount of information we must provide to the federal government regarding our compliance with federal regulations. The reports we provide in connection with the Corporate Integrity Agreement could result in greater scrutiny by other regulatory agencies.

In addition, we could be subject to future investigations. Many healthcare companies have announced government investigations of their sales and marketing practices and other activities. Even with compliance training and a company culture of compliance, our current or future practices may nonetheless become the subject of an investigation. A number of laws, often referred to as "whistleblower" statutes, provide for financial rewards to employees and others for bringing to the attention of the government practices that the government views as illegal or fraudulent. The costs of investigating any claims, responding to subpoenas of investigators and any resulting fines can be significant and could divert the attention of our management from operating our business.

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Risk factors

The global COVID-19 pandemic and related impacts are having an adverse effect on our operations, financial performance and cash flows. We are unable to predict the extent to which the pandemic and related impacts will continue to adversely impact our business operations, financial performance, results of operations, financial position and the achievement of our strategic objectives.

Our operations, financial performance and cash flows have been negatively impacted by the COVID-19 pandemic that has caused, and is expected to continue to cause, the global slowdown of economic activity, including the decrease in demand for a broad variety of goods and services, disruptions in global supply chains and significant volatility and disruption of financial markets. Because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing, and difficult to predict, the pandemic's impact on our operations and financial performance, as well as its impact on our ability to successfully execute our business strategies and initiatives, remains uncertain and difficult to predict. In addition, the ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control.

The COVID-19 pandemic has subjected, and is expected to continue to subject, our operations, financial performance and financial condition to a number of risks including, but not limited to, the following:

➤

Product sales risks: Beginning in mid-March 2020, we began experiencing decreased demand for our products, resulting in a material decrease in our product sales. As a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking to quell the spread of COVID-19 and protect our customers, employees, and the patients receiving our products, we may experience significant and unpredictable reductions in demand for certain of our products as health care customers re-prioritize the treatment of patients. This decrease in demand, and potential decreased demand in the future, may be attributable to:

•: Lower rates of traumatic acute wounds. We believe that state stay-at-home orders, closures of businesses, restrictions on travel and social distancing measures have all contributed to fewer acute injuries as people stay and work in their homes.
•: Slowdown of elective surgeries. In the United States in mid-March 2020, governmental authorities began recommending, and in certain cases required, that elective procedures be suspended or canceled to avoid non-essential patient exposure to medical environments and potential infection with COVID-19 and to focus limited resources and personnel capacity toward the treatment of COVID-19. Although some healthcare facilities are in the early stages of resuming elective procedures, these policies vary from facility to facility.
•: Temporary hospital limitations and restrictions on visitors. A key element of our strategy and success has been the relationships our sales representatives have forged with hospitals and physicians, and their presence in the operating room when the decision to use our products is made. As hospitals seek to limit the spread of COVID-19, many have instituted temporary restrictions which have included requiring some of our sales force personnel to present documentation of a negative COVID-19 test result in order to be present in the hospital.

➤

Operations-related risks: We are facing increased operational challenges from the need to protect employee health and safety. While many of our employees are able to work remotely, we also must continue our manufacturing and distribution operations. We have implemented new safety measures designed to minimize risk for our employees and, ultimately, our customers, such as enacting a new screening protocol to identify employees who may have been exposed to COVID-19 and having

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these employees work in two-week rotating shifts. However, because the severity, magnitude, and duration of the COVID-19 pandemic and its economic consequences are uncertain, rapidly changing, and difficult to predict, we may, in the future, have to consider taking additional actions including further reductions to salary and work hours, furloughs, restructuring, layoffs or extensions of remote work arrangements, which may negatively impact our workforce and our business. These negative impacts could include inhibiting our ability to quickly respond to increased customer demand and to take advantage of more favorable economic and market conditions after the pandemic subsides as well as lower productivity and higher employee attrition.

➤: Liquidity- and funding-related risks: Although we had cash and cash equivalents of $4.6 million as of March 31, 2020 and have subsequently drawn approximately $5.5 million on our line of credit and received approximately $9.0 million as part of the federal Paycheck Protection Program, a prolonged period of generating lower cash flows from operations could adversely affect our financial condition and the achievement of our strategic objectives. Additionally, as a result of weaker than previously anticipated operating and financial performance of our business, our cost of funds and related margins, liquidity, competitive position and access to capital markets may be adversely affected, negatively impacting our business. Any future credit downgrades could further adversely affect our cost of funds and related margins, liquidity, competitive position and access to capital markets, and a significant downgrade could have an adverse commercial impact on our business. Conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding, which could adversely affect our business, financial position and results of operations. Although the U.S. federal and other governments have announced a number of funding programs to support businesses, our ability or willingness to access funding under such programs may be limited by regulations or other guidance, by further change or uncertainty related to the terms of these programs or by being a public company.

As the COVID-19 pandemic continues to adversely affect our operating and financial results, it may also have the effect of heightening many of the other risks described in this prospectus. Further, the COVID-19 pandemic may also affect our operating and financial results in a manner that is not presently known to us or that we currently do not expect to present significant risks to our operations or financial results, particularly if the COVID-19 pandemic and its associated impacts reoccur in successive waves in the coming months.

Our results of operations could suffer if we are unable to manage our planned international expansion effectively.

Further expansion into international markets is an element of our business strategy and involves risk. The sale and shipment of our products across international borders, as well as the purchase of materials and products from international sources, subject us to extensive U.S. and foreign governmental trade, import, and export and customs regulations and laws. Compliance with these regulations and laws is costly and exposes us to penalties for non-compliance. Other laws and regulations that can significantly affect us include various anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, or FCPA, anti-boycott laws, anti-money laundering laws and regulations relating to economic sanctions imposed by the United States, including the Office of Foreign Assets Control or the U.S. Treasury. Any failure to comply with applicable legal and regulatory obligations in the United States or abroad could adversely affect us in a variety of ways that include, but are not limited to significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments and restrictions on certain business activities. The occurrence of any of these events could have a negative effect on our financial returns and impact our planned foreign expansion.

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We may be unable to maintain current, and obtain future, contracts with major GPOs and integrated delivery networks, or IDNs, for our products, and even if we are able to do so, such contracts may not generate sufficient sales of our products.

Many existing and potential customers for our products within the United States are members of GPOs and IDNs, including accountable care organizations or public-based purchasing organizations, and our business strategy includes entering into major contracts with these organizations. Our products can be contracted under national tenders or with larger hospital GPOs. These organizations typically award contracts on a category-by-category basis through a competitive bidding process. We are currently responding to bids and negotiating a number of GPO and IDN agreements. Due to the highly competitive nature of the bidding process and the GPO and IDN contracting processes in the United States, we may not be able to obtain contracts with major GPOs and IDNs for our products. In addition, while having a contract with a major purchaser for a given product category can facilitate sales, sales volumes of those products may not be maintained. For example, GPOs and IDNs are increasingly awarding contracts to multiple suppliers for the same product category. Even if we are the sole contracted supplier for our product category, members of the GPO or IDN generally are free to purchase from other suppliers. Furthermore, such contracts typically are terminable without cause upon 60 to 90 days' notice.

We may be unable to compete successfully against our existing or future competitors.

We operate in a highly competitive market characterized by rapid technological change. We compete with both alternative biologically-derived products and synthetic products based on efficacy, price, ease of use, reimbursement, customer support services and healthcare provider education. We face competition from various industry participants, including medical device companies, pharmaceutical companies, biotechnology companies, academic institutions and government agencies, as well as private and public research institutions.

Our success depends, in part, on our ability to maintain a competitive position in the development of technologies and products for use by our customers. Many of the companies developing or marketing competing or alternative products have competitive advantages when compared to us, including:

➤: greater financial and human resources for product development, sales and marketing;
➤: greater domestic and international name recognition and more product familiarity among physicians;
➤: broader and more established relationships with physicians, hospitals and third-party payors;
➤: broader product lines and the ability to offer lower prices or rebates or bundle products to offer greater discounts or incentives;
➤: a greater body of clinical data supporting the efficacy and safety of their products, and the ability and resources to continue to develop supportive clinical data;
➤: broader intellectual property protection for their technology and products;
➤: broader and more established domestic and international sales and marketing and distribution networks; and
➤: more experience in conducting research and development, manufacturing, preparing regulatory submissions and obtaining regulatory clearance or approval for products, both in the United States and in foreign jurisdictions.

In the market for wound management, which includes burn care, we primarily compete against products marketed by Avita Medical Ltd., Integra LifeSciences Holdings Corporation, MiMedx

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Group, Inc., Organogenesis Holdings Inc., Osiris Therapeutics, Inc., a subsidiary of Smith & Nephew plc, and Vericel Corporation.

In the market for hernia repair, we primarily compete against products marketed by C.R. Bard, Inc., a subsidiary of Becton, Dickinson and Company, Cook Biotech Inc., Ethicon LLC, a subsidiary of Johnson & Johnson, Integra LifeSciences Holdings Corporation, LifeCell Corporation, a subsidiary of AbbVie Inc., Medtronic plc, TELA Bio, Inc. and W. L. Gore & Associates, Inc.

In addition to already marketed products, we also face competition from products that are or could be under development and that target the same applications as our products or applications that we may address in the future. Such product candidates may be developed by the above-mentioned entities and others, including pharmaceutical companies, biotechnology companies, academic institutions, government agencies and private and public research institutions. Our competitors may develop and patent processes or products earlier than we can, obtain regulatory clearance or approvals for competing products more rapidly than we can and develop more effective or less expensive products or technologies that render our technology or products obsolete or non-competitive. Despite the steps we have taken to maintain and protect our intellectual property, competitors may nevertheless attempt to or succeed in developing similar porcine or other UBM technology. We also compete with other organizations in recruiting and retaining qualified scientific, sales and management personnel. If our competitors are more successful than us in these matters, we may be unable to compete successfully against our existing or future competitors.

RISKS RELATED TO THE SUPPLY AND MANUFACTURING OF OUR PRODUCTS

We rely on third-party suppliers and providers, some of which are currently the only source for the respective materials or services they provide to us.

Any delay, interruption or cessation of production by our third-party suppliers of important materials, or any delay in qualifying new materials, if necessary, could prevent or delay our ability to manufacture our products. Although the porcine urinary bladders used in the manufacture of our products are available from multiple suppliers, we currently rely on two abattoirs to harvest the porcine urinary bladders that we use in our manufacturing process. In addition, we currently rely on one company to sterilize our porcine urinary bladders. While we have developed business continuity plans for various scenarios affecting the supply and sterilization of our raw materials and will continue to update these plans as necessary, including to mitigate supply risks that could occur as the result of the COVID-19 pandemic, we cannot give assurance that these plans will be effective in eliminating the negative effects of any such supply failures on our ability to manufacture and market our products.

In addition, an uncorrected impurity, a supplier's variation in a raw material, either unknown to us or incompatible with our manufacturing process, or any other problem with our materials, would prevent or delay our ability to manufacture products. These delays may limit our ability to meet demand for our products, which would have a material adverse impact on our business, results of operations and financial condition. In addition, any undetected defect or impurity could lead us to sell products that are defective and could cause harm to patients or lead to product liability lawsuits or other actions against us.

The production of our products involves a highly complex manufacturing process that is subject to a number of risks.

We manufacture our products in our own facilities through a complex, multi-step process involving procurement and preparation of porcine urinary bladders for initial processing, tissue delamination, disinfection, final processing to size and shape our products and sterilization. Manufacturing any

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animal-derived medical device is highly complex and is subject to a number of risks, and failure can occur at any stage in the production process. If we fail to achieve and maintain high quality controls, processing and manufacturing standards, including avoidance of manufacturing errors, defects or product failures, we could experience recalls or withdrawals of our products, delays in delivery, cost overruns or other problems that would adversely affect our business. If we are unable to manufacture our products on a timely basis, at acceptable quality and costs, and in sufficient quantities, or if we experience unanticipated technological problems or delays in production, our business would be adversely affected.

If we are unable to manage product inventory in an effective and efficient manner, our profitability could be impaired.

Many factors affect the efficient use and planning of product inventory, such as effectiveness of predicting demand, effectiveness of preparing manufacturing to meet demand, efficiently meeting product mix and product demand requirements and product expiration. Our products have an expected shelf life of two years. If we are unable to manage our product inventory efficiently or within expected budget goals, or keep sufficient finished and in-process product on hand to meet demand, our operating margins and long term growth prospects could be impaired.

We place orders with our suppliers 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.

An outbreak of infectious disease carried by pigs could negatively affect the supply of our porcine urinary bladders and the sales of our products.

Sales of our UBM products could be materially adversely affected by the outbreak of disease carried by pigs, which could lead to the widespread death or precautionary destruction of animals that we rely upon for the manufacturing of our products. For example, recent outbreaks of African Swine Fever have seriously impacted swine herds primarily in China and certain Southeast Asian countries. The further spread of African Swine Fever within China, and its continued expansion to other countries, could further impact the size of swine herds globally and therefore the demand for our UBM products, and if widespread, could have a material impact on our financial results. Also, the outbreak of any highly contagious disease at or near our abattoirs could require us to immediately halt supply of the porcine bladders for our products at such sites and force us to incur substantial expenses in procuring raw materials or products elsewhere.

RISKS RELATED TO OUR PRODUCTS SALES

Substantially all of our revenue has been, and we expect that it will continue to be, generated from sales of our UBM products, and we therefore are highly dependent on their success.

Sales of our UBM products accounted for substantially all of our revenue for the years ended December 31, 2018 and 2019 and the three months ended March 31, 2019 and 2020, and we expect that sales of our UBM products will continue to account for substantially all of our revenue for the foreseeable future. Our failure to successfully increase sales of these products or any other event

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impeding our ability to sell these products would result in a material adverse effect on our business, financial condition and results of operations.

We rely heavily on our sales professionals to market and sell our products. If we are unable to hire, effectively train, manage, improve the productivity of, and retain our sales professionals, our business will be harmed, which would impair our future revenue and profitability.

Our success largely depends on our ability to hire, train, manage and improve the productivity levels of our sales professionals. We train our existing and recently recruited sales professionals to better understand our existing and new product technologies and how they can be positioned against our competitors' products and increase the revenue of our customers. It may take time for the sales professionals to become productive and there can be no assurance that recently recruited sales professionals will be adequately trained in a timely manner, or that our direct sales productivity will improve, or that we will not experience significant levels of attrition in the future. Furthermore, there is a risk that our sales professionals may make inaccurate claims regarding the efficacy and benefits of our products, including in indications for which the products are not cleared by the FDA, which could subject us to claims and liabilities.

Even if we receive the necessary regulatory clearances or approvals for new products or the use of our existing products for the additional indications currently in our development pipeline, we may not be able to successfully launch and market our new products, or our existing products for each intended treatment indication.

We may not market new products or our existing products for the various new treatments contemplated by our development efforts until we have received the requisite regulatory approvals or clearances for each product or treatment indication. Our product development program may be curtailed, redirected, eliminated or delayed at any time for many reasons, and we cannot predict whether we will successfully develop and commercialize our new products or additional indications for our existing products. The commercial success of our new products, and existing products for the treatment of each future proposed indication, whether 510(k)-cleared or with an approved PMA or BLA, will depend on a number of factors, including the following:

➤: the availability, relative cost and relative effectiveness of alternative and competing treatments;
➤: acceptance by patients and healthcare practitioners of our products as safe and effective treatment; and
➤: our ability to obtain sufficient third-party payor coverage or reimbursement for our products for the treatment of each indication.

We anticipate submitting additional 510(k) premarket notifications in 2020 for our products for new surgical soft tissue repair indications. However, even if we obtain a 510(k) clearance, the FDA may issue a clearance for more narrow indications than we seek, or restrict the claims we may make regarding our products. Even if we receive clearance or approval to market our products to treat each new indication we seek, any problems associated with the successful marketing and commercialization of our products for such indications could harm sales of our products for current treatment indications. If we are not successful in launching and marketing our products for the treatment of new indications, or if we are significantly delayed in doing so, our future prospects may be diminished.

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In the future our products may become obsolete, which would negatively affect operations and financial condition.

The field of regenerative medicine is characterized by rapid and significant advancement and change. There can be no assurance that other companies will not succeed in developing or marketing devices and products that are more clinically or cost effective than our UBM products or that would render our products obsolete or noncompetitive. Additionally, new surgical procedures, medications and other therapies could be developed that replace or reduce the importance of our products.

Accordingly, our success will depend in part on our ability to respond quickly to medical and other changes through the development and introduction of new products. Product development involves a high degree of risk, and there can be no assurance that our new product development efforts will result in any commercially successful products.

Product liability lawsuits against us could cause us to incur substantial liabilities and could limit commercialization of any products we may develop.

We face an inherent risk of product liability exposure relating to the use of our products, which may result from previously unknown problems with a product, manufacturer or facility. This risk exists even if a product is 510(k)-cleared, PMA-approved or BLA-approved for commercial sale by the FDA and manufactured in facilities that are required to be in compliance with the FDA's quality system regulation, or QSR, or has received marketing authorization from an applicable foreign regulatory authority. Any side effects, manufacturing defects, misuse or abuse associated with our products could result in injury to a patient. In addition, a liability claim may be brought against us even if our products merely appear to have caused an injury or were used in a procedure in which an injury occurred. Product liability claims may be brought against us by consumers, healthcare providers, medical device companies or others selling or otherwise coming into contact with our products, among others. If we cannot successfully defend ourselves against product liability claims, we will incur substantial liabilities. While we carry product liability insurance coverage for our products that we believe is consistent with industry norms, our insurance coverage may not be sufficient to cover all of our product liability related expenses or losses and may not cover us for any expenses or losses we may suffer.

Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost, in sufficient amounts or upon adequate terms to protect us against losses due to product liability. Even if we determine that it is prudent to increase our product liability coverage, we may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all. Large judgments have been awarded in class action or individual lawsuits based on device or drug products that had unanticipated side effects. A successful product liability claim or series of claims brought against us could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and have a material adverse effect on our business, results of operations, financial condition and growth prospects.

RISKS RELATED TO OUR REGULATORY ENVIRONMENT

If our products are found to be defective or otherwise pose certain safety risks, we may decide, or the FDA could require us, to initiate a recall, and we will be subject to medical device reporting requirements and could be subject to agency enforcement actions.

The FDA has the authority to require the recall of commercialized products if there is a reasonable probability that the product would cause serious, adverse health consequences or death, for example in

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the case of material deficiencies or defects in the design or manufacture of the product. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated or voluntary recall could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labeling defects or other deficiencies and issues.

In addition, under the FDA regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. If we fail to report these events or a product recall to the FDA within the required timeframes, or at all, the FDA and/or the United States Department of Justice could take regulatory or enforcement action against us. In response to a recall initiated by us or the FDA, and depending on the circumstances, the FDA could pursue additional remedies including an injunction, product seizure, imposition of monetary penalties or criminal charges. For example, we recently entered into a plea agreement with the United States Attorney's Office for the District of Maryland and the United States Department of Justice Consumer Protection Branch, in which we pled guilty to one count of failure and refusal to report a medical device removal, agreed to pay a criminal fine and agreed to establish and maintain a compliance and ethics program. We are obligated under the plea agreement to report to the Department of Justice, among other things, (i) the initiation of a recall of a medical device; (ii) the failure to report to the FDA a medical device correction or removal under 21 USC § 360i(g); or (iii) the failure to submit a medical device report to the FDA as required by 21 USC § 360i(a). Failure to do so could result in the rescission of the plea agreement and monetary penalties. We are also obligated under the Corporate Integrity Agreement to report to OIG-HHS the initiation of a recall by us or the FDA. Failure to do so could result in monetary penalties and exclusion from participation in all federal health care programs. We would expect scrutiny by the FDA, Department of Justice and OIG-HHS if we initiate or are ordered to initiate a recall. Repeated product malfunctions may also result in a voluntary or mandatory product recall. 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 or clearances 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. We may also be required to bear other costs or take other actions that may have a negative impact on our sales as well as face significant adverse publicity or regulatory consequences, which could harm our business, including our ability to market our products in the future. Additional recalls of any of our products would divert managerial and financial resources and have an adverse effect on our business, results of operations and financial condition. A recall could harm our reputation with customers and negatively affect our sales. We may initiate withdrawals of our products in the future that we determine do not require notification of the FDA. If the FDA were to disagree with our determinations, it could request that we report those actions as recalls, and again take regulatory or enforcement action against us or our products.

Our manufacturing operations require us to comply with the FDA's and other governmental authorities' laws and regulations regarding the manufacture and production of medical devices, which is costly and could subject us to enforcement action.

We are required to comply with the FDA's QSR, which covers the methods used in, and the facilities and controls used for, the design, testing, manufacture, quality assurance, labeling, packaging, sterilization, storage and shipping of our products. The FDA enforces the QSR through periodic announced and unannounced inspections of manufacturing facilities. The failure by us or one of our

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suppliers to comply with applicable statutes and regulations administered by the FDA and other regulatory authorities, or the failure to timely and adequately respond to any adverse inspectional observations, could result in, among other things, any of the following enforcement actions:

➤: untitled letters, warning letters, injunctions, civil penalties and criminal fines;
➤: customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;
➤: operating restrictions or partial suspension or total shutdown of production;
➤: refusing or delaying our requests for approval of a PMA or BLA, or 510(k) clearance of new products, modified products or new indications of cleared products;
➤: withdrawing PMA approvals, revoking BLA approvals or reclassifying devices that have 510(k) clearances;
➤: refusal to grant export certificates for our products; or
➤: criminal prosecution.

Any of these actions could impair our ability to produce our products in a cost-effective and timely manner to meet our customers' demands. Furthermore, our key suppliers may not currently be or may not continue to be in compliance with all applicable regulatory requirements, which could result in our failure to produce our products on a timely basis and in the required quantities, if at all.

In addition to the FDA requirements in the United States, we are required to comply with requirements for the commercialization and distribution of medical devices in foreign countries to sell our products. While those requirements vary by country, they generally require compliance with ISO 13485 (Quality Management Systems). Some countries where we may commercialize our products also have special requirements related to medical devices that contain ingredients of an animal origin and require Transmissible Spongiform Encephalopathy or Bovine Spongiform Encephalopathy certification. If we are unable to comply with these international requirements related to the commercialization of our products, our ability to expand internationally may be limited, or if we fail to maintain compliance we may be subject to sanctions, including a total shutdown of our commercialization of the products internationally.

A reclassification of our products by the FDA could significantly increase our regulatory costs, including the time and expense associated with required clinical trials, or may require us to suspend or discontinue sales of our products.

Under the Federal Food, Drug, and Cosmetic Act, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurance of safety and effectiveness.

Class I devices are those for which safety and effectiveness can be reasonably assured by adherence to FDA's "general controls" for medical devices, which include compliance with the applicable portions of the QSR facility registration and product listing, reporting of adverse medical events, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials. Some Class I devices also require premarket clearance by the FDA through the 510(k) premarket notification process described below.

Class II devices are subject to FDA's general controls, and any other "special controls" deemed necessary by FDA to ensure the safety and effectiveness of the device. Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification procedure, though certain Class II devices are exempt from this premarket review process. When a 510(k) is

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required, the manufacturer must submit to the FDA a premarket notification submission demonstrating that the device is "substantially equivalent" to a legally marketed device, which in some cases may require submission of clinical data. A legally marketed device is defined by statute to mean a device that was legally marketed prior to May 28, 1976, the date upon which the Medical Device Amendments of 1976 were enacted, or another commercially available, similar device that was cleared through the 510(k) process. Unless a specific exemption applies, 510(k) premarket notification submissions are subject to user fees. If the FDA determines that the device, or its intended use, is not substantially equivalent to a legally marketed device, the FDA will place the device, or the particular use of the device, into Class III, and the device sponsor must then fulfill much more rigorous premarketing requirements in the form of a PMA.

A Class III device includes devices deemed by the FDA to pose the greatest risk such as life-supporting or life-sustaining devices, or implantable devices, in addition to a device that has a new intended use or utilizes advanced technology that is not substantially equivalent to that of a legally marketed device. The safety and effectiveness of Class III devices cannot be reasonably assured solely by general and special controls. These devices almost always require formal clinical studies to demonstrate safety and effectiveness. Submission and FDA approval of a PMA or BLA is required before marketing of a Class III device can proceed.

Our products are currently Class II medical devices; however, from time to time, the FDA may disagree with the classification and require us to apply for approval as a Class III medical device. In the event that the FDA determines that our products should be classified as Class III, we could be precluded from marketing the products for clinical use within the United States for months, years or longer, depending on the specific change in the classification. Reclassification of our technology as Class III could significantly increase our regulatory costs, including the timing and expense associated with required clinical trials and other costs. In addition, the FDA could determine that our products, or claims related to them, are biologics. For example, certain tissue-engineered products do not meet the criteria to be classified as medical devices and may be regulated as biologic products under Section 351 of the Public Health Service Act and also, in some respects, as drugs under the FDCA. Before a biological product can be marketed in interstate commerce, it must receive approval of a BLA by the FDA. Although we do not currently market any biological products, we may consider pursuing potential product opportunities that may require BLA approval. Should we choose to manufacture any potential product opportunities that require BLA approval in the future, the process must comply with the FDA's current good manufacturing, or cGMP, regulations, which are designed to ensure that finished products are not adulterated or misbranded or otherwise in violation of the requirements of the FDCA. Furthermore, we may determine to suspend or discontinue sales of products that are reclassified if we are unable to meet the new FDA requirements, if ever.

We are subject to substantial post-market government regulation that could have a material adverse effect on our business.

The manufacture, labeling, advertising, promotion, record-keeping, post-market surveillance, and marketing of our products are subject to extensive regulation and review by the FDA and numerous other governmental authorities in the United States as well as foreign countries where we may sell our products. Even after we have obtained 510(k) clearance or PMA approval to market a product, we have ongoing responsibilities under FDA and other regulations. The FDA and other national governmental authorities have broad enforcement powers. The regulations to which we are subject are complex and have become more stringent over time. Regulatory changes could result in restrictions on our ability to continue or expand our operations, higher than anticipated costs or lower than

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anticipated sales. Our failure to comply with applicable regulatory requirements could result in enforcement actions such as:

➤: civil penalties;
➤: delays on or denials of pending requests for 510(k) clearance or PMA approval;
➤: recalls or seizures;
➤: withdrawals or suspensions of current PMA approvals or reclassification of 510(k) cleared devices, resulting in prohibitions on sales of our products;
➤: warning letters or untitled letters;
➤: operating restrictions, including a partial or total shutdown of production on our products for any indication;
➤: refusal to issue export approvals or certifications;
➤: obtaining injunctions preventing us from manufacturing or distributing our products;
➤: commencing criminal prosecutions; and
➤: total prohibitions on our international sales.

The incurrence or commencement of any such action would harm our reputation and cause sales of our products to suffer and may prevent us from generating revenue.

If we modify or change one or more of our products without 510(k) clearance, the FDA could retroactively determine that the modifications were improper and require us to stop marketing and recall our modified products.

Even after 510(k) clearance is obtained from the FDA for one or more of our products, any change or modification to such product that could significantly affect its safety or effectiveness, such as a significant change or modification in design, material, chemical composition, energy source or manufacturing process, or a major change or modification in the device's intended use, would require a new 510(k) clearance or possibly even a PMA approval. 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. We have modified some of our 510(k) cleared products, and have determined, based on our review of the applicable FDA guidance, that in certain instances new 510(k) clearances are not required. If the FDA disagrees with our determination and requires us to submit new premarket 510(k) notifications or PMAs for modifications to our previously cleared products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

If the FDA disagrees with our decision not to seek a new 510(k) for modifications to existing products, we may be required to submit extensive preclinical and clinical data, depending on the nature of the changes, in support of an application for marketing clearance or approval. We may not be able to obtain additional 510(k) clearances or premarket approvals for modifications to, or additional indications for, our existing products in a timely fashion, or at all. Delays in obtaining future clearances or approvals would adversely affect our ability to introduce our products for additional indications in a timely manner, which in turn would harm our revenue and operating results.

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Furthermore, the FDA's ongoing review of the 510(k) program may make it more difficult for us to make modifications to our previously cleared products, either by imposing more stringent requirements on when a manufacturer must submit a new 510(k) for a modification to a previously cleared product, or by applying more onerous review criteria to such submissions. Even though recent FDA guidance related to the Abbreviated 510(k) Program issued September 13, 2019 updates earlier guidance from 1998, the practical impact of any changes to the FDA's 510(k) program remains unclear.

The misuse or off-label use of our products may harm our reputation or the image of our products in the marketplace, or result in injuries that lead to product liability suits, which could be costly to our business. Moreover, we could be subject to FDA sanctions if we are deemed to have engaged in off-label promotion.

We have received 510(k) clearances from the FDA for the management of wounds, including for products indicated for pressure ulcers, venous ulcers, diabetic ulcers, second-degree burns, surgical wounds and trauma wounds, and the reinforcement of soft tissue where weakness exists in urological, gynecological and gastroenterological anatomy. Our promotional materials and training methods must comply with FDA and other applicable laws and regulations, including the prohibition on the promotion of a medical device for an indication that has not been approved or cleared by the FDA, referred to as an off-label use. We have been accused of, and recently entered into a settlement agreement regarding, the promotion of products in a manner that has not been approved by the FDA. While we have entered into a settlement agreement with the United States, acting through the United States Department of Justice on behalf of the Office of the Inspector General of the Department of Health and Human Services, the Defense Health Agency, acting on behalf of the TRICARE Program, and the United States Department of Veteran Affairs, regarding such claims, such accusation along with the terms of the Settlement Agreement may cause or impose increased scrutiny of our operations. The FDA does not restrict or regulate a physician's use of a medical device within the practice of medicine, and we cannot prevent a physician from using our products for an off-label use. If the FDA determines that our current or future promotional or training materials constitute the unlawful promotion of an off-label use, it could subject us to regulatory or enforcement actions, including additional civil money penalties, criminal fines and penalties, and exclusion from participation in federal health programs, among others. Other federal, state or foreign governmental authorities might also take action if they consider our promotion or training materials to constitute promotion of an off-label use, which could result in significant fines or penalties under other statutory authorities. In that event, our reputation could be damaged and the use of our products in the marketplace could be impaired.

In addition, there may be increased risk of injury if physicians or others attempt to use our products for off-label indications. Furthermore, the use of our products for indications other than those that have been cleared by the FDA may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients. Physicians may also misuse our products or use improper techniques if they are not adequately trained in the particular use, potentially leading to injury and an increased risk of product liability. Product liability claims are expensive to defend and could divert our management's attention from our primary business and result in substantial damage awards against us. Any of these events could harm our business, results of operations and financial condition.

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Our business and sale of our products are subject to extensive regulatory requirements, including compliance with labelling, manufacturing and reporting controls. If we fail or are unable to timely obtain the necessary 510(k) clearances or PMA approvals for new products or for the use of our products for additional indications, our ability to generate revenue could be materially harmed.

Our products are classified as medical devices and are subject to extensive regulation in the United States by the FDA and other federal, state and local authorities and by similar regulatory authorities in overseas jurisdictions. Government regulation of medical devices is meant to assure their safety and effectiveness, and includes regulation of, among other things:

➤: design, development and manufacturing;
➤: testing, labeling, including directions for use, processes, controls, quality assurance, packaging, storage, distribution, installation and servicing;
➤: preclinical studies and clinical trials;
➤: establishment registration and listing;
➤: product safety and effectiveness;
➤: marketing, sales and distribution;
➤: premarket approval and 510(k) clearance;
➤: recordkeeping procedures;
➤: advertising and promotion;
➤: corrections and removals and recalls; post-market surveillance, including reporting of deaths or serious injuries, and malfunctions that, if they were to recur, would be likely to cause or contribute to a death or serious injury; and
➤: product import and export.

In the United States, before we can market a new medical device, or a new use of, or claim for, an existing product, we must first receive either 510(k) clearance or PMA approval from the FDA, unless an exemption applies.

In the 510(k) clearance process, the FDA must determine that a proposed device is "substantially equivalent" to a device legally on the market, known as a "predicate" device. Substantial equivalence means that with respect to the proposed device being compared to the predicate device, the proposed device has the same intended use as the predicate device and the proposed device has the same technological characteristics as the predicate device, or has different technological characteristics but that the proposed device is as safe and effective as the predicate device and does not raise different questions of safety and effectiveness. Clinical data are sometimes required to support substantial equivalence. The PMA pathway requires an applicant to demonstrate the safety and effectiveness of the device based, in part, on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and labeling data. The PMA process is typically required for devices that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices and also novel devices that remain in Class III. Products that are approved from a PMA application generally need FDA approval of a PMA supplement before they can be modified. Similarly, some modifications made to products cleared through a 510(k) may require a new 510(k). Both of these processes can be expensive and lengthy, and with respect to a PMA, can entail significant user fees, unless exempt. The FDA's 510(k) clearance process usually takes from three to six months, but may take significantly

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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 longer, from the time the application is submitted to the FDA until an approval is obtained. The process of obtaining 510(k) clearances or PMA approvals to market a medical device can be costly and time consuming, and we may not be able to obtain these clearances or approvals on a timely basis, if at all.

In the United States, our currently commercialized products have received multiple 510(k) clearances. If the FDA requires us to go through a lengthier, more rigorous process for future products or modifications to existing products than expected, our product introductions or modifications could be delayed or cancelled, which could cause our sales to decline. In addition, the FDA may determine that future products will require the more costly, lengthy and uncertain PMA process. Although we do not currently market any devices under a PMA, the FDA may demand that we obtain a PMA prior to marketing certain of our future products. Further, even with respect to those future products where a PMA is not required, we cannot assure you that we will be able to obtain the 510(k) clearances with respect to those products. The FDA can delay, limit or deny 510(k) clearance or PMA approval of a device for many reasons, including:

➤: we may not be able to demonstrate to the FDA's satisfaction that our products are safe and effective for their intended uses;
➤: the data from our preclinical studies and clinical trials may be insufficient to support clearance or approval, where required; and
➤: the manufacturing process or facilities we use may not meet applicable requirements.

While we have previously received FDA clearance for the indication of our products, the FDA may not approve or clear additional indications that are necessary or desirable for future successful commercialization of our products. Indeed, the FDA may refuse our requests for 510(k) clearance or premarket approval of new products, new intended uses or modifications to existing products.

From time to time, legislation is drafted and introduced in the United States that could significantly change the statutory provisions governing any regulatory approval or clearance that we receive in the United States. 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 products under development or impact our ability to modify our currently approved or cleared products on a timely basis.

In addition, it is possible that changes in the FDA's review processes or policies regarding tissue-engineered or animal-derived products may result in an FDA decision to review future potential indications of our products under FDA's authority to regulate biological products. Such a determination would require us to submit a BLA rather than a 510(k) or PMA to obtain marketing authorization, comply with applicable good manufacturing practice requirements for biological products, and may subject us to additional data requirements and conditions of approval prior to marketing our products for such indications.

Healthcare policy changes may have a material adverse effect on our business.

The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that could affect our ability to profitably sell our products. Changes in regulations, statutes or the interpretation of existing statutes or regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or

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(iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.

In the United States, there have been and continue to be laws enacted and policies implemented by the federal government, state governments, regulators and third party payors to control healthcare costs, and generally, to reform the healthcare system in the United States. For example, the Patient Protection and Affordable Care Act, amended by the Health Care and Education Reconciliation Act or, collectively, ACA, substantially changed the way healthcare is delivered and financed by both governmental and private insurers. Among other things, the ACA:

➤: established a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research; and
➤: implemented payment system reforms, including a national pilot program to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain health care services through bundled payment models.

These changes included the creation of demonstration programs and other value-based purchasing initiatives that provide financial incentives for physicians and hospitals to reduce costs, including incentives for furnishing low cost therapies for chronic wounds even if those therapies are less effective than our products.

Under the Trump Administration, there are ongoing efforts to modify or repeal all or part of the ACA or to take executive action that affects its implementation. The Tax Cuts and Jobs Act of 2017, or the Tax Act, includes a provision that repealed effective January 1, 2019 the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the "individual mandate." On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, or the Texas District Court Judge, ruled that the individual mandate is unconstitutional and a critical and inseverable feature of the ACA, and therefore, the remaining provisions of the ACA are invalid as well. On December 18, 2019, the Fifth Circuit U.S. Court of Appeals held the individual mandate is unconstitutional, but remanded the case to the lower court to reconsider its earlier invalidation of the full ACA. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case, and has allotted one hour for oral arguments, which are expected to occur in the fall. Pending review, the ACA remains in effect, but it is unclear at this time what effect such litigation will have on the status of the ACA.

General legislative action may also affect our business. For example, the Budget Control Act of 2011 included provisions to reduce the federal deficit and resulted in the imposition of reductions of up to 2% in Medicare payments to providers, which began in April 2013. The CARES Act suspended the 2% Medicare sequester from May 1, 2020, through December 31, 2020, and extended the sequester through 2030. The American Taxpayer Relief Act of 2012 further reduced Medicare payments to several types of providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These or other similar reductions in government healthcare spending could result in reduced demand for our products or additional pricing pressure.

On January 20, 2017, President Trump signed an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. On October 13, 2017, President Trump signed

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an Executive Order terminating the cost-sharing subsidies that reimburse insurers under the ACA. The Trump administration has concluded that cost-sharing reduction, or CSR, payments to insurance companies required under the ACA have not received necessary appropriations from Congress and discontinued these payments. The loss of the CSR payments was expected to increase premiums on certain policies issued by qualified health plan issuers under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. The Bipartisan Health Care Stabilization Act of 2017, as well as the follow-on Bipartisan Health Care Stabilization Act of 2018 were introduced to appropriate funds to stabilize CSR payments; however, the future of this effort is unclear. The effects of the loss of CSR payments on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet fully known.

Moreover, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so called "Cadillac" tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices (these three provisions have been repealed, as discussed below). The Bipartisan Budget Act of 2018, also amended the ACA, effective January 1, 2019, by increasing the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and closing the coverage gap in most Medicare drug plans, commonly referred to as the "donut hole." In addition, CMS published a final rule that would give states greater flexibility, starting in 2020, in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for certain plans sold through such marketplaces.

We expect that the ACA, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement, and new payment methodologies. This could lower the price that we receive for our products. Any denial in coverage or reduction in reimbursement from Medicare or other government-funded programs may result in a similar denial or reduction in payments from private payors, which may prevent us from being able to generate sufficient revenue, attain profitability or commercialize our products. Litigation and legislative efforts to change or repeal the ACA are likely to continue, with unpredictable and uncertain results. We cannot predict the results of subsequent cases or appeals, any action by the Trump Administration, or whether additional legislative reform proposals will be adopted, when they will be adopted, or what impact they may have on us, but any such proposals could have a negative impact on our business and provide incentives for hospitals and physicians to not use our products.

We may be subject to or otherwise affected by federal and state healthcare laws, including anti-kickback, fraud and abuse and health information privacy and security laws, and could face substantial penalties if we are unable to fully comply with such laws.

Although we do not provide healthcare services, submit claims for third-party reimbursement, or receive payments directly from Medicare, Medicaid or other third-party payors for our products, we are subject to broadly applicable healthcare fraud and abuse regulation and enforcement by federal and state governments, which could significantly impact our business. Manufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities in the United States in addition to the FDA, including the Centers for Medicare and Medicaid Services, or CMS, the Office of Inspector General and Office for Civil Rights, other divisions

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of the Department of Health and Human Services, or HHS, the Department of Justice, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments.

Additionally, healthcare providers and third-party payors play a primary role in the recommendation of medical devices and other medical items and services. Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable fraud and abuse, anti-kickback, false claims laws, reporting of payments to physicians and teaching hospitals and patient privacy laws and regulations and other healthcare laws and regulations that may constrain our business and/or financial arrangements. Healthcare fraud and abuse and health information privacy and security laws potentially applicable to our operations include:

➤: the federal Anti-Kickback Statute, which makes it illegal for any person to knowingly and willfully solicit, receive, offer or pay any remuneration (including any kickback, bribe or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, or in return for, that is intended to induce or reward referrals, including the purchase, recommendation, order or prescription of a particular drug, for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. A person or entity need not have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation. Violations are subject to civil and criminal fines and penalties for each violation, plus imprisonment and exclusion from government healthcare programs. In addition, the government may assert that a claim that includes items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act, or FCA. There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. This law applies to our marketing practices, educational programs, pricing policies and relationships with healthcare providers, by prohibiting, among other things, soliciting, receiving, offering or providing remuneration intended to induce the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare or Medicaid programs;
➤: federal civil and criminal false claims laws, including the FCA, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment or approval that are false, fictitious or fraudulent; knowingly making, using or causing to be made or used, a false statement or record material to a false or fraudulent claim or obligation to pay or transmit money or property to the federal government; or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay money to the federal government. Manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are deemed to "cause" the submission of false or fraudulent claims. Companies that submit claims directly to payors may also be liable under the FCA for the direct submission of such claims. The FCA also permits a private individual acting as a "whistleblower" to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary recovery. When an entity is determined to have violated the FCA, the government may impose civil fines and penalties for each false claim, plus treble damages, and exclude the entity from participation in Medicare, Medicaid and other federal healthcare programs;
➤: the federal civil monetary penalties laws, which impose civil fines for, among other things, the offering or transfer or remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary's selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state health care program, unless an exception applies;

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➤: the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, and its implementing regulations, which created additional federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating HIPAA without actual knowledge of the statute or specific intent to violate it;
➤: federal "sunshine" reporting requirements imposed by the ACA on drug, device, biological and medical supply manufacturers when payment is available under Medicare, Medicaid or the Children's Health Insurance Program (with certain exceptions) to report annually to the U.S. Department of Health and Human Services, or HHS, under the Open Payments Program, information regarding any payment or other "transfers of value" made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year (or up to an aggregate of $1 million per year for "knowing failures"), for all payments, transfers of value or ownership or investment interests that are not timely, accurately, and completely reported in an annual submission. Beginning in 2022, these reporting obligations will extend to include transfers of value made to certain non-physician providers such as physician assistants and nurse practitioners; and
➤: analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers or patients; state laws that require device companies to comply with the industry's voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state and local laws that require the licensure of sales representatives; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information; data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the United States (such as the European Union, which adopted the General Data Protection Regulation, which became effective in May 2018); state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; and state laws related to insurance fraud in the case of claims involving private insurers.

In addition, certain states mandate implementation of corporate compliance programs to ensure compliance with these laws, impose additional restrictions on our financial relationships with physicians and other healthcare providers, and/or require the tracking and reporting of compensation and other remuneration to physicians.

Another development affecting fraud and abuse risks is the continued use of the whistleblower or qui tam provisions of the FCA. The FCA imposes liability on any person or entity who, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program. The qui tam provisions of the FCA allow a private individual to bring civil actions on behalf of the federal government alleging that the defendant has submitted a false claim to

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the federal government, and to share in any monetary recovery. Over the past several years, the number of suits brought by private individuals has increased dramatically. In addition, various states have enacted false claim laws analogous to the FCA. A number of these state laws apply where a claim is submitted to any third-party payor and not merely a federal healthcare program.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available under the federal Anti-Kickback Statute, it is possible that some of our business activities, including our relationships with physicians, hospitals, IDNs, and group purchasing organizations, or GPOs, could be subject to challenge under one or more of such laws. We could be adversely affected if regulatory agencies interpret our financial relationships with our physician consultants who order our products to be in violation of applicable laws. This could subject us to civil and criminal penalties for non-compliance, the cost of which could be substantial.

If our past or present operations are found to be in violation of any of such laws or any other governmental regulations that may apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from government healthcare programs and the curtailment or restructuring of our operations. Similarly, if the healthcare providers or entities with whom we do business are found to be non-compliant with applicable laws, they may be subject to sanctions, which could also have an adverse impact on us. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against them, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business. Moreover, we expect there will continue to be federal and state laws and regulations, proposed and implemented, that could impact our operations and business. The extent to which future legislation or regulations, if any, relating to healthcare fraud abuse laws or enforcement, may be enacted or what effect such legislation or regulation would have on our business remains uncertain. In addition, the commercialization of any of our products outside the United States will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

Failure to obtain and maintain regulatory authorization in foreign jurisdictions will prevent us from marketing our products internationally.

We have been audited and are ISO 13485 certified by our Notified Body, BSI Group, which we expect will enable us, in combination with the appropriate marking authorizations, to initiate commercialization of our products in Latin America, Asia and the Middle East. Outside the United States, we can market a product only if we receive marketing authorization and, in some cases, pricing approval, from the appropriate regulatory authorities. The approval procedure varies among countries and can involve compliance with manufacturing and design controls and additional testing. The time required to obtain approval may differ from that required to obtain FDA approval or clearance and may include all of the risks associated with obtaining FDA clearance or approval in addition to other risks. We may not obtain foreign regulatory approvals or certifications on a timely basis, if at all. Approval or clearance by the FDA does not ensure approval or certification by regulatory authorities in other countries, and approval or certification by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. However, the failure to obtain marketing authorization in one jurisdiction may adversely impact our ability to obtain marketing authorization in another jurisdiction. We may be required to perform additional preclinical or clinical studies even if we have obtained FDA clearance or approval. If we fail to receive necessary approvals to commercialize our products in foreign jurisdictions on a timely basis, or at all, or are deemed to be in violation of marketing restrictions in such countries, we may be subject to fines or other penalties and our business, results of operations and financial condition could be adversely affected.

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Changes in existing third-party coverage and reimbursement may impact our ability to sell our products.

In the United States and markets in other countries, patients who are prescribed medical products for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Maintaining and growing sales of our products depends in large part on the availability of adequate coverage and reimbursement from third-party payors, including government programs such as Medicare and Medicaid, private insurance plans and managed care programs. Hospitals and other healthcare provider customers that purchase our products typically bill various third-party payors to cover all or a portion of the costs and fees associated with the procedures in which our products are used, including the cost of the purchase of our products. Medicare reimbursement for procedures using our products during an inpatient stay is generally made under a prospective payment system that is determined by a classification system known as the Medicare severity diagnosis-related groups, or MS-DRGs. The Centers for Medicare & Medicaid Services, or CMS, the agency responsible for administering the Medicare program, also includes payment for our products in Medicare payments for outpatient surgical procedures in ambulatory surgery centers or hospital outpatient departments. Our customers' access to adequate coverage and reimbursement for the procedures performed with our products by government and private insurance plans is central to the acceptance of our current and future products. Changes in the amount third-party payors are willing to reimburse our customers for procedures using our products or our products themselves could create pricing pressures for us. We may be unable to sell our products on a profitable basis if third-party payors deny coverage or reduce their current levels of payment, or if our costs of production increase faster than increases in reimbursement levels.

Coverage decisions and payment amounts are established at the discretion of individual third-party payors. Many private payors, however, use coverage decisions and payment amounts determined by CMS as guidelines in setting their coverage and reimbursement policies. As the portion of the U.S. population over the age of 65 and eligible for Medicare continues to grow, we may be more vulnerable to coverage and reimbursement limitations imposed by CMS. While certain procedures using our products are currently covered by Medicare and other third-party payors, future action by CMS or other government agencies may diminish payments to physicians, outpatient centers and/or hospitals for covered services. For instance, our products generally are classified as "skin substitutes" for Medicare reimbursement purposes, and therefore are typically reimbursed in the outpatient setting by CMS through bundled payments. Under these Medicare bundled payments, reimbursement for skin substitute products, including ours, are made as a single payment to the health care provider that includes both the application of the product and the product itself. These bundled payments are subject to a two-tier system—one bundled payment for procedures that involve products whose cost exceeds a threshold amount (i.e., high cost products) and another bundled payment for procedures that involve low cost products below that designated threshold (i.e., low cost payments). Bundled payment rates are modified annually based on modifications to the threshold amounts and geographic adjustments. Currently, our skin substitute products are classified as low cost; however it is not possible to predict whether their designation will change, or whether the bundled payment reimbursement rates will change.

In any case, these bundled payments are limited by dollar amount and may not cover the cost of our products used in a given surgical procedure. Moreover, coverage decisions are at the discretion of the Medicare contractors. As a result, we cannot be certain that the procedures performed with our products will be reimbursed at a cost-effective level or reimbursed at all.

Some third-party payors in the United States, including certain Medicare contractors and private health insurance companies, have developed policies that deny coverage for our products when used as

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wound care treatment for certain clinical indications such as lower extremity ulcers in a hospital outpatient facility, ambulatory surgery center or physician office. To support changes in these policies and expanded coverage, we may need to conduct prospective, randomized controlled clinical trials and present data from such trials to payors to demonstrate the medical necessity or cost effectiveness of our products for these indications. While we are devoting considerable resources to such post-market clinical trials to support such additional coverage and reimbursement, there can be no assurance that coverage for our products will be expanded. In addition, those private payors that do not follow the Medicare guidelines may adopt different coverage and reimbursement policies for procedures performed with our products, though we cannot predict whether coverage will be sufficient or if there will be coverage at all. Failure to obtain favorable payor policies could have a material adverse effect on our business and operations.

Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek to control healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Therefore, we cannot be certain that the procedures performed with our products will be reimbursed at cost-effective levels. Nor can we be certain that third-party payors using a methodology that sets amounts based on the type of procedure performed, such as those utilized by Medicare and in many privately managed care systems, will view the cost of our products to be justified so as to incorporate such costs into the overall cost of the procedure. Moreover, we are unable to predict what changes will be made to the reimbursement methodologies used by third-party payors in the future.

To the extent we sell our products internationally, market acceptance may depend, in part, upon the availability of coverage and reimbursement within prevailing healthcare payment systems. Reimbursement and healthcare payment systems in international markets vary significantly by country, and include both government-sponsored healthcare and private insurance. We may not obtain international coverage and reimbursement approvals in a timely manner, if at all. Our failure to receive such approvals would negatively impact market acceptance of our products in the international markets in which those approvals are sought.

Consolidation in the healthcare industry could lead to demands for price concessions or to the exclusion of some suppliers from certain of our markets, which could have an adverse effect on our business, results of operations and financial condition.

Because healthcare costs have risen significantly over the past decade, numerous initiatives and reforms initiated by legislators, regulators and third-party payors to curb these costs have resulted in a consolidation trend in the healthcare industry to create new companies with greater market power. As the healthcare industry consolidates, competition to provide products and services to industry participants has become and will continue to become more intense. This in turn has resulted and will likely continue to result in greater pricing pressures and the exclusion of certain suppliers from important market segments as GPOs, independent delivery networks and large single accounts continue to use their market power to consolidate purchasing decisions for some of our customers. We expect that market demand, government regulation, third-party coverage and reimbursement policies and societal pressures will continue to change the worldwide healthcare industry, resulting in further business consolidations and alliances among our customers, which may reduce competition, exert further downward pressure on the prices of our products and could adversely impact our business, results of operations and financial condition.

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RISKS RELATED TO OUR FINANCIAL POSITION AND CAPITAL REQUIREMENTS

We may need additional funding beyond the proceeds of this offering and may be unable to raise capital when needed, which would force us to delay, reduce, eliminate or abandon our commercialization efforts or product development programs.

We cannot be certain that our anticipated cash flow from operations will be sufficient to meet all of our cash requirements of our growth plan. We intend to continue to make investments to support our business growth and may require additional funds to:

➤: expand the commercialization of our products and execute on our growth strategy;
➤: fund our operations and product development;
➤: finance the expansion into new international markets;
➤: defend, in litigation or otherwise, any claims that we infringe third-party patents or other intellectual property rights;
➤: commercialize our new products, if any such products receive regulatory clearance or approval for commercial sale; and
➤: acquire companies and in-license products or intellectual property.

We believe that the net proceeds from this offering, together with our existing cash balances and cash receipts generated from sales of our products, will be sufficient to meet our anticipated cash requirements for at least the next 12 months. However, we may need additional funding sooner than expected and our business and future funding requirements can change unpredictably due to a variety of factors, which could affect our funding needs or cash flows from operations. We may be unable to raise additional funds in a timely manner or on terms that are acceptable to us. If we do not have, or are not able to obtain, sufficient funds, we may have to delay the further development or commercialization of our products for one or more indications. We also may have to reduce marketing, customer support or other resources devoted to our products.

Our results of operations and liquidity needs could be materially and adversely affected by market fluctuations and economic downturn.

Our results of operations and liquidity could be materially and adversely affected by economic conditions generally, both in the United States and elsewhere around the world. Domestic and international equity and debt markets have experienced and may continue to experience heightened volatility and turmoil based on domestic and international economic policies, conditions and concerns. In the event the markets continue to remain volatile, including as a result of the current COVID-19 pandemic, our results of operations and liquidity could be adversely affected by those factors in many ways, including making it more difficult for us to raise funds if necessary, and our stock price may decline. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions, some of which may not be federally insured. If economic instability were to occur, we cannot be certain that we will not experience losses on these cash and cash equivalents.

Our quarterly operating results may fluctuate significantly, which may cause the price of our stock to fluctuate.

Due in part to the unpredictability of the occurrence of traumatic wounds, which in turn causes some unpredictability in our acute wound management business, our operating results have varied from

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quarter to quarter and may vary significantly from quarter to quarter in the future. Quarterly fluctuations may also result from factors such as:

➤: changes in the complex wound management and soft tissue surgical repair markets that we currently serve or our rate of penetration within such markets;
➤: our ability to achieve our growth strategies, including increased penetration of existing acute care customer accounts and the establishment of new customer accounts;
➤: the continued impact of the COVID-19 pandemic on our business operations;
➤: our ability to develop and commercialize our products for additional applications and the timing and costs thereof, including with respect to obtaining coverage by third-party payors, and our ability to develop new products;
➤: changes in the reimbursement rates for our products by government and private insurers;
➤: changes in our operating, manufacturing or selling costs;
➤: changes in the pricing of our products or those of our competitors;
➤: our ability to retain and attract additional management, sales and other key revenue-generating personnel;
➤: our ability to enter into and maintain profitable international distribution arrangements;
➤: disruptions in the supply or manufacture of our products;
➤: product defects or a recall of one of more of our products by us or the FDA due to noncompliance with FDA requirements;
➤: our ability to protect and enforce our intellectual property rights;
➤: our ability to accurately report our financial results in a timely manner;
➤: changes or enactment of new laws or regulations promulgated by federal, state, local or foreign governments;
➤: our ability to obtain additional capital that may be necessary to maintain and expand our business;
➤: imposition of sanctions by any governmental body due to non-compliance with laws and regulations; and
➤: general economic conditions in the United States and abroad, as well as economic conditions specific to the health care industry.

As a result of these factors, we may not be able to accurately forecast our revenues or operating results, and our quarterly operating results may vary significantly in the future. This quarterly variation means that period-to-period comparisons of results of operations may not necessarily be meaningful and, as a result, such comparisons should not be relied upon as indications of future performance. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially.

Changes in tax law could adversely affect our business and could differ materially from the financial statements provided herein.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury

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Department. Changes to tax laws (which changes may have retroactive application) could adversely affect us or holders of our common stock. In recent years, many such changes have been made and changes are likely to continue to occur in the future. Future changes in tax laws could have a material adverse effect on our business, cash flow, financial condition or results of operations. We urge investors to consult with their legal and tax advisers regarding the implication of potential changes in tax laws on an investment in our common stock.

Our ability to use net operating loss carryforwards and certain other tax attributes to reduce future tax payments may be subject to limitations.

Our U.S. federal net operating loss carryforwards generated in taxable years beginning before January 1, 2018 may be carried forward to offset future taxable income, if any, until such net operating loss carryforwards expire. Under the Tax Act, as modified by the CARES Act, U.S. federal net operating losses incurred in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such U.S. federal net operating losses in taxable years beginning after December 31, 2020, is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to the Tax Act or the CARES Act.

In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an "ownership change" (generally defined as a greater than 50 percentage point change (by value) in its equity ownership over a three-year period), the corporation's ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income may be limited. It is possible that we have experienced one or more ownership changes in the past, and we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership. We may therefore be limited in the portion of net operating loss carryforwards and other applicable tax attributes that we can use in the future to offset taxable income for U.S. federal income tax purposes. In addition, at the state level, there may be periods during which the use of net operating losses is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

RISKS RELATED TO OUR OPERATIONS

Significant disruptions of information technology systems or breaches of information security could adversely affect our business, results of operations and financial condition.

We rely to a large extent upon sophisticated information technology systems to operate our business. In the ordinary course of business, we collect, store and transmit large amounts of confidential information (including but not limited to, personal information and intellectual property). We also have outsourced significant elements of our operations to third parties, including significant elements of our information technology infrastructure and, as a result, we are managing many independent vendor relationships with third parties who may or could have access to our confidential information. The size and complexity of our information security systems, and those of our third-party vendors with whom we contract (and the large amounts of confidential information that is present on them), make such systems potentially vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees or vendors, or from malicious attacks by third parties. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives (including, but not limited to, industrial espionage and market manipulation) and expertise. While we have invested significantly in the protection of data and information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches. Although we have cyber-insurance coverage that may cover certain events described

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above, this insurance is subject to deductibles and coverage limitations and we may not be able to maintain this insurance. Also, it is possible that claims could exceed the limits of our coverage. Any interruption or breach in our systems could adversely affect our business operations and/or result in the loss of critical or sensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us or allow third parties to gain material, inside information that they use to trade in our securities.

Our future success depends on our ability to retain key employees and our ability to attract, retain and motivate qualified personnel.

Our success depends, in part, upon key managerial, manufacturing, scientific, sales and technical personnel, as well as our ability to continue to attract and retain additional highly qualified personnel. We compete for such personnel with other companies, academic institutions, governmental entities and other organizations, some of which have greater financial resources than we do to recruit and retain personnel. We cannot be certain that we will be successful in retaining our current personnel or in hiring or retaining qualified personnel in the future. Recruiting and retaining qualified employees, including sales and scientific personnel, will be critical to our success. Our failure to retain key employees or to attract, retain or motivate qualified personnel may impede the progress of our commercialization, research and development objectives. Further, any inability on our part to enforce non-compete arrangements related to key personnel who have left our company or may leave our company in the future could have a material adverse effect on our business.

Our business could be adversely affected if there are disputes among members of our board and stockholders.

In 2015, one of our stockholders—and now a current director—acted to remove the then board of directors by means of a written stockholder consent. The action led to a lawsuit that ultimately confirmed the effectiveness of the consent, resulting in the replacement of the incumbent directors with the director slate elected by the stockholders. All legal proceedings related to this matter were resolved in 2016 and, in 2019, two of the removed directors were reappointed to our board. Although we believe the current relationships among our directors are good, we cannot guarantee that there will not be future disputes among stockholders or members of our board. If such a dispute were to occur, it could adversely affect the functioning of our board of directors, lead to management distraction and interfere with our operations, any of which could materially harm our business.

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

We are exposed to the risk that our officers, employees, independent contractors (including contract research organizations, or CROs), consultants, suppliers and third party distributors may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violate FDA regulations, including those laws requiring the reporting of true, complete and accurate information to the FDA, manufacturing standards, federal and state healthcare laws and regulations, and laws that require the true, complete and accurate reporting of financial information or data. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Misconduct by these parties could also involve the improper use of individually identifiable information, which could result in regulatory sanctions and serious harm to our reputation. While we have programs in place to

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address this conduct, it is not always possible to identify and deter misconduct, and the precautions we take to detect and prevent this activity 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. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant civil, criminal, and administrative penalties, including without limitation, damages, fines, imprisonment, exclusion from participation in government healthcare programs, and the curtailment or restructuring of our operations.

Our efforts to acquire and integrate other companies or technologies could adversely affect our operations and financial results.

As part of our growth strategy, we may, among other things, selectively in-license or acquire complementary products and technologies. A successful acquisition depends on our ability to identify, negotiate, complete and integrate such acquisition and to obtain any necessary financing. The process of proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Other companies, including some with substantially greater financial, marketing, sales and other resources, may compete with us for the license or acquisition of product candidates and approved products. With respect to any such future acquisitions, we may experience:

➤: difficulties in integrating any acquired companies, personnel and products into our existing business;
➤: exposure to unknown liabilities;
➤: delays in realizing the benefits of the acquired company or products;
➤: diversion of our management's time and attention as well as our capital resources from other business concerns;
➤: challenges due to limited or no direct prior experience in new markets or countries we may enter;
➤: impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership;
➤: higher costs of integration than we anticipated; or
➤: difficulties in retaining key employees of the acquired business.

In addition, any future acquisitions could materially impair our operating results by causing us to make significant expenditures or incur debt in an effort to fund such acquisitions.

The estimates of market opportunity and forecasts of market growth included in this prospectus may prove to be inaccurate, and even if the markets in which we compete are as large as we estimate or achieve their forecasted growth, our business could fail to grow at similar rates, if at all.

Market opportunity estimates and growth forecasts included in this prospectus, including those we have generated ourselves, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The variables that go into the calculation of our market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of customers covered by our market opportunity estimates will purchase our products at all or generate any particular level of revenue for us. Any expansion in our market depends on a number

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of factors, including the cost and perceived value associated with our products and those of our competitors. Even if the markets in which we compete meet the size estimates and growth forecast in this prospectus, our business could fail to grow at similar rates, if at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market size and growth included in this prospectus should not be taken as indicative of our future growth.

We rely on third parties to conduct our research studies and they may not perform as contractually required or expected.

We rely on third parties, such as medical institutions, clinical investigators and contract laboratories to conduct our clinical research and studies. We and our third party collaborators are required to comply with all applicable regulations governing clinical research, including good clinical practice, or GCP, regulations. The FDA and similar foreign authorities enforce these regulations through periodic inspections of trial sponsors, principal investigators, and trial sites. If we or our third party collaborators fail to comply with GCP regulations, our studies may be delayed or the data generated in our studies may be deemed unreliable and the FDA may require us to perform additional studies before granting us authorization to market, if at all. We cannot be certain that, upon inspection, the FDA and similar foreign regulatory authorities will determine that any of our studies comply or complied with applicable regulations, including GCPs. In addition, our studies must be conducted with product manufactured in accordance with the QSR, and the FDA may also require a large number of test subjects. Our failure or the failure of our third party contractors, to comply with the applicable regulations may require us to repeat studies, which could delay or prevent us from obtaining clearance. Furthermore, our third-party collaborators may be delayed in conducting our studies for reasons outside of their control. For example, as a result of the current COVID-19 pandemic, many studies and clinical trials, including those involving our products, have been temporarily suspended.

If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if these third parties need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our non-clinical development activities or clinical studies may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory clearance for, or successfully commercialize, our products for additional indications on a timely basis, if at all, and our business, results of operations, financial condition and growth prospects may be adversely affected.

RISKS RELATED TO OUR INTELLECTUAL PROPERTY

Our core patents with claims directed to our currently marketed products will soon expire and our remaining patents and other intellectual property rights may not adequately protect our products.

Our ability to compete effectively will depend, in part, on our ability to maintain the proprietary nature of our technology and manufacturing processes. We attempt to protect our intellectual property rights in our technology platform and products through a combination of patent, trademark, copyright and trade secret laws. These legal means, however, afford only limited protection and may not adequately protect our rights. In addition, the laws of some of the countries in which our products are or may be sold may not protect our intellectual property to the same extent as U.S. laws or at all. In particular, the laws of certain countries in which we intend to expand, may provide means to permit the disclosure of our technology to companies of government agencies of such countries. We also may be unable to protect our rights in trade secrets and unpatented proprietary technology in these

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countries. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition. We rely on trade secrets, including proprietary know-how and other unpatented technology, which are difficult to protect. Although we seek such protection in part by entering into confidentiality agreements with our vendors, employees, consultants and others who may have access to proprietary information, we cannot be certain that these agreements will not be breached, that adequate remedies for any breach would be available, or that our trade secrets will not otherwise become known to or be independently developed by our competitors.

In addition to trade secret protection, we also rely on patents to protect our products. However, the core U.S. and foreign patents with claims directed to our currently marketed products will expire between October 2020 and January 2021. After these patents expire, we will be unable to prevent competitors from designing, marketing or commercializing products similar to ours, which could have an adverse effect on our revenues, sales, pricing and profitability. The patents we own may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage, and competitors may be able to design around our patents to develop products that provide outcomes that are similar to ours. In addition, a third party may bring a proceeding before the U.S. Patent and Trademark Office, or USPTO, or equivalent foreign agency attempting to significantly narrow the claims in our issued patents, or even to invalidate any of our patents in their entirety. These proceedings could result in adverse decisions as to the ownership or priority of our inventions and the narrowing or invalidation of any or all of the claims in our issued patents.

Further, while we generally apply for patents in those countries where we expect to have material sales of our patented products, we may not accurately predict all of the countries where patent protection will ultimately be desirable. If we fail to timely file a patent application in any such country, we may be precluded from doing so at a later date. Furthermore, we cannot assure you that any of our patent applications will be approved.

We rely on our trademarks, trade names, and brand names to distinguish our products from the products of our competitors, and have registered or applied to register many of these trademarks. We cannot assure you that our trademark applications will be approved. Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition, and could require us to devote resources to the advertising and marketing of new brands.

If we are unsuccessful in protecting our intellectual property rights, sales of our products may suffer and our ability to generate revenue could be severely impacted.

Legal proceedings to assert our intellectual property rights could be costly and could impair our operations.

In the event that a third party infringes upon or challenges our patents or other intellectual property rights, enforcing these rights may be costly, difficult and time-consuming. If we are unsuccessful in enforcing and protecting our intellectual property rights and protecting our products, it could harm our business, results of operations and financial condition. Even if successful, litigation to enforce our intellectual property rights or to defend our intellectual property rights against challenge could be expensive and time-consuming and could divert our management's attention from our primary business. We may not have sufficient resources to enforce our intellectual property rights or to defend our patents or other intellectual property rights against a challenge. The patents covering our UBM technology platform have in the past been the subject of reexamination and interference proceedings

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before the USPTO, as well as patent infringement litigation. While we are pleased with the outcome of these prior proceedings, we cannot assure you that we will be successful enforcing and protecting our intellectual property rights in the future.

We may be sued by third parties for alleged infringement of their proprietary rights, which could be costly, time-consuming and limit our ability to use certain technologies in the future.

We may be subject to claims that our technologies infringe upon the intellectual property or other proprietary rights of third parties. Any claims, even those without merit, could be time-consuming and expensive, and could divert our management's attention away from the execution of our business plan. Moreover, any settlement or adverse judgment resulting from the claim could require us to pay substantial amounts or obtain a license to continue to use the technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology. There can be no assurance that we would be able to obtain a license from the third party asserting the claim on commercially reasonable terms, if at all, that we would be able to develop alternative technology on a timely basis, if at all, or that we would be able to obtain a license to use a suitable alternative technology to permit us to continue offering, and our customers to continue using, our affected product.

We generally indemnify our retail and distribution partners with respect to third party intellectual property infringement claims relating to our products. These claims may require us to initiate or defend protracted and costly litigation on behalf of our retail and distribution partners regardless of the merits. An adverse determination could force us to pay damages on behalf of our retail and distribution partners or obtain licenses on their behalf. If we cannot obtain such licenses on commercially reasonable terms, our retail and distribution partners may be forced to stop selling and distributing our products. Thus, infringement claims asserted against us or our vendors may have a material adverse effect on our business, results of operations or financial condition.

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

Success in the healthcare industry is often dependent on intellectual property, for example, patents. Obtaining and enforcing patents in the healthcare industry involve both technological and legal complexity, and therefore obtaining and enforcing healthcare patents is costly, time-consuming and inherently uncertain.

Moreover, U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty regarding our ability to obtain patents in the future, this combination of events has created uncertainty regarding the value of any patents we do obtain. Depending on decisions by the U.S. Congress, the federal courts, and the U.S. Patent and Trademark Office, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce any current or future patents that we may own or license.

RISKS RELATED TO THIS OFFERING AND OUR COMMON STOCK

There has been no public market for our common stock prior to this offering, and an active market in the shares may not develop or be liquid enough for investors to resell our common stock quickly or at the market price.

Prior to this offering, there has been no public market for our common stock. We cannot predict the extent to which an active market for our common stock will develop or be sustained after this

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offering, or how the development of such a market might affect the market price for our common stock. The initial public offering price of our common stock in this offering will be agreed upon between us and the underwriters based on a number of factors, including market conditions in effect at the time of the offering, which may not be indicative of the price at which our shares will trade following completion of the offering. If an active market for our common stock does not develop or is not sustained, it may be difficult for you to sell shares you purchased in this offering at an attractive price or at all.

The price of our common stock is likely to be volatile and may fluctuate due to factors beyond our control.

The market price of our common stock may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, some of which are beyond our control, including:

➤: actual or anticipated fluctuations in our financial condition or results of operations;
➤: variance in our financial performance from expectations of securities analysts;
➤: changes in our projected operating and financial results;
➤: announcements by us or our competitors of significant business developments, acquisitions, or new offerings;
➤: announcements or concerns regarding real or perceived safety or efficacy issues with our products or similar products of our competitors;
➤: adoption of new regulations applicable to our industry or the expectations concerning future regulatory developments;
➤: volatility and changes in the healthcare industry, particularly in response to the ongoing COVID-19 pandemic;
➤: our involvement in litigation;
➤: future sales of our common stock by us or our stockholders, as well as the anticipation of lock-up releases;
➤: changes in senior management or key personnel;
➤: the trading volume of our common stock;
➤: changes in the anticipated future size and growth rate of our market; and
➤: general economic and market conditions.

Broad market and industry fluctuations, as well as general economic, political, regulatory, and market conditions, may also negatively impact the market price of our common stock.

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

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by equity research analysts. If no or too few securities or industry analysts commence coverage of us, the trading price for our common stock would likely be negatively affected. In the event securities or industry analysts initiate coverage, if one or more of the analysts

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who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the price of our common stock would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our common stock could decrease, which might cause the price of our common stock and trading volume to decline.

We will incur increased costs as a result of operating as a public company, and our management and board of directors will be required to devote substantial time to new compliance initiatives and corporate governance practices.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of the stock exchange on which our common stock is listed, and other applicable securities rules and regulations impose various requirements on public companies, including the establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Our management, board of directors and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more difficult for us to attract and retain qualified members of our management and board of directors. However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.

Future sales of our common stock in the public market could cause our share price to fall.

Sales of a substantial number of shares of our common stock in the public market after this offering, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. Upon the closing of this offering, we will have 22,675,510 shares of common stock outstanding.

All of the shares of common stock sold in this offering will be freely tradable without restrictions or further registration under the Securities Act except for any shares held by our affiliates as defined in Rule 144 under the Securities Act. Approximately 17.0 million shares of common stock outstanding immediately after this offering, or approximately 75%, will be restricted as a result of securities laws, lock-up agreements or other contractual restrictions that restrict transfers for 180 days after the date of this prospectus.

UBS Securities LLC may, in its sole discretion, release all or some portion of the shares subject to lock-up agreements with the underwriters prior to expiration of the lock-up period. See "Shares eligible for future sale."

The holders of approximately 22.7 million shares of common stock outstanding after this offering, or approximately 63.3% of outstanding shares immediately after giving effect to this offering, will be entitled to rights with respect to registration of such shares under the Securities Act pursuant to an investor rights agreement between such holders and us. See "Description of capital stock—Registration rights." If such holders, by exercising their registration rights, sell a large number of shares, the market price for our common stock could be harmed. If we file a registration statement for the purpose of

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selling additional shares to raise capital and are required to include shares held by these holders pursuant to the exercise of their registration rights, our ability to raise capital may be impaired. We intend to file a registration statement on Form S-8 under the Securities Act to register shares for issuance under our equity incentive plans, including our 2002 Plan, 2011 Plan, 2020 Plan and ESPP, and shares issuable upon exercise of options granted outside of our equity incentive plans. Each of the 2020 Plan and ESPP provides for automatic increases in the shares reserved for issuance under the plan which could result in additional dilution to our stockholders. Once we register these shares, they can be freely sold in the public market upon issuance and vesting, subject to any lock-up restrictions of the holder.

Because we do not expect to pay dividends on our common stock in the foreseeable future, capital appreciation, if any, would be your sole source of gain.

We have never declared or paid any dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. The decision to pay future dividends to stockholders will be at the discretion of our board of directors after taking into account various factors including our business prospects, cash requirements, financial performance and new product development. Accordingly, investors cannot rely on dividend income from our common stock and any returns on an investment in our common stock will likely depend entirely upon any future appreciation in the price of our common stock.

If you purchase common stock in this offering, you will suffer immediate dilution of your investment.

The assumed initial public offering price of our common stock is substantially higher than the pro forma as adjusted net tangible book value per share. Therefore, if you purchase common stock in this offering, you will pay a price per share that substantially exceeds the book value of our tangible assets, after subtracting our liabilities, after this offering. Based on the assumed initial public offering price of $15.00 per share, which is the midpoint of the range set forth on the cover page of this prospectus, you will experience immediate dilution of $11.29 per share, representing the difference between our pro forma as adjusted net tangible book value per share after giving effect to this offering and the assumed initial public offering price. In addition, purchasers of common stock in this offering will have contributed approximately 69% of the aggregate price paid by all purchasers of our common stock but will own only approximately 22% of our common stock outstanding after this offering. To the extent options are exercised, you will incur further dilution. See "Dilution."

We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.

Our management will have broad discretion in the application of the net proceeds from this offering and could spend the proceeds in ways that do not improve our results of operations or increase the value of our common stock. We intend to use the net proceeds from this offering to increase awareness of our technology and products, fund research, including clinical trials and post-market studies, grow our sales force, upgrade our Lafayette, Indiana facility, expand our international sales opportunity, expand and enhance our product portfolio and for working capital and general corporate purposes. The failure by our management to apply these funds effectively could result in financial losses that could have an adverse effect on our business, cause the price of our common stock to decline and delay the development of our product candidates. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.

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

We are an "emerging growth company," as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies," including the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, or Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to use the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors. In addition, if we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying with new or revised accounting standards.

We will remain an emerging growth company until the earliest of: (1) the last day of the fiscal year following the fifth anniversary of this offering; (2) the last day of the first fiscal year in which our annual gross revenue is $1.07 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4) the last day of the fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of June 30 of such fiscal year.

We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future results of operations may not be as comparable to the results of operations of certain other companies in our industry that adopted such standards. 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 be more volatile.

If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.

Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

We will be required to disclose changes made in our internal controls and procedures on a quarterly basis and our management will be required to assess the effectiveness of these controls annually.

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However, for as long as we are an "emerging growth company" under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404. We could be an "emerging growth company" for up to five years. An independent assessment of the effectiveness of our internal controls could detect problems that our management's assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as they will be in effect upon the completion of this offering, and provisions of Delaware law, may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws will include provisions that:

➤: authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our common stock;
➤: require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;
➤: specify that special meetings of our stockholders can be called only by our board of directors, the chairperson of our board of directors, or our chief executive officer;
➤: establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors;
➤: establish that our board of directors is divided into three classes, with each class serving three-year staggered terms;
➤: prohibit cumulative voting in the election of directors;
➤: provide that our directors may be removed for cause only upon the vote of at least 66²/3% of our outstanding shares of voting stock; and
➤: provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any "interested" stockholder for a period of three years following the date on which the stockholder became an "interested" stockholder.

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Our amended and restated certificate of incorporation will designate the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America as the exclusive forums for substantially all disputes between us and our stockholders, which will restrict our stockholders' ability to choose the judicial forum for disputes with us or our directors, officers, or employees.

Our amended and restated certificate of incorporation, as will be in effect upon the completion of this offering, will provide that the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: any derivative action or proceeding brought on our behalf; any action asserting a breach of a fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. The provisions would not apply to suits brought to enforce a duty or liability created by the Securities Act or the Exchange Act. In addition, our amended and restated certificate of incorporation will provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, subject to and contingent upon a final adjudication in the State of Delaware of the enforceability of such exclusive forum provision.

These choice of forum provisions may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees. If a court were to find either choice of forum provision contained in our 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. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

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Special note regarding forward-looking statements

This prospectus contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations or financial condition, business strategy and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "will" or "would" or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

➤: our expected use of the net proceeds from this offering;
➤: our estimates regarding expenses, revenues and capital requirements, including our estimates regarding revenue for the three months ended June 30, 2020;
➤: our ability to obtain and maintain regulatory clearance or approval of our current or future products for any indication, and the labeling under any clearance or approval we may obtain;
➤: regulatory developments in the United States and foreign countries;
➤: our expectations regarding future impacts of the COVID-19 pandemic on our business operations and financial condition;
➤: our plans to further develop and commercialize our products for additional applications;
➤: our plans to conduct and fund research, including clinical trials and post-market studies, to provide additional data with respect to our products and UBM technology;
➤: the availability of adequate third-party reimbursement for our products;
➤: our ability to expand and enhance the effectiveness of our U.S. commercial organization to achieve greater market adoption of our products, including through further penetrating existing acute care customer accounts, growing our acute care customer base and selectively expanding the sale of our products into non-acute care facilities;
➤: our ability to expand our international sales opportunity;
➤: our ability to expand and enhance our product portfolio;
➤: our ability to maintain adequate supply of raw materials for our products and our manufacturing and distribution capabilities;
➤: the size and growth of the potential markets for our products and our ability to serve those markets;
➤: our ability to increase awareness of our products in the markets in which we compete and establish and grow market acceptance of our products for any indication;
➤: the success of competing products that are or become available;
➤: our ability to obtain additional financing if needed; and
➤: our ability to obtain and maintain intellectual property protection for our proprietary assets.

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition

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Special note regarding forward-looking statements

and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled "Risk factors" and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this prospectus. And while we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

The forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this prospectus to reflect events or circumstances after the date of this prospectus or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments.

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Market, industry and other data

This prospectus contains estimates, projections and other information concerning our industry, our business and the markets for our products. Some market data and statistical information contained in this prospectus are also based on management's estimates and calculations, which are derived from our review and interpretation of independent sources, our internal research and our knowledge of our markets. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. In addition, projections, assumptions and estimates of the future performance of the industry in which we operate and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described in the sections titled "Risk factors" and "Special note regarding forward-looking statements." These and other factors could cause results to differ materially from those expressed in the projections and estimates made by independent third parties and us.

Unless otherwise expressly stated, we obtained industry, business, market and other data from our own internal estimates and research as well as from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. Some of the estimates, projections and other industry information in this prospectus was obtained from BioMedGPS, provider of SmartTRAK Business Intelligence Solutions.

In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

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Use of proceeds

We estimate that we will receive net proceeds from this offering of approximately $67.4 million based on an assumed initial public offering price of $15.00 per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any of the proceeds from the sale of common stock in this offering by the selling stockholders in the event that the underwriters exercise their option to purchase additional shares.

A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $4.7 million, assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) the net proceeds to us from this offering by approximately $14.0 million, assuming the assumed initial public offering price of $15.00 per share of common stock remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purposes of this offering are to increase our capitalization and financial flexibility, to create a public market for our common stock and to facilitate our future access to the capital markets. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds we receive from this offering. However, we currently intend to use the net proceeds we receive from this offering as follows:

➤: approximately $25.0 million to fund research, including clinical trials and post-market studies, and product development for our existing and pipeline products;
➤: approximately $10.0 million to invest in commercial infrastructure, including growing our sales force, expanding our international opportunities and investing in continued enhancement in training, including professional education;
➤: approximately $8.0 million to invest in upgrades to our Lafayette, Indiana facility; and
➤: the remainder for working capital and general corporate purposes.

We may also use a portion of the net proceeds we receive from this offering to acquire complementary businesses, products, services or technologies. However, we do not have agreements or commitments to enter into any acquisitions at this time.

We will have broad discretion over how to use the net proceeds we receive from this offering. We intend to invest the net proceeds we receive from this offering that are not used as described above in investment-grade, interest-bearing instruments.

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Dividend policy

We have never declared or paid any dividends on our common stock. We currently intend to retain all available funds and future earnings, if any, to fund the development and expansion of our business, and we do not anticipate declaring or paying any cash dividends in the foreseeable future. In addition, our loan and security agreement with Silicon Valley Bank contains restrictive covenants that prohibit us, subject to certain exceptions, from paying dividends on our common stock, and future debt securities or other financing arrangements could contain similar or more restrictive negative covenants. Any future determination regarding the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractual restrictions (including in our then-existing debt arrangements), capital requirements, business prospects and other factors our board of directors may deem relevant.

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Capitalization

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2020:

➤: on an actual basis;
➤: on a pro forma basis, giving effect to the automatic conversion of all outstanding shares of convertible preferred stock into an aggregate of 12,869,466 shares of common stock, which will occur immediately prior to the completion of this offering, as well as the receipt in April 2020 of (i) $9.0 million from the PPP loan and (ii) $5.5 million from the SVB line of credit; and
➤: on a pro forma as adjusted basis, giving effect to (1) the pro forma adjustments described above and (2) our receipt of estimated net proceeds of $67.4 million from the sale of shares of common stock that we are offering at an assumed initial public offering price of $15.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The information below is illustrative only and our capitalization following this offering will be based on the actual initial public offering price and other terms of this offering determined at pricing. Cash and cash equivalents are not components of our total capitalization. You should read this table together with the section titled "Management's discussion and analysis of financial condition and results of operations" and our financial statements and related notes included elsewhere in this prospectus.

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Capitalization

	As of March 31, 2020



	Actual			Pro forma			Pro forma as adjusted

	(in thousands except share and per share amounts)
Cash and cash equivalents	$	4,559		$	19,099		$	86,978



Debt		500			15,040			15,040
Stockholders' equity:
Series A convertible preferred stock, $0.001 par value, 2,000,000 shares authorized, 891,000 shares issued and outstanding with a liquidation preference of $1,337, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted		1			—			—
Series B convertible preferred stock, $0.001 par value, 2,000,000 shares authorized, 1,915,149 shares issued and outstanding with a liquidation preference of $6,263, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted		2			—			—
Series C convertible preferred stock, $0.001 par value, 30,000,000 shares authorized, 23,393,691 shares issued and outstanding with a liquidation preference of $9,357, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted		23			—			—
Series D convertible preferred stock, $0.001 par value, 10,000,000 shares authorized, 6,428,545 shares issued and outstanding with a liquidation preference of $9,000, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted		6			—			—
Common stock, $0.001 par value, 65,000,000 authorized, 4,806,044 shares issued and outstanding, actual; 100,000,000 shares authorized, 17,675,510 shares issued and outstanding, pro forma; 100,000,000 shares authorized, 22,675,510 shares issued and outstanding, pro forma as adjusted		5			18			23
Preferred stock, $0.001 par value, no shares authorized, issued and outstanding, actual; 5,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted		—			—			—
Additional paid-in capital		42,716			42,735			110,080
Accumulated deficit		(26,089	)		(26,089	)		(26,089	)

Total stockholders' equity		16,664			16,664			84,014

Total capitalization	$	17,164		$	31,704		$	99,054

A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders' equity and total capitalization by approximately $4.7 million, assuming the

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Capitalization

number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of common stock offered by us would increase (decrease) each of our pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders' equity and total capitalization by approximately $14.0 million, assuming the assumed initial public offering price of $15.00 per share of common stock remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expense payable by us.

The information in the table above excludes:

➤: 2,609,229 shares of common stock issuable on the exercise of outstanding stock options as of March 31, 2020 under our 2002 Stock Option and Incentive Plan, or 2002 Plan, our 2011 Stock Option and Grant Plan, or 2011 Plan, and granted outside of our equity incentive plans, with a weighted average exercise price of $5.13 per share;
➤: 2,206 shares of common stock issuable on the exercise of a common stock warrant at an exercise price of $1.13 per share, which will expire upon the earlier of August 24, 2020 or the completion of this offering;
➤: 4,925,786 shares of common stock reserved for future issuance under our 2020 Plan, which will become effective immediately prior to the execution of the underwriting agreement related to this offering, as well as any future increases, including annual automatic evergreen increases, in the number of shares of common stock reserved for issuance thereunder, and any shares underlying outstanding stock awards granted under our 2002 Plan and 2011 Plan that expire or are repurchased, forfeited, cancelled or withheld, as more fully described in the section titled "Executive compensation—Equity Incentive Plans"; and
➤: 282,396 shares of common stock reserved for issuance under our ESPP, which will become effective immediately prior to the execution of the underwriting agreement related to this offering, as well as any future increases, including annual automatic evergreen increases, in the number of shares of common stock reserved for future issuance thereunder.

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Dilution

If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share of common stock and the pro forma as adjusted net tangible book value per share immediately after this offering.

Our pro forma net tangible book value as of March 31, 2020 was $16.7 million, or $0.94 per share of common stock. Our pro forma net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the number of our shares of common stock outstanding as of March 31, 2020, after giving effect to the automatic conversion of all outstanding shares of convertible preferred stock into an aggregate of 12,869,466 shares of common stock, which will occur immediately prior to the completion of this offering.

After giving effect to the sale by us of 5,000,000 shares of common stock in this offering at an assumed initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2020 would have been $84.0 million, or $3.71 per share. This amount represents an immediate increase in pro forma as adjusted net tangible book value of $2.76 per share to our existing stockholders and an immediate dilution of $11.29 per share to new investors purchasing common stock in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from the initial public offering price per share paid by investors purchasing common stock in this offering. The following table illustrates this dilution on a per share basis:


Assumed initial public offering price per share				$	15.00
Historical net tangible book value per share as of March 31, 2020	$	3.47
Decrease per share attributable to the pro forma adjustments described above		(2.53	)

Pro forma net tangible book value per share as of March 31, 2020		0.94
Increase in pro forma as adjusted net tangible book value per share attributable to new investors purchasing shares in this offering		2.77

Pro forma as adjusted net tangible book value per share after giving effect to this offering					3.71

Dilution per share to new investors in this offering				$	11.29

The dilution information discussed above is illustrative only and may change based on the actual initial public offering price and other terms of this offering. A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share of common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value per share after this offering by $0.21 per share and increase (decrease) the dilution to new investors by $0.79 per share, in each case assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase of 1,000,000 shares in the number of shares of common stock offered by us would increase our pro forma as adjusted net tangible book value by approximately $0.43 per share and decrease the dilution to new investors by approximately $0.43 per share and a decrease of 1,000,000 shares in the number of shares of common stock offered by us would decrease our pro forma as adjusted net tangible book value by approximately $0.47 per share and increase the dilution to new investors by approximately $0.47 per share, in each case assuming the assumed initial public offering price of

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Dilution

$15.00 per share of common stock remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The following table summarizes, as of March 31, 2020, on a pro forma as adjusted basis as described above, the number of shares of our common stock, the total consideration and the average price per share (1) paid to us by existing stockholders and (2) to be paid by new investors acquiring our common stock in this offering at an assumed initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

						Total consideration

	Shares purchased
	Shares purchased										Average price per share
	Number		Percent			Amount		Percent			Average price per share

Existing stockholders		17,675,510		78	%	$	34,077,983		31	%	$	2.09
New investors		5,000,000		22			75,000,000		69		$	15.00

Total		22,675,510		100.0	%	$	109,077,983		100.0	%

Each $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors and total consideration paid by all stockholders by $5.0 million, assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

The table above assumes no exercise of the underwriters' option to purchase additional shares in this offering. If the underwriters' option to purchase additional shares is exercised in full, the number of shares of our common stock held by existing stockholders would be reduced to 75% of the total number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by new investors purchasing common stock in this offering would be increased to 25% of the total number of shares of our common stock outstanding after this offering.

The foregoing tables and calculations exclude:

➤: 2,609,229 shares of common stock issuable on the exercise of outstanding stock options as of March 31, 2020 under our 2002 Stock Option and Incentive Plan, or 2002 Plan, our 2011 Stock Option and Grant Plan, or 2011 Plan, and granted outside of our equity incentive plans, with a weighted average exercise price of $5.13 per share;
➤: 2,206 shares of common stock issuable on the exercise of a common stock warrant at an exercise price of $1.13 per share, which will expire upon the earlier of August 24, 2020 or the completion of this offering;
➤: 4,925,786 shares of common stock reserved for future issuance under our 2020 Plan, which will become effective immediately prior to the execution of the underwriting agreement related to this offering, as well as any future increases, including annual automatic evergreen increases, in the number of shares of common stock reserved for issuance thereunder, and any shares underlying outstanding stock awards granted under our 2002 Plan and 2011 Plan that expire or are repurchased, forfeited, cancelled or withheld, as more fully described in the section titled "Executive compensation—Equity Incentive Plans"; and

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Dilution

➤: 282,396 shares of common stock reserved for issuance under our ESPP, which will become effective immediately prior to the execution of the underwriting agreement related to this offering, as well as any future increases, including annual automatic evergreen increases, in the number of shares of common stock reserved for future issuance thereunder.

To the extent that stock options or warrants are exercised, new stock options are issued under our equity incentive plans, or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

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Selected financial data

The selected statements of operations data for the fiscal years ended December 31, 2019 and 2018 and the selected balance sheet data as of December 31, 2018 and 2019 have been derived from our audited financial statements included elsewhere in this prospectus. The selected statements of operations data for the three months ended March 31, 2019 and 2020 and the selected balance sheet data as of March 31, 2019 and 2020 have been derived from our unaudited financial statements included elsewhere in this prospectus. You should read the financial data set forth below in conjunction with our financial statements and the accompanying notes and the information in the section titled "Management's discussion and analysis of financial condition and results of operations" included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any period in the future.

	Year ended December 31,						Three months ended March 31,

Statements of operations data:	2019			2018			2020			2019

	(in thousands, except share and per share data)
Revenue	$	100,794		$	89,221		$	23,684		$	24,151
Cost of goods sold		19,111			16,289			4,646			4,434

Gross profit		81,684			72,932			19,038			19,716

Operating expenses:
Selling, general and administrative		72,364			66,977			20,040			17,438
Research and development		7,944			9,020			1,739			2,288

Total operating expenses		80,307			75,997			21,779			19,725

Income (loss) from operations		1,376			(3,065	)		(2,741	)		(9	)

Other income (expense):
Interest expense		(373	)		(303	)		(98	)		(127	)
Interest income		166			180			24			42
Other income		121			9			59			—

Total other expense		(87	)		(115	)		(15	)		(85	)

Income (loss) before income taxes		1,289			(3,180	)		(2,756	)		(94	)
Income taxes benefit		160			49			86			160

Net income (loss)	$	1,449		$	(3,131	)	$	(2,671	)	$	66



Net income (loss) per common share, basic(1)	$	0.08		$	(0.78	)	$	(0.56	)	$	0.00



Net income (loss) per common share, diluted(1)	$	0.08		$	(0.78	)	$	(0.56	)	$	0.00



Weighted average number of common shares outstanding, basic(1)		4,715,669			4,006,027			4,802,342			4,659,219



Weighted average number of common shares outstanding, diluted(1)		5,885,061			4,006,027			4,802,342			5,918,452



Pro forma net income (loss) per common share, basic(1)	$	0.08					$	(0.15	)
Pro forma net income (loss) per common share, diluted(1)	$	0.08					$	(0.15	)
Pro forma weighted average number of common shares outstanding, basic(1)		17,585,135						17,671,808
Pro forma weighted average number of common shares outstanding, diluted(1)		18,754,527						17,671,808

(1): See Note 2 to our financial statements appearing at the end of this prospectus for further details on the calculations of basic and diluted net income (loss) per common share. The pro forma numbers above also give effect to the issuance of 12,869,466 shares of common stock issuable upon the automatic conversion of all outstanding shares of convertible preferred stock, which will occur immediately prior to the completion of this offering.

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Selected financial data

	As of December 31,						As of March 31, 2020

Balance sheet data:	2019			2018			As of March 31, 2020

	(in thousands)
Cash and cash equivalents	$	6,961		$	7,712		$	4,559
Working capital(1)		19,515			18,315			16,705
Total assets		43,397			42,897			38,976
Legal settlement liability, including current portion(2)		12,825			15,000			12,325
Line of credit		—			—			500
Total liabilities		24,426			26,685			22,311
Convertible preferred stock		33			33			33
Additional paid-in capital		42,351			41,042			42,715
Accumulated deficit		(23,418	)		(24,866	)		(26,089	)
Total stockholders' equity		18,971			16,212			16,664

(1): Working capital is defined as current assets less current liabilities.
(2): Represents payment obligations pursuant to settlement agreements with the U.S. federal government and certain states. See "Business—Legal proceedings" for more details regarding these settlement agreements.

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Management's discussion and analysis of financial condition and results of operations

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in "Risk factors," "Special note regarding forward-looking statements" and other matters included elsewhere in this prospectus. The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the notes thereto included elsewhere in this prospectus, as well as the information presented under "Selected financial data."

OVERVIEW

We are a leading regenerative medicine company focused on the development, manufacture and sale of products primarily used in acute care settings as part of the treatment and management of moderate to severe wounds and reinforcement of soft tissue surgical defects. Our products utilize our proprietary porcine urinary bladder matrix platform technology, which is designed to enhance the body's ability to restore natural tissue and minimize scarring in the management of traumatic, surgical and chronic wounds, hernias and other conditions requiring the reinforcement of soft tissue. We believe we are at the forefront of advancing the global standard of care for wounds and soft tissue surgical defects by providing solutions that are designed to significantly improve patient outcomes while lowering the overall cost of care.

We market MicroMatrix, a particulate formulation, and Cytal Wound Matrix products, in sheet formulations, for the management of acute, surgical, chronic and tunneling wounds and partial thickness burns. We also market Gentrix Surgical Matrix products, in sheet formulations, for reinforcement of soft tissue in certain surgical applications, such as for hernia repair. We manufacture our products using our proprietary know-how, trade secrets and patented technology. Since our commercial launch in 2009, we have sold over 500,000 of our urinary bladder matrix, or UBM, products. We recorded $100.8 million and $89.2 million in revenue for the years ended December 31, 2019 and 2018, respectively, and net income of $1.4 million for the year ended December 31, 2019 and net loss of $3.1 million for the year ended December 31, 2018. We generated revenue of $23.7 million and net loss of $2.7 million for the three months ended March 31, 2020, compared to revenue of $24.2 million and net income of $0.1 million for the three months ended March 31, 2019.

Our revenue in the United States is generated through a dedicated, surgically-focused direct sales force of over 160 employees that sell into hospital operating rooms and intensive care units. To complement our direct sales efforts, we also have established a national accounts team that supports our commercial efforts with group purchasing organizations, or GPOs, integrated delivery networks, or IDNs, and government facilities, including Department of Veterans Affairs and Department of Defense medical facilities. Over half of our revenue is derived by direct delivery of our UBM products by our sales representatives at the time of the patient procedure.

We intend to grow our business and market opportunity by further penetrating our current acute care customer accounts, increasing our acute care customer base, selectively expanding the sale of our products into non-acute care settings, expanding our international sales opportunities and enhancing and expanding our product portfolio.

We view our operations and manage our business in one operating segment. All of our operations are located in the United States.

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Management's discussion and analysis of financial condition and results of operations

FINANCIAL OPERATIONS OVERVIEW

Revenue

Our revenue is derived primarily from our sales of our UBM products to acute care customers for complex wound management applications and surgical soft tissue repair applications. Our revenue is driven by (i) direct sales to customers through delivery at the time of procedure by one of our sales representatives, which we refer to as field stock sales; (ii) direct orders shipped from our warehouse to customers, which we refer to as drop ship sales; and (iii) consignment agreements with customers, which we refer to as consignment sales.

Cost of goods sold and gross margin

Cost of goods sold consists of direct labor expenses, including employee benefits and stock-based compensation expense, product material costs, depreciation of manufacturing equipment, freight costs, facility costs and certain allocated overhead expenses. As we grow our revenue, we expect these expenses to increase. Our gross profit represents total revenue less the cost of goods sold, and gross margin is gross profit expressed as a percentage of total revenue.

Selling, general and administrative expense

Selling, general and administrative expenses consist primarily of:

➤: personnel and related expenses for administrative, finance, sales, marketing, information technology, legal and human resource staff, including salaries, commissions, benefits, bonuses and stock-based compensation;
➤: professional services and fees;
➤: facility-related costs;
➤: insurance premiums; and
➤: other corporate expenses, including compliance costs and payments related to our corporate integrity agreement and settlement agreement. See "Business—Legal proceedings" for additional information.

Professional services consist principally of external legal, accounting, recruiting and other consulting services. Our provision for doubtful accounts, insurance premiums and banking fees, as well as insurance verification services provided by an outside service provider to supplement our internal reimbursement team, are also included in selling, general and administrative expense. We expense all selling, general and administrative expenses as incurred.

We expect that our selling, general and administrative expenses will increase in absolute dollars as we grow our commercial organization and incur additional expenses related to operating as a public company, including director and officer insurance coverage, legal costs, accounting costs, costs related to listing our shares on the Nasdaq Global Market, costs related to compliance with the rules and regulations of the U.S. Securities and Exchange Commission, or SEC, and investor relations costs.

Research and development expense

Research and development expenses consist of costs incurred for the development of our products for various applications, and include:

➤: employee-related expenses, including salaries and stock-based compensation expense;

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Management's discussion and analysis of financial condition and results of operations

➤: expenses incurred in connection with conducting or funding research, including clinical trials and post-market studies;
➤: the cost of acquiring, developing and manufacturing raw materials used in connection with our research and development activities; and
➤: costs associated with development activities and regulatory operations.

Research and development costs are expensed as incurred. Historically, our external research and development expenses consisted principally of fees paid in connection with preclinical and clinical activities related to our products and UBM platform technology. We expect to continue to incur research and development costs as we conduct or fund research, including clinical trials and post-market studies, and seek to enhance and expand our product portfolio.

Other (expense) income

Other (expense) income is comprised of interest expense, interest income and other non-operating expense activities. Interest expense consists primarily of interest expense associated with our loan balances and, for the 2019 period, interest on amounts due under our settlement agreement. Interest income consists of interest earned on our cash and cash equivalents.

BUSINESS UPDATE REGARDING COVID-19

We continue to closely monitor developments related to the COVID-19 pandemic and our decisions will continue to be driven by the health and well-being of our employees, hospital and physician customers, and their patients while maintaining operations to support our customers and their patients in the near-term. These developments include:

➤: Slowdown of elective surgeries. Some physicians and their patients are required, or are choosing, to defer elective procedures in which some of our products would otherwise be used. Although some healthcare facilities are in the early stages of resuming elective procedures, these policies vary from facility to facility. The duration of elective surgery deferrals and the pace at which such surgeries resume cannot be determined at this time.
➤: Temporary hospital limitations and restrictions on visitors. As hospitals seek to limit the spread of COVID-19, many have instituted temporary restrictions which have included requiring some of our sales force personnel to present documentation of a negative COVID-19 test result in order to be present in the hospital. This could adversely affect the ability of our sales representatives to forge and maintain relationships with hospitals and physicians.
➤: Lower rates of traumatic acute wounds. We believe that state stay-at-home orders, closures of businesses, restrictions on travel and social distancing measures have all contributed to fewer acute injuries as people stay and work in their homes, which we believe has negatively impacted demand for some of our products during the first quarter of 2020 and may continue to do so in future periods.
➤: Sales and personnel. Our sales efforts have continued since the outbreak of the pandemic, but safety precautions we have taken in response to the pandemic may adversely affect our business. We expect to continue to adapt our sales and marketing plans as we better understand the effects of the COVID-19 pandemic on our business. However, the change in the manner in which our workforce is functioning could adversely affect sales, delay product launches, and could impact our future growth.

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➤: Operations and cost containment. Our manufacturing, distribution and supply chain have largely been uninterrupted, but may be impacted as a result of the pandemic due to staffing shortages, production slowdowns or delivery disruptions. Despite these challenges, we remain focused on managing the business for the long-term, including preserving jobs to support the expected rebound in procedure volumes.

In response to the impact of COVID-19, we have implemented a variety of measures intended to help us manage through its impact and position us to resume normal operations quickly and efficiently once restrictions are lifted. These measures exist across several areas and include:

➤: Employees. In March 2020, we initiated our COVID-19 action plan to maintain employee safety, while continuing our sales, marketing and research and development efforts. To protect the safety, health and well-being of our employees, hospital and physician customers, and communities, we have implemented preventative measures including travel restrictions and a requirement that all office-based employees work from home, except as necessary, as permitted under governmental orders. In our efforts to maintain productivity during the pandemic, we have initiated our remote operations IT plan, including the broad implementation of virtual training software through our internal technological infrastructure.
➤: Customer connectivity. We continue to execute on our plan to service our customers in accordance with access protocols during COVID-19. Through virtual technologies, our sales representatives have maintained contact with healthcare providers, medical professionals, hospital administration and GPOs to provide service and support as necessary. We expect to continue enhancing our access to these constituents throughout the pandemic, informed by direct input we receive from existing and potential customer accounts.
➤: Product development. We continue to evaluate the timing and scope of product development and commercialization initiatives. Although we have experienced and may continue to experience delays in ongoing clinical studies due to the COVID-19 pandemic, we are continuing to advance our key research and development and clinical programs, as well as our regulatory initiatives in both domestic and international markets.
➤: Financial position and liquidity. In April 2020, we improved our cash position by accessing a $9.0 million loan through the Paycheck Protection Program, or PPP, and amending our loan agreement with SVB to increase our line of credit to $6.0 million, with the full amount drawn down to support ongoing operations. We expect to continue carefully managing expenses and cash spend to preserve liquidity and have initiated actions designed to generate savings in areas such as travel and marketing events.

There is considerable uncertainty and lack of visibility regarding our near-term revenue growth prospects and product development plans due to the rapidly evolving environment and continued uncertainties resulting from the COVID-19 pandemic. At this time, the full extent of the impact of the COVID-19 pandemic on our business, financial condition and results of operations is uncertain and cannot be predicted with reasonable accuracy and will depend on future developments that are also uncertain and cannot be predicted with reasonable accuracy. We believe there are a number of patients who have gone untreated during the COVID-19 pandemic who may benefit from procedures using our products once hospitals recover from the impacts of COVID-19 and resume procedures. However, there can be no assurance that such a recovery will occur or that the recent increase in COVID-19 cases experienced in the U.S. will not lead to renewed hospital access restrictions or renewed limitations on mobility, which could lead to further declines in traumatic injuries and hospital procedures, which could negatively impact our business.

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RESULTS OF OPERATIONS

Comparison of Three Months Ended March 31, 2020 and 2019

Our results of operations for the three months ended March 31, 2020 and 2019 are summarized in the table below (in thousands).

	Three months ended March 31,

	Three months ended March 31,						Period over period change (%)
	2020			2019			Period over period change (%)
Revenue	$	23,684		$	24,151			(2	)%
Cost of goods sold		4,646			4,434			5	%

Gross profit		19,038			19,716			(3	)%

Operating expenses:
Selling, general and administrative		20,040			17,438			15	%
Research and development		1,739			2,288			(24	)%

Total operating expenses		21,779			19,725			10	%

Operating loss		(2,741	)		(9	)		*

Other (expense) income:
Interest expense		(98	)		(127	)		(22	)%
Interest income		24			42			(42	)%
Other income, net		59			—			*

Total other (expense) income		(15	)		(85	)		(82	)%

Loss before income tax benefit		(2,756	)		(94	)		*
Income tax benefit		(86	)		(160	)		(46	)%

Net (loss) income	$	(2,671	)	$	66			*

*: not meaningful

Revenue

For the three months ended March 31, 2020 and 2019, our revenues were $23.7 million and $24.2 million, respectively. The decrease in revenue of $0.5 million was primarily a result of a decline in volume of sales within our existing customer accounts due to disruption from COVID-19. Revenues were impacted by lower than expected procedure volumes in the second half of March 2020 due to hospitals and patients deferring elective procedures and other factors related to the COVID-19 pandemic. The following table shows the breakdown of revenue by product for the three months ended March 31, 2019 and 2020 (in thousands):

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	Three months ended March 31,

	Three months ended March 31,				Period over period change (%)
	2020		2019		Period over period change (%)
MicroMatrix	$	11,313	$	11,183		1	%
Cytal		7,762		7,604		2	%
Gentrix		4,293		5,071		(15	)%
Other(1)		316		293		8	%

Total	$	23,684	$	24,151		(2	)%

(1): Consists primarily of revenue from sales of distributed products.

Cost of goods sold

For the three months ended March 31, 2020 and 2019, our cost of goods sold were $4.6 million and $4.4 million, respectively. The increase in cost of goods sold of $0.2 million, or 4.8%, was primarily a result of increased production labor costs of $0.2 million.

Gross profit and Gross margin

For the three months ended March 31, 2020 and 2019, our gross profit was $19.0 million and $19.7 million, respectively. The decrease in gross profit was primarily attributable to decreased revenue from sales of our Gentrix products and greater cost of goods sold for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019. Of our products, Gentrix in particular experienced reduced demand due to the COVID-19 pandemic because many of the hernia repair surgeries in which Gentrix is typically used are non-emergency or elective and therefore may be deferred. Our gross margins were 80.4% and 81.6% respectively, for the three months ended March 31, 2020 and 2019.

Operating expenses

Selling, general and administrative expense

For the three months ended March 31, 2020 and 2019, our selling, general and administrative expenses were $20.0 million and $17.4 million, respectively. The increase in selling, general and administrative expense of $2.6 million, or 14.9%, was driven primarily by an increase in personnel-related expenses of $0.7 million and outside service expenses of $1.3 million primarily to support regulatory and compliance initiatives.

Research and development expense

For the three months ended March 31, 2020 and 2019, our research and development expense was $1.7 million and $2.3 million, respectively. The decrease in research and development expense of $0.6 million, or 24.0%, in the quarter was driven by delays in ongoing clinical studies due to COVID-19 and a reduction in personnel-related expenses of $0.3 million as compared to the three months ended March 31, 2019.

Other income (expense)

For each of the three months ended March 31, 2020 and 2019, our interest expense was $0.1 million, primarily consisting of interest incurred pursuant to our Department of Justice settlement as well as interest on term loans and a line of credit.

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For the three months ended March 31, 2020 and 2019, our interest income was $24,213 and $41,985, respectively, consisting of interest earned on our cash balances residing in banks.

For the three months ended March 31, 2020 and 2019, our other income was $0.1 million and $0, respectively, primarily consisting of fees received for use of our facility by third parties in the 2020 period.

Income tax benefit

For the three months ended March 31, 2020 and 2019, we recorded income tax benefits of $0.1 million and $0.2 million, respectively, primarily representing our alternative minimum tax credit carryforward.

Comparison of Years Ended December 31, 2019 and 2018

Our results of operations for the years ended December 31, 2019 and 2018 are summarized in the table below (in thousands).

	Year ended December 31,

	Year ended December 31,						Period over period change (%)
	2019			2018			Period over period change (%)
Revenue	$	100,794		$	89,221			13	%
Cost of goods sold		19,111			16,289			17	%

Gross profit		81,684			72,932			12	%

Operating expenses:
Selling, general and administrative		72,364			66,977			8	%
Research and development		7,944			9,020			(12)	%

Total operating expenses		80,308			75,997			6	%

Net operating income (loss)		1,376			(3,065	)		*

Other income (expense):
Interest expense		(373	)		(303	)		23	%
Interest income		166			180			(8)	%
Other income		121			9			*

Other expense, net		(87	)		(115	)		(24)	%

Income (loss) before income taxes		1,289			(3,180	)		*
Income tax benefit		160			49			7	%

Net income (loss)	$	1,449		$	(3,131	)		*

*: Not meaningful

Revenue and gross profit

Revenue

For the years ended December 31, 2019 and 2018, our revenues were $100.8 million and $89.2 million, respectively. The increase in revenue of $11.6 million primarily consisted of an overall increase in volume of sales, growth of sales to new customer accounts and increased penetration within our

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existing customer accounts. The following table shows the breakdown of revenue by product for the years ended December 31, 2018 and 2019 (in thousands):

	Year ended December 31,

	Year ended December 31,				Period over period change (%)
	2019		2018		Period over period change (%)
MicroMatrix	$	46,390	$	39,486		17	%
Cytal		31,976		26,955		19	%
Gentrix		21,073		19,263		9	%
Other(1)		1,355		3,517		(61)	%

Total	$	100,794	$	89,221		13	%

(1): Consists primarily of revenue from sales of distributed products. For the year ended December 31, 2018, also includes $2.3 million of revenue from sales of discontinued products.

Cost of goods sold

For the years ended December 31, 2019 and 2018, our cost of goods sold were $19.1 million and $16.3 million, respectively. The increase in cost of goods sold of $2.8 million, or 17.3%, was attributable to an increase in manufacturing and production expenses resulting from volume growth and increased sales of our products and increased account penetration within our existing customer base.

Gross profit and Gross margin

For the years ended December 31, 2019 and 2018, our gross profit was $81.7 million and $72.9 million, respectively. The increase in gross profit was primarily attributable to increased revenue from sales of our MicroMatrix, Cytal and Gentrix products for the year ended December 31, 2019 as compared to the prior year. Our gross margins were 81.0% and 81.7% respectively, for the years ended December 31, 2019 and 2018.

Operating expenses

Selling, general and administrative expense

For the years ended December 31, 2019 and 2018, our selling, general and administrative expenses were $72.4 million and $67.0 million, respectively. The increase in selling, general and administrative expense of $5.4 million, or 8.0%, was driven primarily by an increase in selling, general and administrative personnel-related expense of $4.1 million as we increased our headcount in these areas.

Research and development expense

For the years ended December 31, 2019 and 2018, our research and development expense was $7.9 million and $9.0 million, respectively. The decrease in research and development expense of $1.1 million, or 12.2%, was driven primarily by a reduction in outsourced preclinical research projects in order to focus resources on clinical trials and product development.

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Other income (expense)

For the years ended December 31, 2019 and 2018, our interest expense was $0.4 million and $0.3 million, respectively, primarily consisting of interest incurred pursuant to our Department of Justice settlement as well as interest on term loans and a line of credit.

For the year ended December 31, 2019 and 2018, our interest income was $0.2 million and $0.2 million, respectively, consisting of interest earned on our cash balance residing in banks.

For the years ended December 31, 2019 and 2018, our other income was $121,000 and $9,000, respectively, primarily consisting of fees received for use of our facility by third parties.

Income tax benefit

For the years ended December 31, 2019 and 2018, we recorded income tax benefits of $159,595 and $48,757, respectively, primarily representing our alternative minimum tax credit carryforward.

LIQUIDITY AND CAPITAL RESOURCES

Through 2011, we funded our operations primarily through the sale of our common stock and convertible preferred stock. Since 2012, we have funded our operations primarily through cash provided by operating activities, as well as through debt. As of March 31, 2020, we had cash and cash equivalents of $4.6 million and approximately $3.5 million available under our revolving line of credit with Silicon Valley Bank, or SVB. In April 2020, we amended our loan agreement with SVB to increase our available line of credit to $6.0 million, and we drew down the remaining $5.5 million to support ongoing operations. Additionally, we were granted a loan of $9.0 million from the federal government through the Paycheck Protection Program in April 2020, which we refer to as the PPP loan.

Although it is difficult to predict future liquidity requirements, based on our current operations, we believe that our existing cash and cash equivalents and our borrowings under the line of credit and PPP loan will be sufficient to fund our operations for at least the next 12 months. If our existing cash balances, net proceeds from this offering and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of lower demand for our products as a result of the risks described in this prospectus, we may seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing. We cannot be assured that additional equity, equity-linked or debt financing will be available on terms favorable to us or our stockholders, or at all, including as a result of market volatility in light of the COVID-19 pandemic. If we are unable to obtain adequate financing, we may be required to delay the development, commercialization and marketing of our products.

Credit facility

We are party to a loan and security agreement, or the credit agreement, with SVB that, as of December 31, 2019, provided for a $4.0 million revolving credit line secured by our accounts receivable. As of December 31, 2019, we had $0.5 million of borrowings outstanding under the line of credit, which matures in 2020. The annual interest rate on borrowings under the line of credit is the greater of 6.25% or the prime rate plus 1.5%. As of December 31, 2019, we were in compliance with the covenants under the credit agreement.

In April 2020, we modified our SVB line of credit to extend the maturity date to March 2022 and modify the interest rate to the to the greater of prime plus 750 basis points or 5%. We also amended

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our loan agreement with SVB to increase our available line of credit to $6.0 million, and we drew down the remaining $5.5 million to support ongoing operations.

PPP loan

In April 2020, we were granted a loan of $9.0 million from the federal government under the Paycheck Protection Program, or PPP. The PPP was established under the recently congressionally-approved Coronavirus Air, Relief, and Economic Security Act, or the CARES Act, and is administered by the U.S. Small Business Administration, or SBA. Our PPP loan is being made through SVB. The PPP loan matures in April 2022 and has an annual interest rate of 1.0%. Payments of principal and interest are deferred until November 2020. Pursuant to Section 1106 of the CARES Act, we may apply for and be granted forgiveness for all or a portion of the PPP loan. Such forgiveness will be determined, subject to limitations, based on the use of the loan proceeds for qualifying expenses, which include payroll costs, rent and utility costs over the 24-week measurement period following receipt of the loan proceeds. Additionally, the SBA and the U.S. Treasury Department continue to develop and issue new and updated guidance regarding the PPP loan application process, including guidance regarding required borrower certifications and requirements for forgiveness of loans made under the PPP. We continue to track the guidance as it is released and assess and re-assess various aspects of its application as necessary based on the guidance. Although we intend to use, and have been using, the PPP loan proceeds for qualifying expenses, in the absence of final guidance or regulations, we cannot give any assurance that the PPP loan will be forgivable in whole or in part.

Cash flows

Our primary sources of cash are cash receipts on accounts receivable from sales of our products. In addition to changes in the amounts billed to our customers for product sales, net cash collections of accounts receivable are impacted by the efficiency of our cash collections process, which can vary from period to period.

The following tables summarize our cash flows for each of the periods indicated (in thousands):

	Year ended December 31,						Three months ended March 31,

	2019			2018			2020			2019
Net cash provided by (used in) operating activities	$	607		$	(2,615	)	$	(2,283	)	$	(909	)
Net cash used in investing activities		(612	)		(3,726	)		(174	)		(129	)
Net cash provided by (used in) financing activities		(745	)		(933	)		55			(334	)

Net decrease in cash and cash equivalents		(751	)		(7,274	)		(2,402	)		(1,372	)

Cash and cash equivalents, beginning of year and period		7,712			14,986			6,961			7,712

Cash and cash equivalents, end of year and period	$	6,961		$	7,712		$	4,559		$	6,340

Net cash provided by (used in) operating activities

Net cash used in operating activities for the three months ended March 31, 2020 was primarily impacted by a net loss of $2.7 million and non-cash expenses of $1.1 million, which included $0.3 million of stock-based compensation, $0.5 million of depreciation and $0.3 million of provision for losses on accounts receivable. These amounts were partially offset by net working capital outflows of $0.7 million, which included a $1.8 million decrease in accrued expenses, a $0.5 million decrease in

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legal settlement liability, a $0.5 million increase in other assets and a $0.3 million increase in inventory, partially offset by a $1.5 million decrease in accounts receivable, a $0.7 million decrease in prepaid expenses and other current assets and a $0.2 million increase in accounts payable.

Net cash used in operating activities for the three months ended March 31, 2019 was primarily impacted by net income of $0.1 million and non-cash expenses of $0.8 million, which included $0.2 million of stock-based compensation and $0.6 million of depreciation. These amounts were offset by net working capital outflows of $2.7 million, which included a $0.7 million increase in accounts receivable, a $0.6 million decrease in accounts payable, a $0.3 million decrease in accrued expenses, a $0.2 million decrease in other long term liabilities and a $0.1 million increase in inventory, partially offset by a $0.2 million decrease in prepaid expenses and other current assets.

Net cash provided by operating activities for the twelve months ended December 31, 2019 was primarily impacted by a net income of $1.4 million and non-cash expenses of $3.2 million, which included $1.0 million of stock-based compensation and $2.3 million of depreciation. These amounts were partially offset by working capital outflows of $0.9 million, which included a $1.7 million increase in accounts receivable and a $2.2 million decrease in legal settlement liability.

Net cash used in operating activities for the twelve months ended December 31, 2018, was primarily impacted by net loss of $3.1 million and non-cash expenses of $3.8 million, which included $0.7 million of stock-based compensation, $0.6 million of deferred rent and $2.2 million of depreciation. These amounts were partially offset by working capital outflows of $2.3 million, which included a $1.2 million increase in accrued expenses and a $1.9 million increase in inventory.

Net cash used in investing activities

Net cash used in investing activities for the three months ended March 31, 2020 and 2019 primarily consisted of purchases of production equipment.

Net cash used in investing activities in the twelve months ended December 31, 2019 and 2018 primarily consisted of purchases of production equipment during 2019 and purchases of equipment related to the additional office space leased to build our surgical learning center in Columbia, Maryland during 2018.

Net cash provided by (used in) financing activities

Net cash provided by financing activities in the three months ended March 31, 2020 primarily reflected our receipt of $54,600 from warrant and option exercises.

Net cash used in financing activities in the three months ended March 31, 2019 primarily reflected the repayment of $350,000 of debt, partially offset by our receipt of $15,853 from warrant and option exercises.

Net cash used in financing activities in the twelve months ended December 31, 2019 primarily reflected the repayment of $1.0 million of debt and $0.4 million of deferred costs related to this offering, partially offset by our receipt of $0.3 million from warrant and option exercises.

Net cash used in financing activities in the twelve months ended December 31, 2018 primarily reflected the repayment of $1.4 million of debt, partially offset by our receipt of $0.3 million from warrant and option exercises.

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OPERATING AND CAPITAL EXPENDITURE REQUIREMENTS

We expect to continue to incur significant expenses for the foreseeable future. We anticipate that our expenses will increase substantially as we:

➤: grow our commercial organization;
➤: continue to invest in growing and training our sales and marketing organization;
➤: conduct or fund research, including clinical trials and post-marketing studies, to provide additional efficacy data for our products;
➤: expand and enhance our product portfolio, including seeking marketing approval for additional applications for our existing products and developing new products based on our UBM platform technology;
➤: continue the research and development efforts for our products, future product candidates and UBM technology;
➤: expand our sales and marketing efforts to grow our international sales opportunity; and
➤: add operational, financial and management information systems and personnel, including personnel to support our growth and our operations as a public company.

For more information as to the risks associated with our future funding needs, see "Risk factors."

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The following table summarizes our future contractual obligations as of December 31, 2019 (in thousands):

	Payments due by period

	Less than one year		1 - 3 years		3 - 5 years		More than five years		Total

	(in thousands)

Debt obligations(1)	$	500	$	—	$	—	$	—	$	500
Settlement obligation(2)		2,479		5,915		4,431		—		12,825
Debt and settlement interest(3)		346		446		112		—		904
Operating lease obligations(4)		1,932		4,112		1,828		4,739		12,611

Total	$	5,257	$	10,473	$	6,371	$	4,739	$	26,840

(1): Represents principal payments due on our outstanding loans under our line of credit with SVB.
(2): Represents principal payments due pursuant to our settlement agreements. See "Business—Legal Proceedings" for more details regarding these settlement agreements.
(3): Represents interest on regular scheduled debt payments on our outstanding loans and the settlement agreement.
(4): Includes minimum rental payments on all facility leases.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our management's discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of our financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the

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reported amounts of assets, liabilities, revenue, expense and related disclosures. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. The results of our analyses form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ, potentially materially, from these estimates under different assumptions or conditions.

We believe the following critical accounting policies, which are more fully described in Note 2 of the notes to the financial statements included elsewhere in this prospectus involve significant judgments and estimates that we use in the preparation of our financial statements.

Revenue recognition

On January 1, 2019, we adopted the new accounting standard ASC 606, "Revenue from Contracts with Customers" (Topic 606), or ASC 606, and the related amendments to all contracts with customers that were not completed as of the date of adoption using the modified retrospective method. ASC 606 supersedes prior revenue guidance under ASC 605, "Revenue Recognition" and requires entities to recognize revenue to depict the transfer of promised goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We completed our assessment of the new guidance and evaluated the new requirements as applied to our existing revenue contracts not completed as of the date of initial application. As a result of the assessment, we determined that adoption of the new standard did not have a significant impact on our revenue recognition methodology. In accordance with ASC 606, we recognize revenue when the customer obtains control of a promised good or service, in an amount that reflects the consideration to which we expect to be entitled in exchange for the good or service.

ASC 606 outlines a five-step process for recognizing revenue from contracts with customers: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the separate performance obligations in the contract, and (v) recognize revenue associated with the performance obligations as they are satisfied.

We only apply the five-step model to contracts when it is probable that we will collect the consideration to which we are entitled in exchange for the goods or services we transfer to the customer. Once a contract is determined to be within the scope of ASC 606, we determine the performance obligations that are distinct. We recognize as revenues the amount of the transaction price that is allocated to each respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, our performance obligations are transferred to customers at a point in time, typically upon receipt of the product by the customer.

Our revenue is primarily derived from sales of our MicroMatrix, Cytal or Gentrix products. All revenues are categorized as drop ship sales, consignment sales or field stock sales. Drop ship sales involve orders that are placed for products that will be directly delivered from our warehouse to the customer. Consignment sales involve the use of a product from consignment inventory on location at a customer facility that has been received and stored by the customer under the terms of a consignment agreement; each consignment customer is required to notify us after it has used a product from its consignment inventory. Field stock sales involve the use of a product from inventory maintained and carried by one of our sales representatives that the sales representative brings into the customer facility in connection with a procedure being performed there. We recognized revenue for all sales categories upon the satisfaction of our performance obligations, generally upon transfer of control of the goods and risk of loss transfer to customers, in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods.

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We have agreements with brokers that represent a consortium of individual hospitals. We pay administrative fees to the broker. We are a principal to these transactions because we control the goods prior to transferring control to the customer. The administrative fees are recorded as selling, general and administrative expenses.

We also elected to utilize the practical expedient that allows us to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less. We did not record a deferral of contract cost as a result of the adoption of ASC 606.

In 2018 and periods prior to the adoption of ASC 606, we recognized revenue for all sales categories when title to the goods and risk of loss transferred to customers, provided there were no material remaining performance obligations required of us or any matters requiring customer acceptance, and when persuasive evidence of an arrangement exists, the amount due from the customer is fixed or determinable and collection is reasonably assured. With respect to our agreements with brokers, we determined that we are a principal to these transactions because we are the primary obligor and have the ultimate and contractual responsibility for fulfillment and acceptability of the products purchased. We deliver the product directly to the customer. The customer enters into the agreement to confirm pricing and delivery terms. Under these agreements, consistent with our normal agreements, the customer does not have a right of return. We also bear full risk of delivery and loss for products, whether the products are sold as drop ship sales, consignment sales or field stock sales.

Research and Development

Expenses related to the development of products are expensed as incurred. For payments made in advance for research and development contractual arrangements, we recognize research and development expense as the services are rendered. Research and development costs primarily consist of salaries and related expenses for personnel, laboratory supplies and raw materials, depreciation of laboratory facilities and leasehold improvements, and utilities costs related to research space. Other research and development expenses include fees paid to consultants, materials, and outside service providers.

Allowance for doubtful accounts

We regularly review the creditworthiness of our customers and consider factors such as historical collection experience, the age of accounts receivable balances and general economic conditions that may affect a customer's ability to pay. If we determine that collectability of an account receivable becomes doubtful, we will establish an allowance for doubtful accounts which is charged against income.

We maintain an allowance for doubtful accounts for estimated credit losses. We continuously monitor collections and payments from our customers and maintain an allowance for doubtful accounts based upon our historical payment experience and any specific identifiable customer accounts considered at risk or uncollectible. We provide credit, in the normal course of business, to our customers. As of March 31, 2020 and 2019, our allowance for doubtful accounts totaled $716,707 and $446,076, respectively. Our allowance for doubtful accounts totaled $438,268 and $467,545 at December 31, 2019 and 2018, respectively.

Inventories

Inventories, which are recorded at the lower of cost or market, include materials, labor and other direct and indirect costs and are valued using the first-in, first-out method. We capitalize

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manufacturing costs for each product SKU beginning once our product is first sold after commercial launch. We capitalize inventories produced in preparation for commercial launches when it becomes probable that the applicable product will receive regulatory clearance and that the related costs will be recoverable through the commercialization of the product. We currently do not have any pre-launch inventory for any period presented. At each balance sheet date, we evaluate ending inventories for excess quantities, obsolescence or shelf-life expiration. Our evaluation includes an analysis of historical sales levels by product, projections of future demand by product, the risk of technological or competitive obsolescence for our products, general market conditions, a review of the shelf-life expiration dates for our products and the feasibility of reworking or using excess or obsolete products or components in the production or assembly of other products that are not obsolete or for which we do not have excess quantities in inventory. To the extent that we determine there are excess or obsolete quantities or quantities with a shelf life that is too near its expiration for us to reasonably expect that we can sell those products prior to their expiration, we adjust their carrying value to estimated net realizable value. If future demand or market conditions are lower than our projections, or if we are unable to rework excess or obsolete quantities into other products, we may record further adjustments to the carrying value of inventory through a charge to cost of product revenues in the period the revision is made.

Accrued expenses

As part of the process of preparing our financial statements, we may be required to estimate accrued expenses. This process involves reviewing open contracts and purchase orders, communicating with applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost. The majority of our service providers invoice us monthly in arrears for services performed. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us. We confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Examples of estimated accrued expenses include:

➤: employee compensation;
➤: sales commissions;
➤: state and federal taxes; and
➤: professional service fees.

If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services and liabilities, our actual expenses could differ from our estimates. We do not anticipate the future settlement of existing accruals to differ materially from our estimates.

Stock-based compensation

We account for all equity awards to employees and members of our board of directors using the provisions of Accounting Standards Committee Topic 718, "Compensation—Stock Compensation", and recognize the fair value of each award as an expense on a straight-line basis over the employee's or director's expected vesting period. In June 2018, the Financial Accounting Standards Board issued guidance with respect to the accounting for non-employee share-based payment awards. The guidance generally aligns the accounting for non-employee awards to that for employees. We adopted this

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guidance effective January 1, 2019 and the adoption did not have a material impact on our financial statements.

For the three months ended March 31, 2020 and 2019, we incurred stock-based compensation expense of $309,397 and $220,739, respectively. For the years ended December 31, 2019 and 2018, we incurred stock-based compensation expense of $972,456 and $745,526, respectively.

For purposes of calculating stock-based compensation, we estimate the fair value of stock options using a Black-Scholes valuation model, which requires the use of certain subjective assumptions, including expected term, volatility, expected dividend yield, risk-free interest rate, and the fair value of our common stock. These assumptions generally require significant judgment. A summary of our assumptions used in determining the fair value of stock options is as follows:

	Three months ended March 31,

	2020	2019
Expected dividend yield	—%	—%
Expected volatility	41.8 - 42.4%	54.2 - 70.6%
Risk-free interest rate	1.46 - 1.48%	2.55 - 3.00%
Expected average life (in years)	5.83 - 6.26	5.50 - 6.06

We estimate the expected term of employee options using the simplified method, which is based on the midpoint between the vesting date and the expiration date. Our expected dividend rate is zero, as we have never paid any dividends on our common stock and do not anticipate paying any dividends in the foreseeable future. We derive our expected volatility from the historical volatilities of several peer public companies within our industry because we have little information on the volatility of the price of our common stock due to our lack of a trading history. When selecting our industry peer companies to be used in the volatility calculation, we considered the industry, stage of development, size and financial leverage. We base the risk-free interest rate on the implied yield currently available on zero coupon U.S. Treasury notes with maturities approximately equal to the expected term of the option.

We estimate our forfeiture rate based on an analysis of our actual forfeitures and will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover behavior and other factors. If factors change and we employ different assumptions, stock-based compensation expense may differ significantly from what we have recorded in the past. If there is a difference between the assumptions used in determining stock-based compensation expense and the actual factors that become known over time, we may change the input factors used in determining stock-based compensation costs for future grants. These changes, if any, may materially impact our results of operations in the period such changes are made. We expect to continue to grant stock options in the future, and to the extent that we do, our actual stock-based compensation expense recognized in future periods will likely increase.

The fair value of the common stock that underlies our stock options has historically been determined by our board of directors based upon information available to it at the time of grant. Because there has been no public market for our common stock, the determination of the fair value of our common stock was based on the board of directors' consideration of various subjective and objective factors, including contemporaneous valuations. The contemporaneous valuations were performed in accordance with applicable methodologies, approaches and assumptions of the technical practice-aid issued by the American Institute of Certified Public Accountants Practice Aid entitled Valuation of Privately-Held Company Equity Securities Issued as Compensation, or the AICPA Practice Aid, and considered many

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objective and subjective factors to determine the common stock fair market value each valuation date. The following factors, among others, were considered:

➤: any recent valuations obtained from an independent third-party valuation firm;
➤: the rights, privileges and preferences of our convertible preferred stock;
➤: our historical and forecasted operating and financial performance;
➤: the hiring of key personnel;
➤: the introduction of new products;
➤: the risks inherent in the development and expansion of our products;
➤: the fact that the option grants involve illiquid securities in a private company; and
➤: the likelihood of achieving a liquidity event, such as an initial public offering or the sale of our company.

The assumptions underlying these valuations represented management's best estimate, which involved inherent uncertainties and the application of management's judgment. As a result, if we had used different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could have been materially different.

Following the closing of this offering, the fair value of our common stock will be determined based on the quoted market price of our common stock on the date of grant.

Income taxes

We are subject to income taxes in the United States, and we use estimates in determining our provision for income taxes. We account for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which those temporary differences are expected to be recovered or settled. A deferred tax asset is established for the expected future benefit of net operating loss and credit carryforwards.

Recognition of deferred tax assets is appropriate when realization of such assets is more likely than not. We recognize a valuation allowance against our net deferred tax assets if it is more likely than not that some portion of the deferred tax assets will not be fully realizable. This assessment requires judgment as to the likelihood and amounts of future taxable income by tax jurisdiction. At December 31, 2019, we had a full valuation allowance against all of our net deferred tax assets because realization of our deferred tax assets did not meet the more likely than not standard.

We assess all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. We prescribe a comprehensive model for recognizing, measuring, presenting and disclosing in financial statements uncertain tax positions taken or expected to be taken on a tax return, including a decision whether to file a tax return in a particular jurisdiction. Assessing an uncertain tax position begins with the initial determination of the position's sustainability and is measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and we will determine whether the factors underlying the sustainability assertion have changed and the amount of the recognized tax

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benefit is still appropriate. The recognition and measurement of tax benefits require significant judgment. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

OFF-BALANCE SHEET ARRANGEMENTS

We do not currently have, nor have we had during any of the periods presented, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

RECENT ACCOUNTING PRONOUNCEMENTS

A discussion of recent accounting pronouncements is included in Note 2 to our audited financial statements included elsewhere in this prospectus.

JOBS ACT

We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.

An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. This includes an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002. We may take advantage of this exemption for up to five years or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company if we have more than $1.07 billion in total annual gross revenue, have more than $700 million in market value of our common stock held by non-affiliates as of June 30 of a fiscal year or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these provisions that allow for reduced reporting and other burdens.

We have elected to use the extended transition period under the JOBS Act for the implementation of new or revised accounting standards. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our cash and cash equivalents as of December 31, 2019 and March 31, 2020 primarily consisted of cash accounts. The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing risk. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the instruments in our portfolio, a sudden change in market interest rates would not be expected to have a material impact on our financial condition and/or results of operation. We do not have any foreign currency or other derivative financial instruments.

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OVERVIEW

Our products address large, underserved and growing markets with significant commercial potential. In addition to the ongoing need to manage traumatic injuries, we believe that demand for our products is increasing due to aging demographics and the growing prevalence of conditions such as diabetes, obesity and vascular disease. We estimate our total addressable market in the United States for our currently marketed products is over $2 billion, based on estimated 2019 revenues for hernia matrices and biologic skin and dermal substitutes for wound care. We intend to grow our business and market opportunity by further penetrating our current acute care customer accounts, increasing our acute care customer base, selectively expanding the sale of our products into non-acute care settings, expanding our international sales opportunity and enhancing and expanding our product portfolio.

We have 17 clearances from the U.S. Food and Drug Administration, or FDA, and many of our products are also approved for sale in Canada and Saudi Arabia. We are also seeking regulatory approvals for our products in several international markets including China, South Korea and the European Union. We currently sell and market our products in the United States through a dedicated, surgically-focused direct sales force of over 160 employees that sell into hospital operating rooms and intensive care units. To complement our direct sales efforts, we also have established a national accounts team that supports our commercial efforts with group purchasing organizations, or GPOs, integrated delivery networks, or IDNs, and government facilities, including Department of Veterans Affairs and Department of Defense medical facilities. During the year ended December 31, 2019, we sold our products to over 1,900 customers and had contracts with eight GPOs and seven distributors in 11 countries. We also provide medical education programs that offer hands-on and virtual education for all of our products and host symposiums throughout the United States, including at our state-of-the-art surgical learning center in Columbia, Maryland.

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We have achieved significant revenue growth since our commercial launch in 2009. Our revenue increased to $100.8 million for the year ended December 31, 2019 from $89.2 million for the year ended December 31, 2018, an increase of 13.0%. For the years ended December 31, 2019 and 2018, we recorded a gross margin of 81.0% and 81.7%, respectively, and net income of $1.4 million and net loss of $3.1 million, respectively. In the three months ended March 31, 2020, we recorded revenue of $23.7 million, a gross margin of 80.4% and net loss of $2.7 million.

INDUSTRY BACKGROUND

Worldwide, the epidemiological burden of wounds is significant, driving the need for improved healing and wound management solutions. There are two broad wound categories: acute wounds and chronic wounds. Acute wounds include traumatic wounds, surgical wounds and moderate to severe burns. Traumatic wounds were estimated to have a global incidence of at least 5.6 million in 2019. In the United States and European Union alone, major surgical wounds were estimated to have an incidence of approximately 12.8 million in 2019. Burns are classified as either minor burns, medically treated or hospitalized cases. In 2019, medically treated burns, which typically tend to be moderate to severe, were estimated to have a global incidence of over 6.3 million, while burns requiring hospitalization were estimated to have a global incidence of approximately 597,000. Chronic wounds include stage 3 and stage 4 pressure ulcers, diabetic ulcers and venous and arterial ulcers, which were expected to have global incidences in 2019 of approximately 22.6 million, 14.5 million and 13.3 million, respectively. The market for U.S. wound biologics is estimated to increase to approximately $1.4 billion by 2024. We believe the annual incidence of acute wounds, aging demographics and increased prevalence of systemic comorbidities, including growth of vascular complications and diabetes, are contributing to the growth in wound management procedures and demand for alternative therapies.

Incidence of hernias, a type of soft tissue defect, and the resulting market for hernia repair are increasing. Hernias develop as a result of an abdominal wall defect caused by the weakening of the inner layers of the inside wall of the abdominal muscle. Common types of hernias include inguinal, ventral, femoral, umbilical and hiatal. Surgery is the only treatment that can permanently repair a hernia, and mesh is used in about 90% of those surgeries to reinforce torn or damaged tissue around hernias. Mesh may be made of synthetic or tissue-based materials, often referred to as regenerative or biologically-derived products, and comes in a variety of shapes and sizes for different hernias. In the United States alone, approximately 1.2 million hernia repairs were estimated to have occurred in 2019. The market for U.S. hernia matrices is estimated to increase to approximately $1.1 billion by 2024. We believe the growth in hernia repair procedures, increased incidence of obesity, aging demographics and incidence and awareness of infection and rejection of synthetic or other biologically-derived meshes, is driving the need for new therapies.

Regenerative medicine combines the fields of biology, engineering and medicine to repair or replace diseased or injured tissues and organs. The market for regenerative medicine products is primarily driven by the clinical need for durable and effective healing with desired aesthetic outcomes. While regenerative medicine has advanced over the last decade, we believe there are significant limitations to other currently available biologically-derived products as well as relevant synthetic products.

OUR UBM PLATFORM TECHNOLOGY

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porous scaffold that allows for the body's cells to infiltrate the UBM. Through our proprietary manufacturing process, we retain both of these layers while removing cellular content without the use of harsh and damaging detergents or chemicals. Our ability to retain these two layers differentiates our products from other ECM-based products. Specifically, our products contain a protein composition that provides a surface for cellular ingrowth and maturation, with the intent to help restore natural tissue function at the wound or surgical site.

In addition, we use a proprietary processing method to remove the cellular content specific to a pig. This decellularization process isolates the ECM of the tissue, resulting in products that are acellular scaffolds appropriate for use in humans. When used to treat a wound or soft tissue surgical defect, these scaffolds provide a platform for the body's cells to populate and differentiate, resulting in biomechanically-functional tissue.

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The unique structure and composition of our UBM products are designed to provide an environment in which macrophages are more likely to exhibit an M2-type healing response. While an M1 process often results in increased inflammation and scarring, in an M2 process, the macrophages and other cells break down the UBM as the body naturally generates new proteins, remodeling the scaffold into a tissue that is similar to the native tissue structure and biomechanical function while reducing scarring. We believe the ability of UBM to facilitate a greater M2-type healing response also may result in reduced scarring, more biomechanically functional tissue and better aesthetic outcomes.

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OUR UBM PRODUCTS

The following table summarizes the key indications and attributes of our currently marketed products:

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In addition to selling our own products, we currently are the exclusive U.S. distributor of Southmedic, Inc.'s ABRA solutions, a dynamic system used to facilitate closure in open wounds and surgical repairs. During the year ended December 31, 2018, revenue from our distribution of these and other products accounted for less than 2% of our total revenue.

While we currently sell our products under the MicroMatrix, Cytal and Gentrix brand names, we have received 17 510(k) clearances over the years. The following table summarizes our history of FDA regulatory clearances:

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LIMITATIONS OF COMPETITIVE BIOLOGICALLY-DERIVED AND SYNTHETIC PRODUCTS

The clinical goal in the treatment of moderate to severe wounds and soft tissue surgical defects is to promote healing through the restoration of natural, functional tissue while avoiding adverse reactions such as infection, chronic inflammation, excessive scarring and undesirable aesthetic outcomes. There are a number of currently available alternative products that are typically used for complex wound treatment, including those made from biologic tissue such as human, porcine, bovine and ovine sources and those made from synthetic materials such as polyethylene, polypropylene or polyester. Biologically-derived products include chemically strengthened, or crosslinked, products and cellular, acellular and amniotic products. We believe characteristics of competing products including (i) the type of tissue or synthetic material utilized, (ii) the processing techniques required and (iii) physical attributes including thickness, porosity, pliability and form, can limit the functional healing response of the body.

Specifically, we believe these limitations include:

➤: Risk of foreign body response and inflammation. Use of synthetic and many biologically-derived products can lead to a foreign body response, characterized by chronic inflammation and scarring. Chronic inflammation is associated with extended symptoms of redness, swelling, excess fluid accumulation, pain and scarring and may ultimately lead to the need for further treatment. For those biologically-derived products in which the cells have not been removed from the source tissue, the potential release of cytokines and cellular debris into the wound or defect from these products can trigger a pro-inflammatory response more consistent with scarring and reduce the effectiveness of the treatment.
➤: Limited remodeling, formation of scar tissue and infection. Ideally, the treatment of a wound or soft tissue surgical defect with any tissue scaffold product would result in full restoration of natural, functional tissue. Instead, many synthetic and biologically-derived products heal through the formation of scar tissue, thereby limiting the body's healing response and potentially leading to decreased function, prolonged healing times, infection, dehiscence and other surgical complications. For some human- and animal-derived scaffolds, the prolonged exposure to detergents and enzymes used to remove cellular material during the manufacturing process also can limit the body's ability to remodel the scaffold and optimize healing.
➤: Limited or lack of resorption. One of the principal limitations of both crosslinked and synthetic products is that the body has difficulty resorbing these products, limiting the body's natural healing process. This lack of resorption can result in complications such as adhesions, fistula formation and product erosion into surrounding tissues and organs.
➤: Limited application versatility. The strength levels and handling characteristics of synthetic products vary, which can limit their range of applications depending on the needs for strength and conformability for a given type of wound being treated. Furthermore, most synthetic and biologically-derived products come in sheet form and lack alternative configurations, such as a particulate formulation, making the management of wounds or defects with irregular topographies more difficult.
➤: Limited storage flexibility and logistical challenges. Many currently available products have manufacturing and storage limitations that restrict their use and potential range of applications. For example, the composition and manufacturing of these products can limit shelf life, requiring orders on a just-in-time delivery, procedure-by-procedure basis, and may require refrigerated shipping and specialized storage, among other handling challenges. Furthermore, human-derived products may also be subject to strict and cumbersome tissue tracking requirements, adding another logistical hurdle to their use.

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➤: Cost-effectiveness concerns. The price points for biologically-derived and synthetic products can vary; however, the cost-effectiveness of such products, taking into account both clinical performance and price, is an important consideration for use. While synthetic products can be effective and are typically lower priced, they can lead to costly complications and a higher overall cost of care. Biologically-derived products can be effective when synthetic products fail or are not appropriate, but typically command a higher price. As clinicians and hospitals evaluate the overall cost-effectiveness for wound and hernia repairs, they must weigh any initial savings when selecting a product with the potential costs of future complications and the speed of recovery, particularly in complex patient populations.

KEY ADVANTAGES OF OUR PRODUCTS

Our products support the body's natural remodeling process and address many of the limitations of competitive biologically-derived and synthetic products. The advantages of our products include:

➤: Clinically favorable healing with reduced foreign body response and inflammation. Unlike synthetic and many other biologically-derived products, our products are acellular scaffolds that the body recognizes as natural tissue, which facilitates new healthy tissue growth while avoiding foreign body response. Both the non-synthetic and fully resorbable nature of our products allow for rapid cell infiltration in the wound tissue where scarring would typically occur, leading to the restoration of functional tissue with more desirable aesthetic outcomes. Moreover, our products can be placed in challenging defects while avoiding many of the clinical complications associated with chronic inflammation.
➤: Natural, functional tissue remodeling in place of scar tissue. Our products facilitate the body's ability to form tissue that has characteristics similar to natural, uninjured tissue. This feature minimizes encapsulation, related infections and complications associated with the formation of scar tissue and tissue adhesions.
➤: Non-crosslinked and resorbable. Our products do not require harsh chemicals to decellularize the porcine bladder material. Furthermore, the composition of our products does not require crosslinking to achieve adequate strength. These characteristics allow our products to be highly resorbable by the body, which facilitates the body's natural healing process.
➤: Broad application versatility. The physical properties of our technology combined with our ability to offer our products in a variety of forms enable us to address a wide range of clinical applications. Our products are available as flexible sheets that vary in the number of UBM layers and sizing as well as in a particulate formulation that is especially useful for wounds or defects with irregular topographies. In applications like hernia repair, in which strength is a significant consideration, we manufacture various configurations to enable clinicians to provide the appropriate products to their patients. In addition, our sheet and particulate products are cleared by the FDA for concomitant use in wound management, which we believe enables clinicians to more thoroughly and uniformly address the wound site and differentiates us from our competitors.
➤: Convenience and ease of use. Our products have a two-year shelf life, can be stored at room temperature and do not require special handling. These attributes may provide greater convenience for our customers compared to other biologically-derived products. Moreover, because our products are not human-derived, they are not subject to The American Association of Tissue Banks requirements, which enables ease of access to our products.
➤: Cost-effective alternative. We offer products with high clinical utility as part of the treatment of a broad range of moderate to severe traumatic wounds and the reinforcement of soft tissue surgical defects. We believe that because our products provide durable wound repair and restoration of natural tissue, while avoiding many clinical complications often associated with other biologic and synthetic alternatives, we provide cost-effective solutions.

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OUR GROWTH STRATEGIES

➤

Increase awareness of our products in the markets in which we compete. While the use of regenerative therapies is increasing, we believe that our products have been shown to offer significant advantages in the management of moderate to severe wounds and reinforcement of soft tissue surgical defects relative to existing competitive regenerative medicine therapies. We intend to broaden our market presence by further increasing awareness of our differentiated technology, products and brand among hospitals, wound care centers, LTACHs, government facilities, ambulatory surgical centers, physician offices and patient advocates, as well as other key clinical and economic decision-makers. In addition, we intend to continue establishing strong relationships with these key constituents by offering comprehensive customer service and clinical education that demonstrates the advantages of using our products.

➤

Continue the development of data supporting the clinical benefits of UBM. We intend to grow the body of clinical evidence supporting the benefits and efficacy of UBM in order to further drive adoption of our products. In addition, we expect our sales growth to be bolstered by economic data supporting our products' economic value in the care continuum by reducing potential costs associated with surgical complications and follow-up care. We believe that more robust clinical trials and post-market studies will provide physicians with greater evidence of the safety and efficacy of our products, thereby increasing the likelihood that they would use our products. We are conducting post-market studies which we believe can expand the commercialization potential for our existing portfolio, primarily by broadening clinical differentiation and reimbursement coverage for additional care settings. We believe that expanded reimbursement coverage will increase adoption and sales of our products in certain outpatient settings.

➤

Expand and enhance the effectiveness of our U.S. commercial organization to achieve greater market adoption. We intend to grow our sales force and continue to invest in training to further enhance the experience and skills of our sales and marketing personnel. Through disciplined expansion and development of our sales and marketing teams, we intend to focus our sales and marketing efforts to grow our business by:

-: Further penetrating existing acute care customer accounts. We intend to leverage our established contracts with hospitals, hospital networks, GPOs, IDNs and government facilities to drive further penetration in acute care settings, including the more than 1,000 hospitals and post-acute care centers into which we currently sell.
-: Growing our acute care customer base. In addition to our existing acute care accounts, we plan to add new acute care customers, both within the traditional hospital setting, as well as through the targeting of LTACHs and facilities operated by the Department of Veterans Affairs.
-: Selectively expanding the sale of our products into non-acute care facilities. The clinicians who use our UBM products primarily in the hospital setting, including vascular, plastic and general surgeons and podiatrists, also often treat complex wounds in outpatient wound management centers and physician's offices. By leveraging similar call points across the continuum-of-care, we believe our direct sales force will be able to strategically drive adoption and utilization of our

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products in some non-acute care facilities, representing a potential opportunity for longer-term growth.

➤

Expand our international sales opportunity. We believe the global addressable patient population for our products represents a significant growth opportunity. We will continue to work with distributors to attain regulatory approval for our products in additional jurisdictions outside of the United States. Furthermore, we have manufacturing and quality certifications that will facilitate the international expansion of our sales efforts, once the appropriate marketing authorizations are received. We expect to continue to expand our international sales opportunity in the following regions:

-: APAC: China and South Korea represent our most significant opportunities within APAC due to high unmet demand for quality healthcare, increasing initiatives by governments to improve healthcare infrastructure, growing awareness about the clinical benefits of regenerative medicine among end-users and the increasing prevalence of chronic and acute diseases.
-: EMEA: Western Europe represents our most significant opportunity in EMEA due to the increasing incidence of acute and chronic diseases, high awareness about technologically advanced regenerative therapies and the rapidly rising aging population.
-: Rest of world: The need for treatment and management of moderate to severe wounds and reinforcement of soft tissue surgical defects is a global issue. We plan on selectively entering additional international markets based on varying country-specific factors, including the regulatory environment, awareness and advocacy of regenerative medicine technologies, healthcare infrastructure and economic development.

➤

Expand and enhance our product portfolio, including expanding treatment applications, to grow our addressable markets. Our products have received numerous 510(k) clearances from the FDA. We intend to submit additional 510(k) premarket notifications in the coming years to pursue a number of initiatives, which include adding features and designs to our existing products, as well as expanding treatment applications for these products. In addition, we are actively considering other product opportunities for which the FDA may require a premarket approval application, or PMA, or biologics license application, or BLA, to commercialize. If successful, we believe these additional applications may provide opportunities to increase future sales by allowing us to address large, underserved markets.

PRECLINICAL STUDIES, POST-MARKET STUDIES AND REGISTRIES

Our UBM technology is validated by substantial preclinical and clinical results including more than 120 peer-reviewed preclinical publications and over 50 peer-reviewed clinical publications that identify UBM's many compositional characteristics and its ability to support the body's natural remodeling process in areas such as wounds, hernia, fascia, cardiac tissue, neural tissue, esophageal tissue, tendon, cartilage and lung. These publications include findings that UBM is gradually resorbed and replaced with natural, functional tissue following implantation, resulting in remodeling with minimal scarring. We believe that by continuing to enhance the clinical data on UBM, we can seek additional marketing authorizations, further drive product utilization in existing markets, enter new markets and potentially enhance reimbursement for our products.

The following tables detail prospective and retrospective studies of MicroMatrix and Cytal wound management products and Gentrix surgical and hernia repair products. This breadth of clinical literature demonstrates our products' ability to manage various acute and chronic wounds, including traumatic and surgical wounds, hernias, among other medical conditions and applications. The use of our products in the publications referenced below and the images include uses that have been cleared by the FDA and some uses that the FDA may maintain fall outside of the cleared indications for use.

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Peer-reviewed clinical publications—wound management

Author	Year	Title	Journal


Kraemer et al	2019	Use of Porcine Urinary Bladder Matrix in the Head and Neck Region	Regenerative Medicine and Plastic Surgery

Wilson et al	2019	Novel Use of Porcine Urinary Bladder Matrix in the Exenterated Socket	Ophthalmic Plastic and Reconstructive Surgery

Puckett et al	2019	A Case Series of Successful Abdominal Closure Utilizing a Novel Technique Combining a Mechanical Closure System With a Biologic Xenograft That Accelerates Wound Healing	Journal of Visualized Experiments

Micallef et al	2019	A Value Analysis of Microsurgical Lower Extremity Reconstruction vs. Acellular Urinary Bladder Matrix (UBM) for Radiation Wounds of the Lower Extremity	Journal of Surgical Case Reports

Dillingham et al	2019	Managing Ulcers Associated with Pyoderma Gangrenosum with a Urinary Bladder Matrix and Negative-Pressure Wound Therapy	Advances in Skin & Wound Care

Paige et al	2019	Modulation of Inflammation in Wounds of Diabetic Patients Treated with Porcine Urinary Bladder Matrix	Regenerative Medicine and Plastic Surgery

Fokin et al	2018	Extracellular Matrix Applications in the Treatment of Open Fractures with Complex Wounds and Large Soft Tissue Defects	Journal of Orthopaedic Trauma

Assam, Spanos	2018	Oral Cavity Reconstruction Outcomes Using a Porcine Urinary Bladder Matrix: A Retrospective Case Series	Wounds

Shanti et al	2017	Porcine Urinary Bladder Extracellular Matrix for the Salvage of Fibula Free Flap Skin Paddle: Technical Note and Description of a Case	Craniomaxillofacial Trauma & Reconstruction

Puckett et al	2017	Porcine Urinary Bladder Matrix for Management of Infected Radiation Mastectomy Wound	Cureus

Alvarez et al	2017	Diabetic Foot Ulcers Treated With Porcine Urinary Bladder Extracellular Matrix and Total Contact Cast: Interim Analysis of a Randomized, Controlled Trial	Wounds

Kim et al	2016	New Innovations for Deep Partial-Thickness Burn Treatment with ACell MatriStem Matrix	Advances in Wound Care

Kraemer et al	2016	Management of Open Lower Extremity Wounds With Concomitant Fracture Using a Porcine Urinary Bladder Matrix	Wounds

Sivak et al	2016	Decellularized Matrix and Supplemental Fat Grafting Leads to Regeneration following Traumatic Fingertip Amputation	Plastic and Reconstructive Surgery—Global Open

Geiger et al	2016	Management of Open Distal Lower Extremity Wounds With Exposed Tendons Using Porcine Urinary Bladder Matrix	Wounds

Frykberg et al	2016	Evaluation of Tissue Engineering Products for the Management of Neuropathic Diabetic Foot Ulcers: An Interim Analysis	Journal of Wound Care

Dorman et al	2016	Novel Use of Porcine Urinary Bladder Matrix for Pediatric Pilonidal Wound Care: Preliminary Experience	Pediatric Surgery International

Melville et al	2016	The Use of Acellular Urinary Bladder Matrix as Coverage for Fasciocutaneous Free Flap Donor Sites: An Alternative to Traditional Grafting Procedures	Journal of Oral and Maxillofacial Surgery

Valerio et al	2015	The Use of Urinary Bladder Matrix in the Treatment of Trauma and Combat Casualty Wound Care	Regenerative Medicine

Lanteri et al	2014	The Use of Urinary Bladder Matrix in the Treatment of Complicated Open Wounds	Wounds

Fleming et al	2014	Application of the Orthoplastic Reconstructive Ladder to Preserve Lower Extremity Amputation Length	Annals of Plastic Surgery

Sasse et al	2013	Accelerated Healing of Complex Open Pilonidal Wounds using MatriStem Extracellular Matrix Xenograft: Nine Cases	Journal of Surgical Case Reports

Rommer et al	2013	Urinary Bladder Matrix for the Treatment of Recalcitrant Nonhealing Radiation Wounds	Advances in Skin and Wound Care

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Author	Year	Title	Journal


Kruper et al	2013	Salvage of Failed Local and Regional Flaps with Porcine Urinary Bladder Extracellular Matrix Aided Tissue Regeneration	Case Reports in Otolaryngology

LeCheminant et al	2012	Porcine Urinary Bladder Matrix: A Retrospective Study and Establishment of Protocol	Journal of Wound Care

Mitchell, Gallagher	2012	Porcine Bladder Extracellular Matrix for Closure of a Large Defect in a Burn Contracture Release	Journal of Wound Care

Kimmel et al	2010	The Clinical Effectiveness in Wound Healing With Extracellular Matrix Derived From Porcine Urinary Bladder Matrix: A Case Series on Severe Chronic Wounds	The Journal of the American College of Certified Wound Specialists

The following published images are examples of MicroMatrix and Cytal wound product use for the management of traumatic wounds. The authors of the respective publications, included in the table above, conclude that UBM provides an off-the-shelf solution to aid in soft tissue and limb salvage as well as wound closure by facilitating vascular tissue formation over avascular structures, ischemic wound beds and/or contaminated wounds.

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Valerio IL, et al. The Use of Urinary Bladder Matrix in the Treatment of Trauma and Combat Casualty Wound Care. Regen Med. 2015.


Fokin AA, et al. Extracellular Matrix Applications in the Treatment of Open Fractures with Complex Wounds and Large Soft Tissue Defects. J Ortho Trauma. 2018.

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Peer-reviewed clinical publications—surgical reinforcement and hernia repair

Author	Year	Title	Journal


Sasse et al	2019	Large Hiatal Hernia Repair with Urinary Bladder Matrix Graft Reinforcement and Concomitant Sleeve Gastrectomy	Journal of the Society of Laparoendoscopic Surgeons

Sasse et al	2018	Long-Term Clinical, Radiological, and Histological Follow-Up After Complex Ventral Incisional Hernia Repair Using Urinary Bladder Matrix Graft Reinforcement: A Retrospective Cohort Study	Hernia

Wang et al	2018	Symptomatic, Radiological, and Quality of Life Outcome of Paraesophageal Hernia Repair With Urinary Bladder Extracellular Surgical Matrix: Comparison With Primary Repair	Surgical Laparoscopy Endoscopy & Percutaneous Techniques

Mahajan et al	2018	Successful Endobronchial Treatment of a Non-Healing Tracheoesophageal Fistula from a Previous Histoplasmosis Capsulatum Infection Using Decellularized Porcine Urinary Bladder Matrix	Journal of Surgical Case Reports

Gupta et al	2018	Repair of Colonic Neovaginal Stenosis Using a Biological Graft in a Male-to-Female Transgender Patient	International Urogynecology Journal

Howell et al	2018	Paraesophageal Hiatal Hernia Repair With Urinary Bladder Matrix Graft	Journal of the Society of Laparoendoscopic Surgeons

Zografakis et al	2018	Urinary Bladder Matrix Reinforcement for Laparoscopic Hiatal Hernia Repair	Journal of the Society of Laparoendoscopic Surgeons

Mehta et al	2017	Laparoscopic Rectopexy with Urinary Bladder Xenograft Reinforcement	Journal of the Society of Laparoendoscopic Surgeons

Devakumar et al	2017	Transvaginal Repair of Complex Rectovaginal Fistulas Using the Porcine Urinary Bladder Matrix as an Augmenting Graft	Female Pelvic Medicine & Reconstructive Surgery

Ansari, Karram	2017	Two Cases of Female Urethral Reconstruction with Acellular Porcine Urinary Bladder Matrix	International Urogynecology Journal

Abu Saleh et al	2016	Right Atrial Tumor Resection and Reconstruction with Use of an Acellular Porcine Bladder Membrane	Texas Heart Institute Journal

Reznichenko	2016	Different Biologic Grafts for Diaphragmatic Crura Reinforcement During Laparoscopic Repair of Large Hiatal Hernia: A Six-Year Single Surgeon Experience	Journal of Medical Implants & Surgery

Reznichenko	2016	Extracellular Matrix Scaffold in Diaphragmatic Crura Reinforcement During Laparoscopic Repair of Large Hiatal Hernia	Journal of Surgery & Transplantation Science

Sasse et al	2016	Hiatal Hernia Repair with Novel Biological Graft Reinforcement	Journal of the Society of Laparoendoscopic Surgeons

Ogaya-Pinies et al	2016	Use of Scaffolding Tissue Biografts To Bolster Vesicourethral Anastomosis During Salvage Robot-assisted Prostatectomy Reduces Leak Rates and Catheter Times	European Urology

Abu Saleh et al	2016	Case Report: Cardiac Tumor Resection And Repair With Porcine Xenograft	Methodist DeBakey Cardiovascular Journal

Abu Saleh et al	2016	Case Report: A Rare Case of Left Atrial Hemangioma: Surgical Resection and Reconstruction	Methodist DeBakey Cardiovascular Journal

Afaneh et al	2015	Esophageal Reinforcement with an Extracellular Scaffold During Total Gastrectomy for Gastric Cancer	Annals of Surgical Oncology

Iorio, Blumberg	2015	Short-term Results of Treating Primary and Recurrent Anal Fistulas with a Novel Extracellular Matrix Derived from Porcine Urinary Bladder	The American Surgeon

Nieponice et al	2014	Patch Esophagoplasty: Esophageal Reconstruction Using Biologic Scaffolds	Annals of Thoracic Surgery

Sicari et al	2014	An Acellular Biologic Scaffold Promotes Skeletal Muscle Formation in Mice and Humans with Volumetric Muscle Loss	Science Translational Medicine

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Comparison of preclinical and clinical results in hernia repair

A preclinical ovine model, conducted in 2018 by PreClinical Research Services, Inc. and sponsored by us, evaluated tissue remodeling and mechanical characteristics of (1) Gentrix Surgical Matrix devices, (2) a commercially available acellular dermal matrix, or ADM, and (3) a commercially available resorbable synthetic. At 90 days, the Gentrix devices showed complete remodeling of the device, noted by histological similarities to uninjured fascia. Furthermore, the overall tissue strength of Gentrix increased over time (noted at 30 and 90 days) while maintaining stiffness comparable to normal, uninjured tissue. The ADM was observed to have limited remodeling characteristics, yielded a decrease in overall strength and maintained relative stiffness comparable to uninjured fascia. The resorbable synthetic was observed to have exhibited clear fibrotic encapsulation and increased in strength over time, but also increased in stiffness. Increased stiffness equates to reduced elasticity of the tissue.

One retrospective clinical ventral hernia study, published by Sasse et al in Hernia (2018), evaluated the use of Gentrix Surgical Matrix Thick when used to reinforce complex ventral hernia repairs, or VHR. Sixty-four patients underwent repair of complex incisional ventral hernias with Gentrix reinforcement. Overall, the patient population was deemed complex with 84% classified as "severe" (Slater severity classification system). Thirty-eight patients (59%) had a failed previous hernia repair, including eleven cases involving excision of prior synthetic mesh. Forty-two patients (66%) had concomitant procedures performed. Post-operative follow-up ranged from 12-70 months, with a median follow-up time of 36 months. A 24-month statistical analysis displayed a 4% recurrence rate, while the overall recurrence rate was 15.6%. Radiographic and histological imaging displayed a long-term, durable, biomechanically functional repair. Study results provide clinical evidence of safety and efficacy when utilizing Gentrix for reinforcement following a complex ventral hernia repair.

Comparatively and for purposes of illustration, a study of hernia patients published by Rosen et al in the Annals of Surgery (2013) reported retrospective results of 128 patients undergoing single-staged VHR in a contaminated field with biologically-derived devices, not including Gentrix, over a five-year period from a prospectively maintained database. Outcome measures included safety, wound complication and hernia recurrence using various hernia repair products. The mean follow-up was at 21.7 months with a 31.3% recurrence rate and a 47.7% wound event rate. In addition, another complex ventral hernia study published by Huntington et al in Surgery (2016), which did not evaluate Gentrix, demonstrated similar challenges with biologically-derived devices. Specifically, the study results reported that 223 patients undergoing complex VHR with biologically-derived devices over a nine-year period of time showed hernia recurrences of 14.7% to 59.1%, depending on device used. The study results also observed a high rate of subsequent wound interventions ranging from 13.6% to 37.9%. A third comparative study published by Itani et al in Surgery (2012) utilized porcine acellular dermis in a similar fashion as described above and noted recurrence and wound event rates at 24 months of 23% and 66%, respectively.

These results involving competitive biologically-derived hernia repair devices highlight outcomes when used in ventral hernia repair procedures. Although Gentrix was not evaluated in these third-party studies, the outcomes provide a general baseline for comparison or meta-analysis to the Gentrix results observed in the Sasse et al study above, which involved similar procedures and patients with similar hernia complexity, based on standardized hernia grading systems.

SALES AND MARKETING

As of June 1, 2020, our direct sales and marketing team consisted of over 190 professionals with backgrounds in the medical device, biotechnology and pharmaceutical industries.

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Sales

We drive continued adoption of our products through our direct sales force, which consists of over 160 dedicated, surgically-focused representatives who are trained in the clinical benefits of our products. This sales force targets acute care call-points including hospitals, hospital-based wound management centers and government hospitals. To complement our direct sales efforts, we also have established a national accounts team that supports our commercial efforts with GPOs, IDNs and government facilities, including Department of Veterans Affairs and Department of Defense medical facilities. Specifically, we have contracts with all of the large domestic GPOs across our product portfolio and a federal supply schedule contract with the Department of Veterans Affairs. Our purchase agreements with our clinical customers allow our sales representatives to gain access into many different hospitals, creating opportunities to build long term relationships and increase usage of our products within these accounts. Our sales force is supported by in-house serialization and scanning technologies that enable us to track our products in real-time to monitor inventory levels while allowing proactive distribution of our products as needed, minimizing the likelihood of product shortages.

We are not dependent on any single customer for a material portion of our revenue. Our sales model involves multiple points of contact within each customer facility, and we believe that it is scalable as we continue to increase the size of our sales force and our penetration within our existing acute care customer accounts.

Marketing

Establishing our products as the new standard of care among healthcare providers is the driving objective of our marketing team. Our marketing teams consist of the following:

➤: Product management. Our product managers coordinate new product launches and campaigns dedicated to helping further expand our reach into new and existing markets.
➤: Marketing communications. Our marketing communications team is focused on graphic design, tradeshow management, branding and public relations. These functions and related tasks are primarily performed in-house.
➤: Customer service and reimbursement support. Our customer service team serves each of the regions within the United States with a dedicated representative to respond to customer and sales representative needs in their geographic area. This personalized approach is designed to establish trust and maintain loyalty. Our third-party reimbursement support, backed by The Pinnacle Health Group, assists clinicians, payors and patients. Our reimbursement offerings include services such as benefit verification, claims appeals and prior authorization support, among others.

International

Outside the United States, our strategy involves the utilization of distribution arrangements with third-party distributors, who are generally responsible for regulatory approval and marketing our products within their respective geographic territories. All of our products are currently approved for marketing in Canada and many of our products are currently approved for marketing in Saudi Arabia. We have exclusive distribution agreements with distributors in these countries, as well as eight additional countries in which we are seeking regulatory approval. We intend to enter into agreements in additional international markets. In the future, we may elect to market our products directly in select geographic regions outside of the United States.

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MANUFACTURING

We manufacture our products at our facilities located in Lafayette, Indiana and Columbia, Maryland. Our manufacturing facilities contain controlled environments and ISO class 7 clean rooms. Our facility located in Lafayette, Indiana processes all of the material used in our products and manufactures the majority of our products. Our facility located in Columbia, Maryland, which is redundant to our Lafayette, Indiana facility with respect to manufacturing, handles all distribution of our products. We do not expect any capacity issues in the foreseeable future and believe that our manufacturing facilities will remain capable of providing sufficient quantities of our products to meet anticipated customer demands.

While we manufacture our products exclusively at our Lafayette, Indiana and Columbia, Maryland manufacturing facilities, we utilize third-party suppliers for the raw materials used in the manufacturing of our products. We obtain our supply of porcine urinary bladders from multiple sources under long-term supply agreements.

Manufacturing our products is highly complex and involves a number of regulatory requirements and significant proprietary know-how and trade secrets. Members of our manufacturing team have spent almost two decades developing, scaling and continuously refining the manufacturing process for our products. We have developed numerous trade secrets, including the precise processes for preparing our raw materials and for engineering this material into sheet and particulate forms—that are usable for a variety of applications—while maintaining the physical properties that distinguish the performance of our products from other products on the market. We believe our manufacturing experience and proprietary know-how, trade secrets and patented technology represent a significant barrier to entry for potential competitors.

COMPETITION

We operate in a highly competitive market characterized by rapid technological change. We compete with both alternative regenerative medicine products and synthetic products based on efficacy, price, ease of use, reimbursement, customer support services and healthcare provider education. We face competition from various industry participants, including medical device companies, pharmaceutical companies, biotechnology companies, academic institutions, government agencies, as well as private and public research institutions. Some of our potential competitors may have:

➤: greater financial and human resources for product development, sales and marketing;
➤: greater domestic and international name recognition and more product familiarity among physicians;
➤: broader and more established relationships with physicians, hospitals and third-party payors;
➤: broader product lines and the ability to offer lower prices or rebates or bundle products to offer greater discounts or incentives;
➤: a greater body of clinical data supporting the efficacy and safety of their products, and the ability and resources to continue to develop supportive clinical data;
➤: broader intellectual property protection for their technology and products;
➤: broader and more established domestic and international sales and marketing and distribution networks; and
➤: more experience in conducting research and development, manufacturing, preparing regulatory submissions and obtaining regulatory clearance or approval for products, both in the United States and in foreign jurisdictions.

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In the market for wound management, which includes burn care, we primarily compete against products marketed by Avita Medical Ltd., Integra LifeSciences Holdings Corporation, MiMedx Group, Inc., Organogenesis Holdings Inc., Osiris Therapeutics, Inc., a subsidiary of Smith & Nephew plc, and Vericel Corporation.

We believe that the unique clinical and economic benefits of using our products, the breadth of our product portfolio, our customer support services and our established customer relationships and reputation offer us significant advantages over our competitors.

INTELLECTUAL PROPERTY

We believe that to have a competitive advantage we must develop, maintain and protect the proprietary aspects of our technologies. We rely on a combination of trade secrets, trademarks, patents and other intellectual property laws, as well as nondisclosure agreements and other measures to protect our intellectual property rights. Our success will partly depend on our ability to obtain and maintain proprietary protection for the technologies and products we consider important to our business, preserve the confidentiality of our trade secrets and operate our business without infringing the patents and proprietary rights of third parties.

Trade secrets, know-how and other measures

We rely primarily on trade secrets and know-how to develop and maintain our competitive position. For example, significant aspects of the process by which we manufacture our products and our proprietary UBM technology platform are based on trade secrets and know-how. Trade secrets and know-how can be difficult to protect. We seek to protect our proprietary technology and processes, in part, by confidentiality agreements with our employees, consultants, advisors, vendors and other commercial partners. We also require our employees, consultants and advisors who develop intellectual property for us to assign to us their rights to all intellectual property developed in connection with their relationship with us. These agreements are designed to protect our proprietary information and, in the case of invention assignment agreements, to grant us ownership of technologies that are developed through a relationship with a third party. We also seek to preserve the integrity and confidentiality of our data, trade secrets and know-how by maintaining physical security of our premises and physical and electronic security of our information technology systems.

Trademarks

Further, we seek trademark protection in the USPTO and appropriate offices in foreign countries where we do business, when appropriate, to distinguish our products from our competitors' products. We have registered seven trademarks with the USPTO and have filed two additional trademark applications in the United States. We also have filed and obtained 44 trademark registrations for our marks in over 30 foreign countries. We own the following marks referred to in this prospectus pursuant to applicable U.S. intellectual property laws: ACell, MicroMatrix, Cytal, Gentrix, MatriStem, MatriStem MicroMatrix, MatriStem UBM, MatriStem Urinary Bladder Matrix and ACell Vet.

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Patents

We also seek patent protection in the United States and foreign jurisdictions. As of December 31, 2019, we owned 108 issued patents globally, of which 36 were U.S. patents, and 31 pending patent applications, of which nine were pending in the United States. Outside of the United States, we own issued patents or patent applications in France, Germany, Italy, Sweden, the United Kingdom, China, Canada, Japan, South Korea and Australia. Our issued patents cover, among other things, devitalized acellular tissue regeneration compositions, tissue graft compositions made of materials of variable densities and methods of manufacturing bioactive gels from ECM material. Our pending patent applications encompass additional areas including ECMs with bactericidal or bacteriostatic characteristics and ECM foam. Subject to payment of required maintenance fees, annuities and other charges, our issued patents are currently expected to expire between 2020 and 2035. The core U.S. and foreign patents with claims directed to our currently marketed products will expire between October 2020 and January 2021. In response to the expiration of those patents, we intend to continue to internally develop patents and look to license existing patented technologies to incorporate into or enhance our current and future products. The loss of patent protection may not have a material effect on company business because of the proprietary nature of our manufacturing processes, reliance upon trade secrets and know-how to protect company products and the substantial capital expenditure that any potential competitor would need to incur to establish and validate a manufacturing facility and obtain clearance for a competing product.

GOVERNMENT REGULATION

FDA regulation

Our products and our operations are subject to extensive regulation by the FDA and other federal and state authorities, as well as comparable authorities in foreign jurisdictions, which are discussed below. Our products are subject to regulation as medical devices in the United States under the Federal Food, Drug, and Cosmetic Act, or FDCA, as implemented and enforced by the FDA.

The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, import, export, adverse event reporting, advertising, promotion, marketing and distribution of medical devices in the United States to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA. Failure to comply with applicable requirements may subject a device and/or its manufacturer to a variety of administrative sanctions, such as FDA refusal to approve pending premarket applications, issuance of warning letters, mandatory product recalls, import detentions, civil monetary penalties, and/or judicial sanctions, such as product seizures, injunctions and criminal prosecution.

FDA premarket clearance and approval requirements

Unless an exemption applies, each medical device commercially distributed in the United States requires either FDA clearance of a 510(k) premarket notification, approval of a premarket approval, or PMA, or grant of a De Novo request for classification. Under the FDCA, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of manufacturer and regulatory control needed to provide reasonable assurance of its safety and effectiveness. Classification of a device is important because the class to which a device is assigned determines, among other things, the necessity and type of FDA review required prior to marketing the device.

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Class I devices are those for which safety and effectiveness can be reasonably assured by adherence to FDA's "general controls" for medical devices, which include compliance with the applicable portions of the FDA's Quality System Regulation, or QSR, facility registration and product listing, reporting of adverse medical events and malfunctions through the submission of Medical Device Reports, or MDRs, and appropriate, truthful and non-misleading labeling, advertising, and promotional materials. Some Class I or low risk devices also require premarket clearance by the FDA through the 510(k) premarket notification process described below.

Class II devices are moderate risk devices subject to FDA's general controls, and any other "special controls" deemed necessary by FDA to ensure the safety and effectiveness of the device, such as performance standards, product-specific guidance documents, special labeling requirements, patient registries or post-market surveillance. Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification process, though certain Class II devices are exempt from this premarket review process. When required, the manufacturer must submit to the FDA a premarket notification, or 510(k), submission demonstrating that the device is "substantially equivalent" to a legally marketed device, which in some cases may require submission of clinical data. Unless a specific exemption applies, 510(k) premarket notification submissions are subject to user fees. If the FDA determines that the device, or its intended use, is not substantially equivalent to a legally marketed device, the FDA will place the device, or the particular use of the device, into Class III, and the device sponsor must then fulfill much more rigorous premarketing requirements.

Class III devices include devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices and devices deemed not substantially equivalent to a predicate device following a 510(k) submission. The safety and effectiveness of Class III devices cannot be reasonably assured solely by general or special controls. Submission and FDA approval of a premarket approval, or PMA, application is required before marketing of a Class III device can proceed. As with 510(k) submissions, unless subject to an exemption, PMA submissions are subject to user fees. The PMA process is much more demanding than the 510(k) premarket notification process. A PMA application, which is intended to demonstrate that the device is reasonably safe and effective for its intended use, must be supported by extensive data, typically including data from preclinical studies and human clinical trials.

Some pre-amendment devices (devices that were on the market prior to May 28, 1976) are unclassified, but are subject to FDA's premarket notification and clearance process in order to be commercially distributed. To date our currently marketed products are classified in Class II, except for our wound management devices that are unclassified and subject to premarket notification.

Certain tissue-engineered products do not meet the criteria to be classified as medical devices and may be regulated as biological products under Section 351 of the Public Health Service Act and also, in some respects, as drugs under the FDCA. Before a biological product can be marketed in interstate commerce, it must receive approval of a Biologics License Application, or BLA, by the FDA. Although we do not currently market any biological products, we may consider pursuing potential product opportunities that may require BLA approval. Should we choose to manufacture any potential product opportunities that require BLA approval in the future, the process must comply with the FDA's current good manufacturing, or cGMP, regulations, which are designed to ensure that finished products are not adulterated or misbranded or otherwise in violation of the requirements of the FDCA.

510(k) Marketing clearance pathway

Our current products are subject to premarket notification and clearance under section 510(k) of the FDCA. To obtain 510(k) clearance for a medical device, an applicant must submit to the FDA a

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premarket notification, or 510(k), submission demonstrating that the proposed device is "substantially equivalent" to a legally marketed device, known as a "predicate device." A legally marketed predicate device may include a device that was legally marketed prior to May 28, 1976 for which a PMA is not required (known as a "pre-amendments device" based on the date of enactment of the Medical Device Amendments of 1976), a device that has been reclassified from Class III to Class II or Class I, or a device that was found substantially equivalent through the 510(k) process. A device is substantially equivalent if, with respect to the predicate device, it has the same intended use and has either (i) the same technological characteristics, or (ii) different technological characteristics, but the information provided in the 510(k) submission demonstrates that the device does not raise new questions of safety and effectiveness and is at least as safe and effective as the predicate device. A showing of substantial equivalence sometimes, but not always, requires clinical data.

Before the FDA will accept a 510(k) submission for substantive review, the FDA will first assess whether the submission satisfies a minimum threshold of acceptability. If the FDA determines that the 510(k) submission is incomplete, the FDA will issue a "Refuse to Accept" letter which generally outlines the information the FDA believes is necessary to permit a substantive review and to reach a determination regarding substantial equivalence. An applicant must submit the requested information within 180 days before the FDA will proceed with additional review of the submission. Once the 510(k) submission is accepted for review, by regulation, the FDA has 90 calendar days to review and issue a determination. As a practical matter, clearance often takes longer. The FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence.

If the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance to commercially market the device. If the FDA determines that the device is "not substantially equivalent" to a previously cleared device, for example, due to a finding of a lack of a predicate device, that the device has a new intended use or different technological characteristics that raise different questions of safety or effectiveness when the device is compared to the cited predicate device, the device is automatically designated as a Class III device. The device sponsor must then fulfill more rigorous PMA requirements, or can request a risk-based classification determination for the device in accordance with the "de novo" process, which is a route to market for novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device. If the FDA determines that the information provided in a 510(k) is insufficient to demonstrate substantial equivalence to the predicate device, the FDA generally identifies the specific information that needs to be provided so that the FDA may complete its evaluation of substantial equivalence, and such information may be provided to the 510(k) within the time allotted by the FDA or in a new 510(k) should the original 510(k) have been withdrawn.

After a device receives 510(k) marketing clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) marketing clearance or, depending on the modification, PMA approval. The determination as to whether or not a modification could significantly affect the device's safety or effectiveness is initially left to the manufacturer using available FDA guidance. Many minor modifications today are accomplished by a "letter to file" in which the manufacture documents the rationale for the change and why a new 510(k) is not required. However, the FDA may review such letters to file to evaluate the regulatory status of the modified product at any time and may require the manufacturer to cease marketing and recall the modified device until 510(k) clearance or PMA approval is obtained. The manufacturer may also be subject to significant regulatory fines or penalties.

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PMA approval pathway

Class III devices require PMA approval before they can be marketed although some pre-amendment Class III devices for which FDA has not yet required a PMA are cleared through the 510(k) process. The PMA process is generally more demanding than the 510(k) premarket notification process. In a PMA the manufacturer must demonstrate that the device is reasonably safe and effective, and the PMA must be supported by extensive data, including data from preclinical studies and human clinical trials. The PMA must also contain a full description of the device and its components, a full description of the methods, facilities and controls used for manufacturing, and proposed labeling. Following receipt of a PMA, the FDA determines whether the application is sufficiently complete to permit a substantive review. If FDA accepts the application for review, it has 180 days under the FDCA to complete its review of a PMA, although in practice, the FDA's review often takes significantly longer, and can take up to several years. An advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDA may or may not accept the panel's recommendation. In addition, the FDA will generally conduct a pre-approval inspection of the applicant or its third-party manufacturers' or suppliers' manufacturing facility or facilities to ensure compliance with the QSR.

The FDA will approve the new device for commercial distribution if it determines that the data and information in the PMA constitute valid scientific evidence and that there is reasonable assurance that the device is safe and effective for its intended use(s). The FDA may approve a PMA with post-approval conditions intended to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution, and collection of long-term follow-up data from patients in the clinical study that supported PMA approval or requirements to conduct additional clinical studies post-approval. The FDA may condition PMA approval on some form of post-market surveillance when deemed necessary to protect the public health or to provide additional safety and efficacy data for the device in a larger population or for a longer period of use. In such cases, the manufacturer might be required to follow certain patient groups for a number of years and to make periodic reports to the FDA on the clinical status of those patients. Failure to comply with the conditions of approval can result in material adverse enforcement action, including withdrawal of the approval.

Certain changes to an approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the design performance specifications, that affect the safety or effectiveness of the device, require submission of a PMA supplement. PMA supplements often require submission of the same type of information as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and may not require as extensive clinical data or the convening of an advisory panel. Certain other changes to an approved device require the submission of a new PMA, such as when the design change causes a different intended use, mode of operation, and technical basis of operation, or when the design change is so significant that a new generation of the device will be developed, and the data that were submitted with the original PMA are not applicable for the change in demonstrating a reasonable assurance of safety and effectiveness. None of our products are currently approved under a PMA. However, we may in the future develop devices which will require the approval of a PMA.

BLA approval pathway

Biological products, or biologics, require FDA approval of a Biologics License Application, or BLA, to be marketed. In order to be approved, a BLA must demonstrate the safety, purity, and potency of the product candidate based on results of preclinical studies and clinical trials. A BLA must also contain extensive Chemistry, Manufacturing and Control, or CMC, information, and the applicant must pass

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an FDA pre-approval inspection of the manufacturing facility or facilities at which the biologic is produced to assess compliance with the FDA's current good manufacturing practice. Satisfaction of FDA approval requirements for biologics typically takes several years and the actual time required may vary substantially based on the type, complexity and novelty of the product. None of our products are currently approved under a BLA. However, we may in the future develop products which will require the approval of a BLA.

The steps for obtaining FDA approval of a BLA to market a biologic in the United States include:

➤: completion of preclinical laboratory tests, animal studies and formulation studies under the FDA's good laboratory practices regulations;
➤: submission to the FDA of an Investigational New Drug Application, or IND, for human clinical testing, which must become effective before human clinical trials may begin and which must include independent Institutional Review Board, or IRB, approval at each clinical site before the trials may be initiated;
➤: performance of adequate and well-controlled clinical trials in accordance with Good Clinical Practices to establish the safety and efficacy of the product for each indication;
➤: submission to the FDA of a BLA, which contains detailed information about the CMC for the product, reports of the outcomes and full data sets of the preclinical testing and clinical trials, and proposed labeling and packaging for the product;
➤: satisfactory review of the contents of the BLA by the FDA, including the satisfactory resolution of any questions raised during the review;
➤: satisfactory completion of an FDA Advisory Committee review, if applicable;
➤: satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP regulations, to assure that the facilities, methods and controls are adequate to ensure the product's identity, strength, quality and purity; and
➤: FDA approval of the BLA including agreement on post-marketing commitments, if applicable.

Preclinical tests include laboratory evaluations of product chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the preclinical tests, together with manufacturing information and analytical data, to the FDA as part of the IND. Some preclinical testing may continue after the IND is submitted. The IND must become effective before human clinical trials may begin. An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA raises concerns or questions about issues such as the conduct of the trials and or supporting preclinical data as outlined in the IND. In that case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. In other words, submission of an IND may not result in the FDA allowing clinical trials to commence.

Before approving a BLA, the FDA generally inspects the facility or the facilities at which the product is manufactured. The FDA will not approve the product if it finds that the facility does not appear to be in cGMP compliance. If the FDA determines the application, manufacturing process or manufacturing facilities are not acceptable, it will either not approve the application or issue a complete response letter in which it will outline the deficiencies in the BLA and provide the applicant an opportunity to submit additional information or data to address the deficiencies. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.

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De novo classification

Medical device types that the FDA has not previously classified as Class I, II or III are automatically classified into Class III regardless of the level of risk they pose. To market low to moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, a manufacturer may request a de novo classification. This procedure allows a manufacturer whose novel device is automatically classified into Class III to request classification of its medical device into Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA application. A medical device may be eligible for de novo classification if the manufacturer first submitted a 510(k) premarket notification and received a determination from the FDA that the device was not substantially equivalent or a manufacturer may request de novo classification directly without first submitting a 510(k) premarket notification to the FDA and receiving a not substantially equivalent determination. The FDA is required to classify the device within 120 days following receipt of the de novo application, although in practice, the FDA's review may take significantly longer. During the pendency of FDA's review, FDA may issue an additional information letter, which places the de novo request on hold and stops the review clock pending receipt of the additional information requested. In the event the de novo requestor does not provide the requested information within 180 calendar days, FDA will consider the de novo request to be withdrawn. If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. In addition, the FDA may reject the de novo request for classification if it identifies a legally marketed predicate device that would be appropriate for a 510(k) or determines that the device is not low to moderate risk or that general controls would be inadequate to control the risks and special controls cannot be developed. In the event FDA determines the data and information submitted demonstrate that general controls or general and special controls are adequate to provide reasonable assurance of safety and effectiveness, FDA will grant the de novo request for classification. When FDA grants a de novo request for classification, the device is granted marketing authorization and further can serve as a predicate for future devices of that type, through a 510(k) premarket notification.

Clinical trials

Clinical trials are typically required to support a PMA, BLA and often for a de novo request for classification, and are sometimes required to support a 510(k) submission. All clinical investigations of devices to determine safety and effectiveness must be conducted in accordance with the FDA's investigational device exemption, or IDE, regulations which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. If the device presents a "significant risk," as defined by the FDA, to human health, the FDA requires the device sponsor to submit an IDE application to the FDA, which must be approved prior to commencing human clinical trials. A significant risk device is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted, purported or represented to be used in supporting or sustaining human life, is for a use that is substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject. An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. A clinical trial may begin 30 days after receipt of the IDE by the FDA unless the FDA notifies the company that the investigation may not begin. If the FDA determines that there are deficiencies or other concerns with an IDE for which it requires modification, the FDA may permit a clinical trial to proceed under a conditional approval. Acceptance of an IDE

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application for review does not guarantee that the FDA will approve the IDE and, if it is approved, the FDA may or may not determine that the data derived from the trials support the safety and effectiveness of the device or warrant the continuation of clinical trials. An IDE supplement must be submitted to, and approved by, the FDA before a sponsor or investigator may make a change to the investigational plan that may affect its scientific soundness, study plan or the rights, safety or welfare of human subjects.

In addition, the study must be approved by, and conducted under the oversight of, an Institutional Review Board, or IRB, for each clinical site. The IRB is responsible for the initial and continuing review of the IDE, and may pose additional requirements for the conduct of the study. If an IDE application is approved by the FDA and one or more IRBs, human clinical trials may begin at a specific number of investigational sites with a specific number of patients, as approved by the FDA.

If the device is considered a "non-significant risk," IDE submission to FDA is not required. Instead, only approval from the IRB overseeing the investigation at each clinical trial site is required. Abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements also apply to non-significant risk device studies.

During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them. The clinical investigators in the clinical study are also subject to FDA's regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all applicable reporting and record keeping requirements.

Additionally, after a trial begins, we, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits. Even if a clinical trial is completed, there can be no assurance that the data generated during a clinical study will meet the safety and effectiveness endpoints or otherwise produce results that will lead the FDA to grant marketing clearance or approval.

Investigational new drug application

For a biologic, an IND must be submitted prior to the initiation of the clinical study. The IND application must contain information in three broad areas:

➤: Animal Pharmacology and Toxicology studies—Preclinical data to permit an assessment as to whether the product is reasonably safe for initial testing in humans. Also included are any previous experiences with the product in humans (often foreign use).
➤: Manufacturing information—Information pertaining to the composition, manufacturer, stability, and controls used for manufacturing of the drug substance and the drug product. This information is assessed to ensure that the company can adequately produce and supply consistent batches of the drug.
➤: Clinical protocols and investigator information—Detailed protocols for proposed clinical studies to assess whether the initial-phase trials will expose subjects to unnecessary risks. Also, information on the qualifications of clinical investigators—professionals (generally physicians) who oversee the administration of the experimental compound—to assess whether they are qualified to fulfill their

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clinical trial duties. Finally, commitments to obtain informed consent from the research subjects, to obtain review of the study by an IRB, and to adhere to the investigational new drug regulations.

Once the IND is submitted, the sponsor must wait 30 calendar days before initiating any clinical trials. During this time, FDA has an opportunity to review the IND for safety to assure that research subjects will not be subjected to unreasonable risk.

Post-market regulation

After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply. These include:

➤: establishment registration and device listing with the FDA;
➤: QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process;
➤: labeling regulations and FDA prohibitions against the promotion of investigational products, or "off-label" uses of cleared or approved products;
➤: requirements related to promotional activities;
➤: clearance or approval of product modifications to 510(k)-cleared devices that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices;
➤: medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur;
➤: correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health;
➤: the FDA's recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and
➤: post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.

Advertising and promotion of medical devices, in addition to being regulated by the FDA, are also regulated by the Federal Trade Commission and by state regulatory and enforcement authorities. Recently, promotional activities for FDA-regulated products have been the subject of enforcement action brought under healthcare reimbursement laws and consumer protection statutes. In addition, under the federal Lanham Act and similar state laws, competitors and others can initiate litigation relating to advertising claims. In general, if the FDA determines that our promotional materials or training constitutes promotion of an unapproved or uncleared use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions. For example, On May 14, 2019, we entered into a civil settlement agreement with the United States that resolved allegations that we, among other things, marketed our MicroMatrix particulate product for uses that were inconsistent with the FDA-cleared Indications For Use. Related to this matter, on June 11, 2019, we entered into a plea agreement with the United States Attorney's Office for the District of Maryland

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on behalf of the Department of Justice and pled guilty to one misdemeanor count of failure to report a medical device removal. See "—Legal proceedings" for more information.

It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our promotional or training materials to constitute promotion of an unapproved or uncleared use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement.

Our manufacturing processes are required to comply with the applicable portions of the QSR, which cover the methods and the facilities and controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation and servicing of finished devices intended for human use. The QSR also requires, among other things, maintenance of a device master file, design history file, device history records, and complaint files. As a manufacturer, we are subject to periodic scheduled or unscheduled inspections by the FDA. Our failure to maintain compliance with the QSR requirements could result in the shut-down of, or restrictions on, our manufacturing operations and the recall or seizure of our products, which would have a material adverse effect on our business. The discovery of previously unknown problems with any of our products, including unanticipated adverse events or adverse events of increasing severity or frequency, whether resulting from the use of the device within the scope of its clearance or off-label by a physician in the practice of medicine, could result in restrictions on the device, including the removal of the product from the market or voluntary or mandatory device recalls.

Similarly, following approval of a biologic, the manufacturer and the approved product are subject to continuing regulation by the FDA, including, among other things, monitoring and record-keeping activities, reporting of adverse experiences, complying with promotion and advertising requirements, which include restrictions on promoting products for off-label use and limitations on industry-sponsored scientific and educational events, continued manufacture in specific approved facilities and in accordance with cGMP regulations, and limitations on modifications to the biologic or manufacturing process without further FDA review and approval.

The FDA has broad regulatory compliance and enforcement powers. If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions:

➤: untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
➤: unanticipated expenditures to address or defend such actions;
➤: customer notifications for repair, replacement, refunds;
➤: recall, detention or seizure of our products;
➤: operating restrictions or partial suspension or total shutdown of production;
➤: refusal of or delay in granting our requests for 510(k) clearance or PMA or BLA approval of new products or modified products;
➤: operating restrictions;
➤: withdrawing 510(k) clearance or PMA or BLA approvals that are already granted;
➤: refusal to grant export approval for our products; or
➤: criminal prosecution.

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There are restrictions under U.S. law on the export from the United States of medical devices that cannot be legally distributed in the United States. A Class I or Class II device that is intended for export only can only be exported to a foreign country without FDA permission if it is in accordance with the specifications of the foreign purchaser; not in conflict with the laws of the country to which it is intended for export; labeled on the outside of the shipping package that it is intended for export; and not sold or distributed in the United States. An unapproved Class III device can be exported with notification to the FDA if it complies with the criteria discussed above for a Class I or II device and meets additional restrictions, including, among other requirements, that it: be in substantial compliance with the QSR or an international quality standard recognized by the FDA, not be adulterated other than by the lack of U.S. marketing approval, have a valid marketing authorization by the appropriate authority in an enumerated list of countries, and comply with the laws of the country to which it is exported. If an unapproved Class III device does not meet these requirements it may still be exported subject to certain restrictions if FDA issues an export permit.

Foreign regulation

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our products to the extent we choose to sell any products outside of the United States. We must obtain approval by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of our products in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required by the FDA for 510(k) clearance, PMA approval or BLA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country. As in the United States, post-approval regulatory requirements, such as those regarding product manufacturing, marketing, or distribution would apply to any product that is approved outside the United States.

Coverage and reimbursement

Since commercializing our soft tissue and surgical repair products in 2010, we have invested significant resources into facilitating the adoption of appropriate coverage and reimbursement for our products. Currently, our complex wound management and surgical soft tissue repair products are primarily used in the hospital operating room setting. Governmental payors, such as Medicare, generally reimburse our customers in a single bundled payment that is based on the patients' MS-DRG classification. While our customers are generally reimbursed for procedures using our products in a hospital inpatient setting under existing MS-DRG codes, there is currently no blanket coverage in the outpatient setting. Coverage decisions are at the discretion of the Medicare contractors and other third party payors. As a result, we cannot be certain that the procedures performed with our products will be reimbursed at a cost-effective level or reimbursed at all. In addition, some managed care programs may require pre-approval of the items and services that a member will receive. Our products are also purchased by VA hospitals, which do not depend on reimbursement from third party payors.

Although procedures using our products are currently covered when used in a hospital inpatient setting, some third-party payors in the United States have developed policies that deny coverage for our products when used as wound care treatment for certain clinical indications, such as lower extremity ulcers in a hospital outpatient facility, ambulatory surgery center or physician office. To support changes in these policies and expanded coverage, we may need to conduct prospective, randomized controlled clinical trials and present data from such trials to payors to demonstrate the medical necessity or cost effectiveness of our products for these indications. While we are devoting considerable resources to such post-market clinical trials to demonstrate the medical necessity and

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cost-effectiveness of our products to support such additional coverage and reimbursement in the outpatient setting, there can be no assurance that coverage for our products will be expanded. In addition, the Centers for Medicare & Medicaid Services, or CMS, the agency responsible for administering the Medicare program, has adopted reimbursement policies in hospital outpatient departments and ambulatory surgery centers for certain "skin substitutes," including our Cytal Wound Matrix products. Under these policies, our customers receive a single bundled payment for both the surgical procedure and any related products used in the surgery. Our MicroMatrix product also is not separately reimbursed under a different Medicare policy. These bundled payments are limited by dollar amount and may not cover the cost of the products used.

Outside of the United States, reimbursement systems vary from country to country. Many foreign markets have government-managed health care systems that govern reimbursement for medical devices and procedures and often require special consideration for reimbursement of a new product. In those countries, where our products may be approved for sale, we expect that the sales volumes and prices of our products will be influenced by the availability of reimbursement from governments or third-party payors.

U.S. anti-kickback, false claims and other healthcare fraud and abuse laws

In the United States, there are federal and state fraud and abuse laws that constrain the business or financial arrangements and relationships through which we research, sell, market and distribute our products. Violations of these laws can lead to significant administrative, civil and criminal penalties, including sanctions, damages, disgorgement, monetary fines, possible exclusion from participation in government healthcare programs such as Medicare and Medicaid, imprisonment, additional reporting requirements and/or oversight obligations, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. These laws apply to manufacturers of products, such as us, with respect to our financial relationship with hospitals, physicians and other potential purchasers or acquirers of our products. on behalf of the government by private whistleblowers, who then receive a share of any recovery.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, ACA. The ACA, among other things, amends the intent requirement of the federal anti-kickback and criminal healthcare fraud statutes. A person or entity no longer needs to have actual knowledge of these statutes or specific intent to violate them. In addition, the ACA provides that the government may assert that a claim that includes items or services resulting from a violation of the federal anti-kickback statute constitutes a false or fraudulent claim for purposes of the False Claims Act. The ACA also imposes new reporting and disclosure requirements on device and drug manufacturers for any "transfer of value" made or distributed to physicians and teaching hospitals. Device and drug manufacturers will also be required to report and disclose any investment interests held by physicians and their immediate family members during the preceding calendar year. As of August 1, 2013, manufacturers are required to collect data, and they will be required to submit their first data reports to Centers for Medicare & Medicaid Services, or CMS, by March 31, 2014 and by the 90th day of each calendar year thereafter. A number of provisions of ACA also reflect increased focus on and funding of healthcare fraud enforcement.

In addition, there has been a recent trend of increased federal and state regulation of payments made to physicians for marketing. Certain states mandate implementation of compliance programs and/or the tracking and reporting of gifts, compensation and other remuneration to physicians. The shifting compliance environment and the need to build and maintain robust and expandable systems to comply

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with different compliance and/or reporting requirements in multiple jurisdictions increase the possibility that a healthcare company may violate one or more of the requirements.

Although our business is structured to comply with these and other applicable laws, it is possible that some of our business practices in the future could be subject to scrutiny and challenge by federal or state enforcement officials under these laws. This type of challenge could have a material adverse effect on our business, financial condition and results of operations.

Anti-Kickback Statute

The federal Anti-Kickback Statute 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, in exchange for or to induce either the referral of an individual for, or the purchase, lease, order or recommendation of, any good, facility, item or service for which payment may be made, in whole or in part, under federal healthcare programs, such as Medicare and Medicaid. The federal Anti-Kickback Statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry. The term "remuneration" includes kickbacks, bribes, or rebates and also has been broadly interpreted to include anything of value, including for example, gifts, discounts, free products, entertainment, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payments, ownership interests and providing anything at less than its fair market value. There are a number of statutory exceptions and regulatory safe harbors protecting certain business arrangements from prosecution under the federal Anti-Kickback Statute. These statutory exceptions and safe harbors set forth provisions that, if all their applicable requirements are met, will assure the parties to a given arrangement that they may not be prosecuted under the federal Anti-Kickback Statute. The failure of a transaction or arrangement to fit precisely within one or more applicable statutory exceptions or safe harbors does not necessarily mean that it is illegal or that prosecution will be pursued. However, conduct and business arrangements that do not fully satisfy all requirements of an applicable safe harbor may result in increased scrutiny by government enforcement authorities and would be evaluated on a case-by-case basis based on a cumulative review of their facts and circumstances. Further, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act, which is discussed below. Penalties for violations of the Anti-Kickback Statute include, but are not limited to, criminal, civil and/or administrative penalties, damages, fines, disgorgement, individual imprisonment, possible exclusion from Medicare, Medicaid and other federal healthcare programs, and the curtailment or restructuring of operations.

Health Insurance Portability and Accountability Act of 1996

The federal Health Insurance Portability and Accountability Act, or HIPAA, created several new federal crimes, including healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

In addition, HIPAA and its implementing regulations established uniform standards for certain covered entities, which generally include certain healthcare providers, health plans and healthcare clearinghouses, as well as their business associates that create, receive, maintain or transmit

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individually identifiable health information for or on behalf of a covered entity, governing the conduct of specified electronic healthcare transactions and protecting the security and privacy of protected health information. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, created new civil monetary penalties and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA privacy and security standards and to seek attorneys' fees and costs associated with pursuing such actions. Additionally, certain states have adopted comparable privacy and security laws and regulations, some of which may be more stringent than HIPAA and HITECH.

The federal Physician Payments Sunshine Act

The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program, with certain exceptions, to report annually to CMS, information related to "payments or other transfers of value" made to physicians (defined to include doctors of medicine or osteopathy, dentists, optometrists, podiatrists and chiropractors), teaching hospitals, and, in 2021, certain other healthcare professionals, including physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives; and to report annually to CMS certain ownership and investment interests held by such healthcare professionals and their immediate family members. Certain states also require manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures, require compliance with the industry's voluntary compliance guidelines and the applicable 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.

False claims laws

The federal false claims laws, including the civil False Claims Act prohibits, among other things, persons or entities from knowingly presenting or causing to be presented a false or fraudulent claim to, or the knowing use of false statements to obtain payment from, the federal government. In addition, private individuals have the ability to bring actions under the civil False Claims Act in the name of the government alleging false and fraudulent claims presented to or paid by the government (or other violations of the statute) and to share in any amounts paid by the entity to the government in fines or settlement. Such suits, known as qui tam actions, have increased significantly in the healthcare industry over the past several years. Manufacturers can be held liable under these laws if they are deemed to "cause" the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. Penalties for a federal civil False Claims Act violation include three times the actual damages sustained by the government, plus mandatory civil penalties of up to $22,363 (adjusted annually for inflation) for each separate false claim and the potential for exclusion from participation in federal healthcare programs. We recently entered into settlement agreements to resolve allegations of non-compliance related to our sales and marketing practices between 2009 and 2014, as further described below in "—Legal proceedings."

Health care reform

In the United States and some foreign jurisdictions there have been, and continue to be, several legislative and regulatory changes and proposed reforms of the healthcare system to contain costs, improve quality, and expand access to care. In the United States, there have been and continue to be a number of healthcare-related legislative initiatives that have significantly affected medical device industry. For example, the ACA, was passed in March 2010, and substantially changed the way

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healthcare is financed by both governmental and private insurers, and continues to significantly impact the U.S. medical device industry.

There remain judicial and Congressional challenges to certain aspects of the ACA, as well as efforts by the Trump administration to repeal or replace certain aspects of the ACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the ACA have been signed into law. The Tax Cuts and Jobs Act of 2017, or Tax Act, included a provision which repealed, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the "individual mandate." In addition, the 2020 federal spending package permanently eliminates, effective January 1, 2020, the ACA-mandated medical device tax and the "Cadillac" tax on high-cost employer-sponsored health coverage and, effective January 1, 2021, also eliminates the health insurer tax. On December 14, 2018, a Texas U.S. District Court Judge ruled that the ACA is invalid in its entirety because the "individual mandate" is unconstitutional and inseverable from the remainder of the ACA. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this case, and has alloted one hour for oral arguments, which are expected to occur in the fall. It is unclear how such litigation and other efforts to repeal and replace the ACA will impact the ACA and our business.

The Foreign Corrupt Practices Act

The Foreign Corrupt Practices Act, or FCPA, prohibits any U.S. individual or business from paying, offering, or authorizing payment or offering of anything of value, directly or indirectly, to any foreign official, political party or candidate for the purpose of influencing any act or decision of the foreign entity in order to assist the individual or business in obtaining or retaining business. The FCPA also obligates companies whose securities are listed in the United States to comply with accounting provisions requiring the company to maintain books and records that accurately and fairly reflect all transactions of the corporation, including international subsidiaries, and to devise and maintain an adequate system of internal accounting controls for international operations.

EU Data Protection Directive

We are subject to laws and regulations in non-U.S. countries covering data privacy and the protection of health-related and other personal information. EU member states and other jurisdictions have adopted data protection laws and regulations, which impose significant compliance obligations. For example, the EU Data Protection Directive, as implemented into national laws by the EU member states, imposes strict obligations and restrictions on the ability to collect, analyze and transfer personal data, including health data from clinical trials and adverse event reporting. Failing to comply with these laws could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results. A proposal for an EU Data Protection Regulation, intended to replace the current EU Data Protection Directive, is currently under consideration and, if adopted, could lead to additional and stricter requirements and penalties in the event of non-compliance.

COMPLIANCE INFRASTRUCTURE

We maintain a comprehensive compliance program that is structured to meet all of the elements of an effective compliance program as set out by the Office of Inspector General of the Department of Health and Human Services, or the OIG-HHS. Our chief compliance officer reports directly to our

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board of directors and has a dotted line reporting relationship to our chief executive officer. The chief compliance officer reports to the full board and the compliance committee of the board on at least a quarterly basis and more frequently as needed. We have a corporate compliance committee whose members include the chief compliance officer, the chief executive officer, the chief financial officer, the general counsel, the vice president of regulatory affairs and quality, the vice president of operations, the vice president of research and development and the director of national sales. The corporate compliance committee meets quarterly and oversees our day-to-day compliance operations.

Our compliance program is comprised of numerous policies that cover key areas such as promotional activity, interactions with healthcare providers, investigations, progressive discipline, the distribution of promotional and non-promotional materials, distribution of evaluation product, grants, compensation, non-retaliation and transparency reporting. We regularly conduct training programs regarding our compliance program and maintain an ethics and integrity helpline. We conduct exclusion screening of potential and current employees and monitor compliance with our policies.

LEGAL PROCEEDINGS

In February 2014, we received a subpoena from the United States Attorney's Office for the District of Maryland, or USAO, requesting materials relating to our sales and marketing activities from January 1, 2009 through October 20, 2014 and a recall of our MicroMatrix particulate product between January and March 2012. In the course of our negotiations with the USAO, we were made aware of two underlying complaints, each filed pursuant to the qui tam provisions of the False Claims Act, 31 U.S.C. § 3730(b).

On May 14, 2019, we entered into a civil False Claims Act settlement with the United States, acting through the United States Department of Justice and on behalf of the OIG-HHS, the Defense Health Agency, acting on behalf of the TRICARE Program and the United States Department of Veteran Affairs, which we refer to as the Federal Settlement Agreement. The Federal Settlement Agreement resolved allegations that we marketed our MicroMatrix particulate product for uses that were inconsistent with the FDA-cleared indications, that we misled physicians as to the safety and efficacy of our MicroMatrix particulate product, that we provided coding recommendations to hospitals that were incorrect and improperly inflated Medicare reimbursement, and that we provided improper inducements to prescribers to order our products, including entertainment, speaker programs payments and free product. We were subsequently dismissed as a party to the qui tam complaints. As contemplated by the Federal Settlement Agreement, the USAO filed an Information against us on June 6, 2019, in a case captioned United States of America v. ACell, Inc., Action No. ELH-19-0282 in the United States District Court for the District of Maryland, and, on June 11, 2019, we entered into a plea agreement with the USAO on behalf of the Department of Justice and pled guilty to one misdemeanor count of failure to report a medical device removal. In connection with the plea agreement, we also agreed to pay a criminal fine of $3.0 million, establish and maintain a compliance and ethics program and cooperate with the Department of Justice with respect to their investigation.

On May 14, 2019, we also entered into civil False Claims Act settlement agreements with the states of Maryland, Wisconsin and Florida, which we refer to collectively as the State Settlement Agreements, on the basis of the same conduct that was the subject of the Federal Settlement Agreement.

Under the terms of the Federal Settlement Agreement and the State Settlement Agreements, we have agreed to pay to the Department of Justice and the states of Maryland, Wisconsin and Florida a total of $12.0 million, plus interest at a rate of 2.875%, which we refer to as the Settlement Amount, over the course of five years, and a total of $222,500 in attorneys' fees and costs for plaintiffs' counsel in the two qui tam complaints.

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Subject to our payment of the Settlement Amount, the United States has released us from any civil or administrative monetary claim the United States has under the False Claims Act and certain other statutes and common law theories of liability arising from the conduct that was the subject of the Federal Settlement Agreement, and the states of Maryland, Wisconsin and Florida have released us from any civil or administrative monetary cause of action that the state had for any claims submitted or caused to be submitted to the state's Medicaid Programs as a result of the conduct covered by the State Settlement Agreements. Likewise, in consideration of the obligations in the Federal Settlement Agreement and the Corporate Integrity Agreement, as described below, OIG-HHS agreed to release and refrain from instituting, directing, or maintaining any administrative action seeking to exclude us from Medicare, Medicaid and other Federal health care programs.

On May 13, 2019, we entered into a Corporate Integrity Agreement with OIG-HHS. The Corporate Integrity Agreement has a term of five years and contains various compliance obligations designed to help ensure our ongoing compliance with federal health care program requirements. The terms of the Corporate Integrity Agreement include internal monitoring requirements, compliance training, certification obligations by our board and certain employees, reporting requirements to OIG-HHS and the engagement of an independent review organization to review and prepare written reports regarding reviews of certain of our systems and transactions.

We are parties to various legal matters and claims arising in the ordinary course of business. We do not expect that the final resolution of these ordinary course matters will have a material adverse impact on our business.

FACILITIES

Our corporate headquarters are located in Columbia, Maryland. We manufacture our products at our manufacturing facilities in Lafayette, Indiana and Columbia, Maryland.

Our Columbia, Maryland facility consists of approximately 25,000 square feet of office, manufacturing and laboratory space pursuant to lease agreements that expire in 2023. Our Lafayette, Indiana facility consists of approximately 52,000 square feet of manufacturing space pursuant to a lease that expires in 2025. We believe that our existing facilities are adequate to meet our current requirements and that suitable additional or substitute space will be available as needed to accommodate expansion of our operations.

EMPLOYEES

As of March 31, 2020, we had 400 employees, all of whom are located in the United States. None of our employees are represented by a labor organization or under any collective-bargaining arrangements. We consider our employee relations to be good.

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The following table sets forth information for our executive officers and directors, including their ages as of June 22, 2020:

Name	Age	Position


Executive Officers:
Patrick A. McBrayer	68	President, Chief Executive Officer and Director
Matthew Kunst	46	Treasurer and Chief Financial Officer
Christopher F. Branch	43	Chief Operating Officer and General Counsel
Non-Employee Directors:
Louis S. Baldino	59	Chairman of the Board of Directors
David W. Anderson	67	Director
Kyle C. Kerbawy	74	Director
Sally L. Maher	63	Director
Martin Pfinsgraff	65	Director

EXECUTIVE OFFICERS

Patrick A. McBrayer has served as our President and Chief Executive Officer and on our board of directors since January 2016. Prior to joining us, Mr. McBrayer served as president and chief executive officer and as a director of AxioMed Spine Corporation from February 2006 to January 2015. Prior to joining AxioMed, he held senior management positions at medical device companies Xylos Corporation, Exogen, Inc. and Osteotech, Inc. Mr. McBrayer also served on the board of directors of Misonix Inc., a company specializing in minimally invasive ultrasound devices, from 2014 to August 2019. Mr. McBrayer received his B.S. in engineering from the United States Military Academy at West Point. We believe that Mr. McBrayer's medical device industry knowledge and public company board experience qualifies him to serve on our board of directors.

Matthew Kunst has served as our Treasurer and Chief Financial Officer since April 2020, previously having served as our Vice President of Finance since 2013. Prior to joining us, Mr. Kunst served as Vice President of Finance at Federal Concepts, LLC, an IT and cyber security company acquired by Jorge Scientific Corporation. Mr. Kunst also held the position of Controller at MobileAccess Networks for more than six years. He is a certified public accountant with more than 20 years of experience, and received his B.A. in accounting from University of Maryland.

Christopher F. Branch has served as our Chief Operating Officer since July 2020 and as our General Counsel since March 2018. Mr. Branch previously served as our Vice President of Human Resources from January 2018 to July 2020 and as our deputy general counsel from May 2013 to March 2018. Mr. Branch has more than 17 years of experience in outside counsel and in-house counsel roles. Mr. Branch received his J.D. from Georgetown University Law Center and received his B.A. in public policy studies from Duke University.

NON-EMPLOYEE DIRECTORS

Louis S. Baldino has served on our board of directors since August 2015 and was appointed as Chairman of the board in February 2020. Mr. Baldino has served as president and Chief Executive Officer of EndoGastric Solutions, a medical device company, since May 2014. Mr. Baldino received his B.A. in marketing from Philadelphia University. We believe that Mr. Baldino's leadership experience in the medical device space qualifies him to serve on our board of directors.

David W. Anderson has served on our board of directors since August 2015. Mr. Anderson has served as president and chief executive officer of BrainTemp Inc. since January 2018. Previously,

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Mr. Anderson served as chief executive officer of Orteq Sports Medicine from 2014 to January 2018, as president and chief executive officer of CellCoTec Ltd., an orthopedic regenerative medicine company, from 2014 to January 2018, and as chairman of Gentis, Inc., a spinal implant company, since 2004. Mr. Anderson has served as a director of KORU Medical Systems since February 2016. Mr. Anderson received his B.S. in chemical engineering from Cornell University. We believe Mr. Anderson's extensive experience in and knowledge of the medical device space qualifies him to serve on our board of directors.

Kyle C. Kerbawy has served as a member of our board of directors since August 2015, serving as Chairman from August 2015 to February 2020. He also served as our interim Chief Executive Officer from August 2015 to January 2016. Mr. Kerbawy founded and served as a managing member of BKS Associates, a residential real estate leasing company, from September 2000 to March 2016. During that time, Mr. Kerbawy also founded and served as president of Medical Devices Sales Corp from 2009 to 2015 and served as a managing director at The Bank of New York Mellon from 2001 to 2008. Mr. Kerbawy received his MBA and his B.A. in Journalism from Michigan State University. We believe Mr. Kerbawy's extensive experience in business operations qualifies him to serve on our board of directors.

Sally L. Maher has served on our board of directors since September 2016. Ms. Maher previously served as our interim Chief Operating Officer from April 2018 to May 2019. Ms. Maher has served as an adjunct professor at the Keck Graduate Institute since January 2018, teaching courses on food and drug law and medical device regulation. Ms. Maher founded and has served as principal of S Maher Consulting, a medical device consulting group, since June 2017. Ms. Maher served as vice president of clinical and regulatory affairs for the critical care division of Edwards Lifesciences, a company focused on medical innovations for treating structural heart disease and critically ill patients, from May 2012 to June 2017. Ms. Maher received her J.D. from the University of Baltimore School of Law and received her B.A. in Bacteriology from Ohio Wesleyan University. We believe Ms. Maher's extensive experience in the medical device industry and her deep knowledge of medical device regulatory affairs qualifies her to serve on our board of directors.

Martin Pfinsgraff has served as a member of our board of directors since July 2019. Previously, Mr. Pfinsgraff served on our board from 2010 to 2015. Since November 2019, Mr. Pfinsgraff has served as an affiliate general partner of Lindsay Goldberg LLC, a private equity firm. Mr. Pfinsgraff has served as a director of The PNC Financial Services Group, Inc. since January 2018 and has served as a member of the advisory board for the International Association of Credit Portfolio Managers since August of 2018. Since April 2017, Mr. Pfinsgraff has served as founder and chief executive officer of MP Alpha Advisory. Mr. Pfinsgraff served as Senior Deputy Comptroller large bank supervision at the Office of the Comptroller of the Currency, or OCC, from 2013 to February 2017 and served as Deputy Comptroller for credit and market risk at the OCC from 2011 to 2013. Mr. Pfinsgraff received his MBA from Harvard Business School and received his B.S. in psychology from Allegheny College. We believe Mr. Pfingsgraff's public company board experience and extensive knowledge and experience in finance qualifies him to serve on our board of directors.

FAMILY RELATIONSHIPS

There are no family relationships among any of the directors or executive officers.

COMPOSITION OF OUR BOARD OF DIRECTORS

Our business and affairs are managed under the direction of our board of directors. We currently have six directors. Each director is currently elected to the board for a one-year term, to serve until the

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election and qualification of successor directors at the annual meeting of stockholders, or until the director's earlier removal, resignation or death.

Our board of directors may establish the authorized number of directors from time to time by resolution. In accordance with our amended and restated certificate of incorporation that will be in effect on the completion of this offering, immediately after this offering, our board of directors will be divided into three classes with staggered three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors will be divided among the three classes as follows:

➤: the Class I directors will be Messrs. Anderson and McBrayer, whose terms will expire at the first annual meeting of stockholders to be held following the completion of this offering;
➤: the Class II directors will be Messrs. Kerbawy and Baldino, whose terms will expire at the second annual meeting of stockholders to be held following the completion of this offering; and
➤: the Class III directors will be Ms. Maher and Mr. Pfinsgraff, whose terms will expire at the third annual meeting of stockholders to be held following the completion of this offering.

We expect that any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.

DIRECTOR INDEPENDENCE

Our board of directors has undertaken a review of the independence of each director. Based on information provided by each director concerning her or his background, employment and affiliations, our board of directors has determined that none of our directors, other than Mr. McBrayer and Ms. Maher, has any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is "independent" as that term is defined under the Nasdaq listing standards. In making these determinations, our board of directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our shares by each non-employee director and the transactions described in the section titled "Certain relationships and related party transactions."

COMMITTEES OF OUR BOARD OF DIRECTORS

Our board of directors has established an audit committee, a compensation committee, a nominating and corporate governance committee and a compliance committee. The composition and responsibilities of the audit, compensation and nominating and corporate governance committees of our board of directors are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors. Our board of directors may establish other committees as it deems necessary or appropriate from time to time.

Audit committee

Our audit committee consists of Messrs. Pfinsgraff, Kerbawy and Anderson. Our board of directors has determined that each of these members is independent under Nasdaq listing standards and Rule 10A-3(b)(1) of the Exchange Act of 1934, as amended, or the Exchange Act. The chair of our audit committee is Mr. Pfinsgraff, whom our board of directors has determined is an "audit committee

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financial expert" within the meaning of SEC regulations. Each member of our audit committee can read and understand fundamental financial statements in accordance with applicable requirements. In arriving at these determinations, our board of directors has examined each audit committee member's scope of experience and the nature of their employment in the corporate finance sector.

The primary purpose of the audit committee is to discharge the responsibilities of our board of directors with respect to our corporate accounting and financial reporting processes, systems of internal control and financial statement audits, and to oversee our independent registered public accounting firm. Specific responsibilities of our audit committee include:

➤: helping our board of directors oversee our corporate accounting and financial reporting processes;
➤: managing the selection, engagement, qualifications, independence and performance of a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;
➤: discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end operating results;
➤: developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
➤: reviewing related person transactions;
➤: obtaining and reviewing a report by the independent registered public accounting firm at least annually that describes our internal quality control procedures, any material issues with such procedures and any steps taken to deal with such issues when required by applicable law; and
➤: approving or, as permitted, pre-approving, audit and permissible non-audit services to be performed by the independent registered public accounting firm.

Our audit committee will operate under a written charter, to be effective prior to the completion of this offering, that satisfies the applicable Nasdaq listing standards.

Compensation committee

Our compensation committee consists of Messrs. Baldino, Pfinsgraff and Kerbawy. The chair of our compensation committee is Mr. Kerbawy. Our board of directors has determined that each of the three members is independent under Nasdaq listing standards and a "non-employee director" as defined in Rule 16b-3 promulgated under the Exchange Act.

The primary purpose of our compensation committee is to discharge the responsibilities of our board of directors in overseeing our compensation policies, plans and programs and to review and determine the compensation to be paid to our executive officers, directors and other senior management, as appropriate. Specific responsibilities of our compensation committee include:

➤: reviewing and approving the compensation of our chief executive officer, other executive officers and senior management;
➤: reviewing, evaluating and recommending to our board of directors succession plans for our executive officers;
➤: reviewing and recommending to our board of directors the compensation paid to our directors;
➤: administering our equity incentive plans and other benefit programs;
➤: reviewing, adopting, amending and terminating incentive compensation and equity plans, severance agreements, profit sharing plans, bonus plans, change-of-control protections and any other compensatory arrangements for our executive officers and other senior management; and

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➤: reviewing and establishing general policies relating to compensation and benefits of our employees, including our overall compensation philosophy.

Our compensation committee will operate under a written charter, to be effective prior to the completion of this offering, that satisfies the applicable Nasdaq listing standards.

Nominating and corporate governance committee

Our nominating and corporate governance committee consists of Ms. Maher and Messrs. Pfinsgraff and Anderson. The chair of our nominating and corporate governance committee is Mr. Anderson. Our board of directors has determined that Messrs. Pfinsgraff and Anderson are each independent under Nasdaq listing standards.

Specific responsibilities of our nominating and corporate governance committee will include:

➤: identifying and evaluating candidates, including the nomination of incumbent directors for reelection and nominees recommended by stockholders, to serve on our board of directors;
➤: considering and making recommendations to our board of directors regarding the composition and chairmanship of the committees of our board of directors;
➤: instituting plans or programs for the continuing education of our board of directors and orientation of new directors;
➤: developing and making recommendations to our board of directors regarding corporate governance guidelines and matters; and
➤: overseeing periodic evaluations of the board of directors' performance, including committees of the board of directors.

Our nominating and corporate governance committee will operate under a written charter, to be effective prior to the completion of this offering, that satisfies the applicable Nasdaq listing standards.

Corporate compliance committee

Our corporate compliance committee consists of Ms. Maher and Messrs. Kerbawy and Baldino. The chair of the corporate compliance committee is Ms. Maher. This committee is responsible for overseeing our compliance programs and obligations.

CODE OF CONDUCT

We have adopted a Code of Conduct that applies to all our employees, officers and directors. This includes our principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions. The full text of our Code of Conduct will be posted on our website at www.acell.com. We intend to disclose on our website any future amendments to our Code of Conduct or waivers that exempt any principal executive officer, principal financial officer, principal accounting officer or controller, persons performing similar functions or our directors from provisions in the Code of Conduct. Information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of the compensation committee are currently, or have been at any time, one of our officers or employees. None of our executive officers currently serve, or have served during the last year, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee.

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NON-EMPLOYEE DIRECTOR COMPENSATION

Prior to February 2020, our nominating, governance and compliance board functions were combined into a single committee called the nominating, corporate governance and compliance committee. We have historically provided our non-employee directors with an annual cash retainer of $40,000 as well as additional annual retainers of $50,000 for the chair of the board, $15,000 for the chair of the audit committee, and $10,000 for the chair of each of the compensation committee and nominating, corporate governance and compliance committee. From time to time, our non-employee directors are also reimbursed upon request for out-of-pocket expenses incurred in connection with their attendance at meetings of our board of directors.

2019 Director compensation table

The following table sets forth information regarding the compensation earned for service on our board of directors in 2019 by our non-employee directors. Patrick A. McBrayer, our President and Chief Executive Officer, is also a member of our board of directors but did not receive any additional compensation for service as a director.

Name


Louis S. Baldino	60,000		—	—		60,000
David W. Anderson	55,000		—	—		55,000
Kyle C. Kerbawy	90,000		—	—		90,000
Sally L. Maher	40,000		—	119,156	(3)	159,156
John J. McDonnell, Jr.(4)	21,333	(2)	—	—		21,333
Martin Pfinsgraff	21,333	(2)	—	—		21,333

(1): The following table provides information regarding the aggregate number of equity awards granted to our non-employee directors that were outstanding as of December 31, 2019:

Name		Option awards outstanding at year-end (#)


Louis S. Baldino			62,951
David W. Anderson			77,659
Kyle C. Kerbawy			52,316
Sally L. Maher			61,774
John J. McDonnell, Jr.			—
Martin Pfinsgraff			—

(2): Messrs. McDonnell and Pfinsgraff re-joined our board in July 2019 and these reflect prorated amounts for 2019.
(3): Ms. Maher served as our interim chief operating officer from April 2018 to May 2019. This amount reflects cash compensation to Ms. Maher for her services as interim chief operating officer pursuant to an employment offer letter between us and Ms. Maher.
(4): Mr. McDonnell was a member of our board of directors until his passing in February 2020.

Non-employee director compensation policy

Our board of directors adopted a non-employee director compensation policy in July 2020 that will become effective upon the execution of the underwriting agreement related to this offering and will be applicable to all of our non-employee directors. This compensation policy provides that each such non-employee director will receive the compensation described below for service on our board of directors:

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Cash compensation. Under this policy, we will pay each of our non-employee directors cash retainers for service on our board of directors and committees of our board of directors as follows:

		Annual Cash Retainer ($)


Annual retainer			40,000
Additional retainer for independent chair			40,000
Additional retainer for audit committee chair			20,000
Additional retainer for audit committee non-chair member			10,000
Additional retainer for compensation committee chair			15,000
Additional retainer for compensation committee non-chair member			7,500
Additional retainer for nominating and corporate governance committee chair			15,000
Additional retainer for nominating and corporate governance committee non-chair member			5,000
Additional retainer for corporate compliance committee chair			15,000
Additional retainer for corporate compliance committee non-chair member			5,000

Equity compensation. In addition to cash compensation, each non-employee director will be eligible to receive options under the 2020 Plan. Any options granted under this policy will have a term of ten years from the date of grant, subject to earlier termination in connection with a termination of service. Vesting schedules for equity awards will be subject to the non-employee director's continuous service on each applicable vesting date, provided that each option will vest in full upon a change in control of the company, as defined in the 2020 Plan.

Initial award. Each new non-employee director elected or appointed to our board of directors after the effective date of the policy will, on the date of their election or appointment, be granted an initial, one-time option to purchase shares of our common stock with an aggregate Black-Scholes option value of $105,000, which will vest in equal monthly installments such that the option is fully vested on the third anniversary of the grant date.

Annual awards. On the date of each annual meeting of stockholders of our company after the effective date of the policy, each non-employee director that continues to serve on our board of directors will be granted an option to purchase shares of our common stock with an aggregate Black-Scholes option value of $105,000, each of which will vest in equal monthly installments over the 12 months following the grant date, provided that such option will in any case become fully vested on the date of our next annual stockholder meeting.

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Executive compensation

Our named executive officers for the fiscal year ended December 31, 2019, consisting of our principal executive officer and the next two most highly compensated executive officers, were:

➤: Patrick A. McBrayer, who currently serves as our President and Chief Executive Officer and as a member of our board of directors;
➤: Edward O'Brien, who served as our Chief Financial Officer through March 2020; and
➤: Christopher F. Branch, who currently serves as our Chief Operating Officer and General Counsel.

2019 SUMMARY COMPENSATION TABLE

The following table presents all of the compensation awarded to or earned by or paid to our named executive officers for the fiscal year ended December 31, 2019.

Name and principal position


Patrick A. McBrayer(4)	381,526	—	—	197,725	11,502	(5)	590,753
President, Chief Executive Officer and Director
Edward O'Brien	327,022	—	—	121,897	11,935	(6)	460,854
Chief Financial Officer
Christopher F. Branch	256,000	80,045	55,428	—	7,190	(7)	398,663
Chief Operating Officer and General Counsel

(1): Represents a bonus paid in the discretion of our board of directors, based on its assessment of corporate and individual performance during the fiscal year ended December 31, 2019.
(2): Amount reported represents the grant date fair value of the stock option granted during fiscal year 2019 under our 2011 Plan, computed in accordance with ASC Topic 718, and assumes no forfeiture rate. The assumptions used in calculating the grant date fair value of the stock option reported in this column are set forth in Note 2 to our audited financial statements included elsewhere in this prospectus. This amount does not reflect the actual economic value that may be realized by the named executive officer.
(3): Represents amounts paid pursuant to our annual incentive compensation program, based on goals set at the beginning of the 2019 fiscal year by our board of directors relating to corporate performance.
(4): Mr. McBrayer does not receive any additional compensation for his service as a director.
(5): Consists of $7,648 in company matching contributions to Mr. McBrayer's 401(k) plan account and $3,854 in company payment of certain of Mr. McBrayer's long-term disability insurance premiums.
(6): Consists of $8,400 in company matching contributions to Mr. O'Brien's 401(k) plan account and $3,535 in company payment of certain of Mr. O'Brien's long-term disability insurance premiums.
(7): Consists of $5,814 in company matching contributions to Mr. Branch's 401(k) plan account and $1,376 in company payment of certain of Mr. Branch's long-term disability insurance premiums.

Performance-Based Bonuses

Each of our named executive officers is eligible to receive an annual performance bonus based on performance goals determined by our board of directors. For 2019, each of Mr. McBrayer and Mr. O'Brien were eligible to earn a bonus dependent on achievement of our revenue and net income

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performance goals, with the target amount of such bonus equal to 50% and 40% of base salary for each of Mr. McBrayer and Mr. O'Brien, respectively. Mr. Branch was also eligible for a 2019 annual performance bonus based on a target amount of 30% of his base salary, which was payable in the discretion of our board of directors. In January 2020, the board of directors assessed company performance against our performance goals and based on such performance, awarded Mr. McBrayer, Mr. O'Brien and Mr. Branch cash performance bonuses in the amounts of $197,725, $121,897 and $80,045, respectively.

OUTSTANDING EQUITY AWARDS AS OF DECEMBER 31, 2019

The following table presents estimated information regarding outstanding equity awards held by our named executive officers as of December 31, 2019. See "—Equity Incentive Plans—2011 Stock option and grant plan" and "Equity Incentive Plans—2002 Stock option and incentive plan" below for additional information.

	Option awards

Name	Grant date		Equity incentive plan		Number of securities underlying unexercised options exercisable		Number of securities underlying unexercised options unexercisable			Option exercise price($)		Option expiration date

Patrick A. McBrayer		10/27/2016		none		278,140		12,139	(1)	$	3.31		10/27/2026
		10/27/2016		none		0		97,112	(2)	$	3.31		10/27/2026
		10/27/2016		none		0		194,225	(3)	$	3.31		10/27/2026
Edward O'Brien		12/22/2010		2002		15,002		0		$	1.13		1/1/2020
		7/22/2012		2011		70,599		0		$	3.23		4/1/2021
Christopher F. Branch		8/18/2014		2011		3,530		0		$	5.67		8/18/2024
		9/17/2013		2011		7,060		0		$	5.86		9/16/2023
		1/24/2018		2011		6,766		7,354	(4)	$	4.19		1/24/2028
		1/14/2019		2011		0		10,590	(5)	$	8.67		1/14/2029

(1): Vested as to 25% of the shares underlying the option on January 16, 2017, the one year anniversary of Mr. McBrayer's date of employment, and the remaining 75% of the shares underlying the option vest in 36 equal monthly installments thereafter, subject to continued service.
(2): Vests as to some or all of the shares underlying the option upon the closing of a merger or acquisition based on a company valuation threshold at such event. The number of shares that will vest is dependent upon the valuation, as set forth in Mr. McBrayer's employment agreement, and any unvested options will be automatically cancelled. The option will become fully vested in connection with this offering, provided this offering is completed during 2020.
(3): Vests upon the closing of a merger or acquisition based on a company valuation threshold at such event.
(4): Vested as to 25% of the shares underlying the option on January 1, 2019 and the remaining 75% of the shares underlying the option vest in 36 equal monthly installments thereafter, subject to continued service.
(5): Vested as to 25% of the shares underlying the option on January 1, 2020 and the remaining 75% of the shares underlying the option vest in 36 equal monthly installments thereafter, subject to continued service.

In July 2020, our board of directors approved option grants to certain of our employees, including two of our named executive officers, which will be granted under the 2020 Equity Incentive Plan, or the 2020 Plan, contingent and effective upon the execution of the underwriting agreement for this offering and will have an exercise price per share equal to the initial public offering price per share, or the IPO grants. Mr. McBrayer will receive an IPO grant to purchase 35,299 shares of our common

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stock. Mr. Branch will receive an IPO option grant to purchase approximately 46,545 shares of our common stock, assuming an initial public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus; the actual number of shares underlying Mr. Branch's IPO grant will depend on our actual initial public offering price per share. The shares subject to each of the IPO grants vest over a four-year period, with 25% of the shares subject to the option vesting after one year and the remainder of the shares vesting in equal monthly installments thereafter for 36 months, subject to the named executive officer's continuous service with us as of each such vesting date.

EMPLOYMENT ARRANGEMENTS

We have not entered into an employment agreement with Mr. Branch. We have entered into employment agreements with Mr. McBrayer and Mr. O'Brien, as described below.

Agreement with Mr. McBrayer

We entered into a second amended senior executive employment agreement with Mr. McBrayer in January 2020, which was further amended in June 2020, that sets forth the terms and conditions of his employment as our President and Chief Executive Officer. The agreement has a two-year term, and can be renewed for successive one-year periods. The agreement provides for an initial base salary of $387,525 and a maximum bonus of 50% of base salary. His salary is subject to increase from time to time by our board of directors or compensation committee; provided it may be lowered in the event of an across the board salary reduction for senior executives, but may never be less than the initial base salary without Mr. McBrayer's written consent. Information with respect to Mr. McBrayer's compensation levels for 2019 is set forth above in the table entitled, "2019 Summary Compensation Table." The agreement also provides for certain grants of equity awards, each of which is set forth and described in more detail in the table above entitled, " Outstanding Equity Awards as of December 31, 2019." The agreement provides for relocation reimbursements, as well as a $3,500 per month housing allowance throughout the term of the agreement. If Mr. McBrayer's employment is terminated without "cause" (as defined in the agreement) or he resigns for "good reason" at any time during the term, then he is entitled to receive one month of salary continuation for each month of service, with a minimum of three months of severance and a maximum of 12 months of severance, as well as COBRA premium reimbursement for 12 months (or, if earlier, the date on which he is no longer eligible for COBRA premium coverage). Under the agreement, "good reason" means the occurrence of any of the following: (a) our adverse breach of his employment agreement; (b) reduction of his title, authority, responsibility or duties; (c) a reduction in his salary below the minimum salary provided in his employment agreement; (d) the failure of any successor entity to assume the terms of his employment agreement upon any change of control; or (e) the relocation of his primary office more than 40 miles from his principal place of employment. We have no less than 30 days to cure the event which otherwise would constitute good reason, and he must terminate his employment with us for such good reason no later than 30 days after the end of our 30 day cure period. Severance payments are subject to the execution of a general release. The agreement also provides for two-year non-compete, non-solicit and non-interference covenants.

Agreement with Mr. O'Brien

Prior to his separation with us in April 2020, Mr. O'Brien had an employment agreement with us that was entered into in July 2011 that sets forth the terms and conditions of his employment as our Chief Financial Officer. The agreement was renewable for successive two-year periods and terminated as a result of Mr. O'Brien's separation with us in April 2020. The agreement provided for an initial base

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salary of $242,050 and stated that Mr. O'Brien would be a participant in any annual cash performance bonus plan we adopt that covers his position. His salary was subject to increase from time to time by our board of directors or compensation committee; provided it may be lowered in the event of an across the board salary reduction, but never to an amount less than $242,050 without Mr. O'Brien's consent. Information with respect to Mr. O'Brien's compensation levels for 2019 is set forth above in the table entitled, "Summary Compensation Table." The agreement noted that Mr. O'Brien was granted equity awards in the past and may be granted equity awards in the future, and provided that such equity awards would vest upon the occurrence of a "change of control," as defined in the agreement. If Mr. O'Brien's employment is terminated without "cause" (as defined in the agreement) or he resigns for "good reason," then he would receive a severance payment equal to 12 months of salary (24 months if the termination occured within 12 months following a change of control), as well as COBRA premium reimbursement for 12 months (or, if earlier, the date on which he is no longer eligible for COBRA coverage) and full vesting of any unvested equity awards then held by him. Severance payments are subject to the execution of a general release. Under the agreement, "good reason" means the occurrence of any of the following: (a) our material breach of his employment agreement, the stock incentive plan or any related agreements; (b) material reduction of his title, status, authority, responsibility or duties or the assignment to him of any duties materially inconsistent with his then current position; (c) a material reduction in his salary or benefits; (d) the failure of any successor entity to assume the terms of his employment agreement upon any change of control; (e) the relocation of his primary office more than 40 miles from his principal place of employment; or (f) our failure to renew his employment agreement. We have no less than 30 days to cure the event which otherwise would constitute good reason, and he must terminate his employment with us for such good reason no later than 30 days after the end of our 30 day cure period. The agreement also provides for two-year non-compete, non-solicit and non-interference covenants. We entered into a separation agreement Mr. O'Brien in connection with his separation in April 2020 which is described below under "—Potential Payments Upon Termination or Change in Control".

Potential Payments Upon Termination or Change in Control

Each of Mr. McBrayer and Mr. O'Brien's employment agreements provide for severance benefits as described above under "—Employment Arrangements." We entered into a separation agreement with Mr. O'Brien in 2020 in connection with his separation that supersedes the terms of his employment agreement. Under the separation agreement, in exchange for a release of claims and subject to certain other post-termination covenants, Mr. O'Brien will receive 12 months of base salary, paid over time from his separation date until the end of 2020, COBRA premium payments for up to 12 months, eligibility for a discretionary pro-rated annual bonus for 2020 and twelve months to exercise the portion of his stock options that were vested at the time of his separation.

Mr. Branch is eligible to receive severance benefits under a separation plan we maintain for certain employees, including Mr. Branch, upon a qualifying termination, which generally means a termination by us as a result of a job elimination, job discontinuation, office closing or relocation, reduction in force or business restricting. Under the separation plan, upon a qualifying termination, Mr. Branch is eligible to receive one month of salary continuation for each month of service, up to a maximum of 12 months of severance paid over time. In addition, the separation plan provides for vesting acceleration of Mr. Branch's stock options to the extent such options are not expressly assumed, substituted or continued following certain company sale events or, if such stock options are assumed, substituted or continued, vesting acceleration upon a qualifying termination within twelve months following the company sale event and an extended period of 12 months to exercise following such qualifying termination.

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HEALTH AND WELFARE AND RETIREMENT BENEFITS; PERQUISITES

All of our current named executive officers are eligible to participate in our employee benefit plans, including our medical, dental, vision, disability and life insurance plans, in each case on the same basis as all of our other employees. In addition, certain members of management, including our current named executive officers, receive individual long term disability benefits in addition to the disability benefits generally available to all of our employees. We generally do not provide perquisites or personal benefits to our named executive officers, other than the housing allowance for Mr. McBrayer which commenced in 2020.

401(k) Plan

We maintain a tax-qualified retirement plan, the 401(k) Plan, that provides eligible employees in the United States with an opportunity to save for retirement on a tax-advantaged basis. Under the 401(k) Plan, we may provide matching and discretionary contributions. We currently provide for various tiers of matching contributions, ranging from a 1% matching contribution for employee contributions from 1% to 1.99% of earnings, up to a 5% matching contribution for employee contributions of 7% and higher, in each case subject to any contribution limits that may be imposed by applicable law. All contributions, including employer matching and discretionary contributions, are 100% vested when contributed. Pre-tax contributions are allocated to each participant's individual account and are then invested in selected investment alternatives according to the participants' directions. The 401(k) Plan is intended to qualify under Sections 401(a) and 501(a) of the Code.

EQUITY INCENTIVE PLANS

2020 Equity incentive plan

Our board of directors adopted our 2020 Plan in July 2020, and we expect our stockholders to approve our 2020 Plan prior to the completion of this offering. Our 2020 Plan is a successor to and continuation of our 2011 Plan (as described below). Our 2020 Plan will become effective on the date of the underwriting agreement related to this offering. The 2020 Plan came into existence upon its adoption by our board of directors, but no grants will be made under the 2020 Plan prior to its effectiveness. In July 2020, our board of directors approved IPO grants under the 2020 Plan which will be granted upon the execution of the underwriting agreement for this offering and will have an exercise price per share equal to the initial public offering price per share. The aggregate number of IPO grants will cover approximately 355,000 shares of our common stock, assuming an initial public offering price of $15.00 per share, which is the midpoint of the price range set forth on the cover of this prospectus; the actual number of aggregate options granted will depend on our actual initial public offering price per share. Once the 2020 Plan is effective, no further grants will be made under the 2011 Plan.

Awards. Our 2020 Plan provides for the grant of incentive stock options (ISOs) within the meaning of Section 422 of the Internal Revenue Code (Code) to employees, including employees of any parent or subsidiary, and for the grant of nonstatutory stock options (NSOs), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of awards to employees, directors and consultants, including employees and consultants of our affiliates.

Authorized shares. Initially, the maximum number of shares of our common stock that may be issued under our 2020 Plan after it becomes effective will not exceed 4,925,786 shares of our common stock, which is the sum of (1) 2,294,468 new shares, plus (2) an additional number of shares not to exceed 2,631,318, consisting of (A) shares that remain available for the issuance of awards under our 2011 Plan as of immediately prior to the time our 2020 Plan becomes effective and (B) shares of our

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common stock subject to outstanding stock options or other stock awards granted under our 2011 Plan or our 2002 Plan that, on or after the 2020 Plan becomes effective, terminate or expire prior to exercise or settlement; are not issued because the award is settled in cash; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price, if any, as such shares become available from time to time. In addition, the number of shares of our common stock reserved for issuance under our 2020 Plan will automatically increase on January 1 of each calendar year, starting on January 1, 2021 through January 1, 2030, in an amount equal to (i) 4.0% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar, or (ii) a lesser number of shares determined by our board of directors prior to the applicable January 1. The maximum number of shares of our common stock that may be issued on the exercise of ISOs under our 2020 Plan is 14,777,358 shares.

Shares subject to stock awards granted under our 2020 Plan that expire or terminate without being exercised in full or that are paid out in cash rather than in shares do not reduce the number of shares available for issuance under our 2020 Plan. Shares withheld under a stock award to satisfy the exercise, strike or purchase price of a stock award or to satisfy a tax withholding obligation do not reduce the number of shares available for issuance under our 2020 Plan. If any shares of our common stock issued pursuant to a stock award are forfeited back to or repurchased or reacquired by us (1) because of a failure to meet a contingency or condition required for the vesting of such shares, (2) to satisfy the exercise, strike or purchase price of an award or (3) to satisfy a tax withholding obligation in connection with an award, the shares that are forfeited or repurchased or reacquired will revert to and again become available for issuance under the 2020 Plan. Any shares previously issued which are reacquired in satisfaction of tax withholding obligations or as consideration for the exercise or purchase price of a stock award will again become available for issuance under the 2020 Plan.

Plan administration. Our board of directors, or a duly authorized committee of our board of directors, will administer our 2020 Plan and is referred to as the "plan administrator" herein. Our board of directors may also delegate to one or more of our officers the authority to (1) designate employees (other than officers) to receive specified stock awards and (2) determine the number of shares subject to such stock awards. Under our 2020 Plan, our board of directors has the authority to determine award recipients, grant dates, the numbers and types of stock awards to be granted, the applicable fair market value, and the provisions of each stock award, including the period of exercisability and the vesting schedule applicable to a stock award.

Stock options. ISOs and NSOs are granted under stock option agreements adopted by the plan administrator. The plan administrator determines the exercise price for stock options, within the terms and conditions of the 2020 Plan, provided that the exercise price of a stock option generally cannot be less than 100% of the fair market value of our common stock on the date of grant. Options granted under the 2020 Plan vest at the rate specified in the stock option agreement as determined by the plan administrator.

The plan administrator determines the term of stock options granted under the 2020 Plan, up to a maximum of 10 years. Unless the terms of an optionholder's stock option agreement, or other written agreement between us and the recipient approved by the plan administrator, provide otherwise, if an optionholder's service relationship with us or any of our affiliates ceases for any reason other than disability, death, or cause, the optionholder may generally exercise any vested options for a period of three months following the cessation of service. This period may be extended in the event that exercise of the option is prohibited by applicable securities laws. If an optionholder's service relationship with us or any of our affiliates ceases due to death, or an optionholder dies within a certain period following cessation of service, the optionholder or a beneficiary may generally exercise any vested options for a period of 18 months following the date of death. If an optionholder's service relationship

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with us or any of our affiliates ceases due to disability, the optionholder may generally exercise any vested options for a period of 12 months following the cessation of service. In the event of a termination for cause, options generally terminate upon the termination date. In no event may an option be exercised beyond the expiration of its term.

Acceptable consideration for the purchase of common stock issued upon the exercise of a stock option will be determined by the plan administrator and may include (1) cash, check, bank draft or money order, (2) a broker-assisted cashless exercise, (3) the tender of shares of our common stock previously owned by the optionholder, (4) a net exercise of the option if it is an NSO, or (5) other legal consideration approved by the plan administrator.

Unless the plan administrator provides otherwise, options or stock appreciation rights generally are not transferable except by will or the laws of descent and distribution. Subject to approval of the plan administrator or a duly authorized officer, an option may be transferred pursuant to a domestic relations order, official marital settlement agreement, or other divorce or separation instrument.

Tax limitations on ISOs. The aggregate fair market value, determined at the time of grant, of our common stock with respect to ISOs that are exercisable for the first time by an award holder during any calendar year under all of our stock plans may not exceed $100,000. Options or portions thereof that exceed such limit will generally be treated as NSOs. No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any of our affiliates unless (1) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant, and (2) the term of the ISO does not exceed five years from the date of grant.

Restricted stock unit awards. Restricted stock unit awards are granted under restricted stock unit award agreements adopted by the plan administrator. Restricted stock unit awards may be granted in consideration for any form of legal consideration that may be acceptable to our board of directors and permissible under applicable law. A restricted stock unit award may be settled by cash, delivery of stock, a combination of cash and stock as deemed appropriate by the plan administrator, or in any other form of consideration set forth in the restricted stock unit award agreement. Additionally, dividend equivalents may be credited in respect of shares covered by a restricted stock unit award. Except as otherwise provided in the applicable award agreement, or other written agreement between us and the recipient approved by the plan administrator, restricted stock unit awards that have not vested will be forfeited once the participant's continuous service ends for any reason.

Restricted stock awards. Restricted stock awards are granted under restricted stock award agreements adopted by the plan administrator. A restricted stock award may be awarded in consideration for cash, check, bank draft or money order, past or future services to us, or any other form of legal consideration that may be acceptable to our board of directors and permissible under applicable law. The plan administrator determines the terms and conditions of restricted stock awards, including vesting and forfeiture terms. If a participant's service relationship with us ends for any reason, we may receive any or all of the shares of common stock held by the participant that have not vested as of the date the participant terminates service with us through a forfeiture condition or a repurchase right.

Stock appreciation rights. Stock appreciation rights are granted under stock appreciation right agreements adopted by the plan administrator. The plan administrator determines the purchase price or strike price for a stock appreciation right, which generally cannot be less than 100% of the fair market value of our common stock on the date of grant. A stock appreciation right granted under the 2020 Plan vests at the rate specified in the stock appreciation right agreement as determined by the plan administrator. Stock appreciation rights may be settled in cash or shares of common stock or in any

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other form of payment as determined by the Board and specified in the stock appreciation right agreement.

The plan administrator determines the term of stock appreciation rights granted under the 2020 Plan, up to a maximum of 10 years. If a participant's service relationship with us or any of our affiliates ceases for any reason other than cause, disability, or death, the participant may generally exercise any vested stock appreciation right for a period of three months following the cessation of service. This period may be further extended in the event that exercise of the stock appreciation right following such a termination of service is prohibited by applicable securities laws. If a participant's service relationship with us, or any of our affiliates, ceases due to disability or death, or a participant dies within a certain period following cessation of service, the participant or a beneficiary may generally exercise any vested stock appreciation right for a period of 12 months in the event of disability and 18 months in the event of death. In the event of a termination for cause, stock appreciation rights generally terminate immediately upon the occurrence of the event giving rise to the termination of the individual for cause. In no event may a stock appreciation right be exercised beyond the expiration of its term.

Performance awards. The 2020 Plan permits the grant of performance awards that may be settled in stock, cash or other property. Performance awards may be structured so that the stock or cash will be issued or paid only following the achievement of certain pre-established performance goals during a designated performance period. Performance awards that are settled in cash or other property are not required to be valued in whole or in part by reference to, or otherwise based on, the common stock.

The performance goals may be based on any measure of performance selected by the board of directors. The performance goals may be based on company-wide performance or performance of one or more business units, divisions, affiliates, or business segments, and may be either absolute or relative to the performance of one or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise by the board of directors at the time the performance award is granted, the board will appropriately make adjustments in the method of calculating the attainment of performance goals as follows: (i) to exclude restructuring and/or other nonrecurring charges; (ii) to exclude exchange rate effects; (iii) to exclude the effects of changes to generally accepted accounting principles; (iv) to exclude the effects of any statutory adjustments to corporate tax rates; (v) to exclude the effects of items that are "unusual" in nature or occur "infrequently" as determined under generally accepted accounting principles; (vi) to exclude the dilutive effects of acquisitions or joint ventures; (vii) to assume that any portion of our business which is divested achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (viii) to exclude the effect of any change in the outstanding shares of our common stock by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends; (ix) to exclude the effects of stock based compensation and the award of bonuses under our bonus plans; (x) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to be expensed under generally accepted accounting principles; and (xi) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles.

Other stock awards. The plan administrator may grant other awards based in whole or in part by reference to our common stock. The plan administrator will set the number of shares under the stock award (or cash equivalent) and all other terms and conditions of such awards.

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Non-employee director compensation limit. The aggregate value of all compensation granted or paid to any non-employee director with respect to any calendar year, including stock awards granted and cash fees paid by us to such non-employee director, will not exceed $562,500 in total value (calculating the value of any such stock awards based on the grant date fair value of such stock awards for financial reporting purposes); provided that such amount will increase to $750,000 for the first year for newly appointed or elected non-employee directors.

Changes to capital structure. In the event there is a specified type of change in our capital structure, such as a stock split, reverse stock split, or recapitalization, appropriate adjustments will be made to (1) the class and maximum number of shares reserved for issuance under the 2020 Plan, (2) the class and maximum number of shares by which the share reserve may increase automatically each year, (3) the class and maximum number of shares that may be issued on the exercise of ISOs, and (4) the class and number of shares and exercise price, strike price, or purchase price, if applicable, of all outstanding stock awards.

Corporate transactions. The following applies to stock awards under the 2020 Plan in the event of a corporate transaction (as defined in the 2020 Plan), unless otherwise provided in a participant's stock award agreement or other written agreement with us or one of our affiliates or unless otherwise expressly provided by the plan administrator at the time of grant.

In the event of a corporate transaction, any stock awards outstanding under the 2020 Plan may be assumed, continued or substituted for by any surviving or acquiring corporation (or its parent company), and any reacquisition or repurchase rights held by us with respect to the stock award may be assigned to the successor (or its parent company). If the surviving or acquiring corporation (or its parent company) does not assume, continue or substitute for such stock awards, then (i) with respect to any such stock awards that are held by participants whose continuous service has not terminated prior to the effective time of the corporate transaction, or current participants, the vesting (and exercisability, if applicable) of such stock awards will be accelerated in full to a date prior to the effective time of the corporate transaction (contingent upon the effectiveness of the corporate transaction), and such stock awards will terminate if not exercised (if applicable) at or prior to the effective time of the corporate transaction, and any reacquisition or repurchase rights held by us with respect to such stock awards will lapse (contingent upon the effectiveness of the corporate transaction), and (ii) any such stock awards that are held by persons other than current participants will terminate if not exercised (if applicable) prior to the effective time of the corporate transaction, except that any reacquisition or repurchase rights held by us with respect to such stock awards will not terminate and may continue to be exercised notwithstanding the corporate transaction.

In the event a stock award will terminate if not exercised prior to the effective time of a corporate transaction, the plan administrator may provide, in its sole discretion, that the holder of such stock award may not exercise such stock award but instead will receive a payment equal in value to the excess (if any) of (i) the per share amount payable to holders of common stock in connection with the corporate transaction, over (ii) any per share exercise price payable by such holder, if applicable. In addition, any escrow, holdback, earn out or similar provisions in the definitive agreement for the corporate transaction may apply to such payment to the same extent and in the same manner as such provisions apply to the holders of common stock.

Change in control. Awards granted under the 2020 Plan may be subject to acceleration of vesting and exercisability upon or after a change in control (as defined in the 2020 Plan) as may be provided in the applicable stock award agreement or in any other written agreement between us or any affiliate and the participant, but in the absence of such provision, no such acceleration will automatically occur.

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Plan amendment or termination. Our board of directors has the authority to amend, suspend, or terminate our 2020 Plan, provided that such action does not materially impair the existing rights of any participant without such participant's written consent. Certain material amendments also require the approval of our stockholders. No ISOs may be granted after the tenth anniversary of the date our board of directors adopts our 2020 Plan. No stock awards may be granted under our 2020 Plan while it is suspended or after it is terminated.

2011 Stock option and grant plan

The 2011 Plan was approved by our board of directors on May 25, 2011 as a replacement for our 2002 Plan, and was subsequently approved by our stockholders on June 18, 2011. Under the 2011 Plan as of March 31, 2020, we have reserved for issuance an aggregate of (i) 3,035,777 shares of our common stock, plus (ii) the number of shares under the 2002 Plan that were not needed to fulfill our obligations for awards issued under the 2002 Plan as a result of forfeiture, expiration, cancellation, termination or net issuances of awards thereunder. As of March 31, 2020, options to purchase 2,054,086 shares of common stock were outstanding and 981,691 shares of common stock were available for future grants under the 2011 Plan. The number of shares of common stock reserved for issuance is subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization.

The shares issued under the 2011 Plan are authorized but unissued shares or shares we reacquire. The shares of common stock underlying any awards that are forfeited, cancelled, withheld upon the exercise of a stock option or settlement of an award to cover the exercise price or tax withholding, reacquired by the Company prior to vesting or are otherwise terminated (other than by exercise) under the 2011 Plan are added to the shares of common stock available for issuance under the 2011 Plan. Upon the closing of this offering, such shares will instead be added to the shares of common stock available for issuance under the 2020 Plan.

Our board of directors has acted as administrator of the 2011 Plan. The administrator has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to determine the specific terms and conditions of each award, to accelerate the time at which an award may be exercised or vest and to amend the 2011 Plan, subject to the provisions of the 2011 Plan. Persons eligible to participate in the 2011 Plan are those full or part-time officers and employees, directors, consultants and other key persons (including prospective employees, but conditioned upon their employment) of the Company and its subsidiaries as selected from time to time by the administrator in its discretion.

The 2011 Plan permits the granting of (1) options to purchase common stock intended to qualify as incentive stock options under Section 422 of the Code and (2) options that do not so qualify. The option exercise price of each option will be determined by the administrator but may not be less than 100% of the fair market value of the common stock on the date of grant (or 110% if such grant is an incentive stock option made to a 10% holder). The term of each option will be fixed by the administrator and may not exceed ten years from the date of grant (or five years if such grant is an incentive stock option made to a 10% holder). The administrator will determine at what time or times each option may be exercised. In addition, the 2011 Plan permits the granting of restricted shares of common stock, restricted stock units and unrestricted shares of common stock.

The 2011 Plan provides that upon the occurrence of a sale event (as defined in the 2011 Plan), all outstanding stock options will terminate at the effective time of such sale event and all shares of restricted stock and restricted stock units will be forfeited, unless the parties to the sale event agree that such awards will be assumed or continued by the successor entity. In the event of a termination of

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the 2011 Plan and all options issued thereunder in connection with a sale event, the optionees will be provided an opportunity to exercise their options prior to the consummation of the sale event. If shares of restricted stock are forfeited in connection with a sale event, such shares of restricted stock will be repurchased from the holders thereof at a price per share equal to the lower of the original per share purchase price or the then current fair market value. In the case of a sale event in which our stockholders will receive cash consideration, the administrator has the right to provide for cash payment to holders of vested (including by reason of the acceleration of awards due to a sale event at a price that does not exceed the sale price) options, shares of restricted stock or restricted stock units in an amount equal to the difference between the per share cash consideration and the exercise price of such awards, as applicable.

No awards may be granted under the 2011 Plan after the date that is 10 years from the date the 2011 Plan was adopted by our board of directors. Our board of directors has determined not to make any further awards under the 2011 Plan following the closing of this offering.

2002 Stock option and incentive plan

Our 2002 Plan was approved by our board of directors on March 27, 2002 and was subsequently approved by our stockholders on March 27, 2002. The number of common stock reserved for issuance is subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization. As of March 31, 2020, awards covering 7,766 shares of common stock were outstanding under the 2002 Plan.

The shares of common stock under the 2002 Plan that are not needed to fulfill our obligations for awards issued under the 2002 Plan as a result of forfeiture, expiration, cancellation, termination or net issuances of awards thereunder are added to the shares of common stock available for issuance under the 2011 Plan. As noted below, our 2002 Plan has expired, and as noted above, no further awards will be granted under the 2011 Plan as of the closing of this offering. As such, following the closing of this offering, the shares referenced in the first sentence of this paragraph will not be added to the shares of common stock available for issuance under the 2020 Plan.

Our board of directors has acted as administrator of the 2002 Plan. The administrator has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to determine the specific terms and conditions of each award and to accelerate the vesting of any award, subject to the provisions of the 2002 Plan. Persons eligible to participate in the 2002 Plan are employees, officers, directors, consultants and advisors of the Company and its affiliates as selected from time to time by the administrator in its discretion.

The 2002 Plan permits the granting of (1) options to purchase common stock intended to qualify as incentive stock options under Section 422 of the Code and (2) options that do not so qualify. The option exercise price of each option will be determined by the administrator. The term of each option will be fixed by the administrator. The administrator will determine at what time or times each option may be exercised. The award agreements provide for a 10 year term for each stock option grant. The 2002 Plan also permits the granting of restricted stock and other stock-based awards, including the grant of stock appreciation rights, phantom stock awards and stock units.

The 2002 Plan provides that upon the occurrence of an acquisition (as defined in the 2002 Plan), (i) all outstanding stock options shall become exercisable in full immediately prior to the consummation of such acquisition and, if any shares of common stock subject to outstanding stock options are subject to repurchase provisions, such repurchase provisions shall lapse upon the consummation of such acquisition, (ii) the repurchase provisions applicable to any outstanding restricted stock awards shall lapse upon the consummation of the acquisition and (iii) all other stock-

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based awards will become exercisable, realized or vested in full upon the consummation of the acquisition. In addition, the administrator may, upon written notice to the affected optionees, provide that one or more stock options then outstanding must be exercised in whole or in part within a specified number of days after the date of such notice, at the end of which period, such stock options shall terminate, or provide that one or more stock options then outstanding shall be terminated in whole or in part in exchange for a cash payment equal to the excess of the fair market value of the shares subject to such option over the exercise price thereof.

Our 2002 Plan expired on March 27, 2012 and no additional awards were made under the 2002 Plan following such expiration.

In addition, as of March 31, 2020, 547,377 shares are currently issuable upon exercise of non-qualified stock options granted to certain of our directors and officers outside of any equity compensation plan, but upon substantially the same terms as the 2002 Plan.

2020 Employee stock purchase plan

Our board of directors adopted our ESPP in July 2020, and we expect our stockholders to approve our ESPP prior to the completion of this offering. The ESPP will become effective immediately prior to and contingent upon the date of the underwriting agreement related to this offering. The purpose of the ESPP is to secure the services of new employees, to retain the services of existing employees, and to provide incentives for such individuals to exert maximum efforts toward our success and that of our affiliates. The ESPP includes two components. One component is designed to allow eligible U.S. employees to purchase our common stock in a manner that may qualify for favorable tax treatment under Section 423 of the Code. In addition, purchase rights may be granted under a component that does not qualify for such favorable tax treatment because of deviations necessary to permit participation by eligible employees who are foreign nationals or employed outside of the United States while complying with applicable foreign laws.

Share reserve. Following this offering, the ESPP authorizes the issuance of 282,396 shares of our common stock under purchase rights granted to our employees or to employees of any of our designated affiliates. The number of shares of our common stock reserved for issuance will automatically increase on January 1 of each calendar year, beginning on January 1, 2021 through January 1, 2030, by the lesser of (1) 1.0% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year, and (2) 705,990 shares; provided that before the date of any such increase, our board of directors may determine that such increase will be less than the amount set forth in clauses (1) and (2). As of the date hereof, no shares of our common stock have been purchased under the ESPP.

Administration. Our board of directors administers the ESPP and may delegate its authority to administer the ESPP to our compensation committee. The ESPP is implemented through a series of offerings under which eligible employees are granted purchase rights to purchase shares of our common stock on specified dates during such offerings. Under the ESPP, we may specify offerings with durations of not more than 27 months, and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of our common stock will be purchased for employees participating in the offering. An offering under the ESPP may be terminated under certain circumstances.

Payroll deductions. Generally, all regular employees, including executive officers, employed by us or by any of our designated affiliates, may participate in the ESPP and may contribute, normally through payroll deductions, up to 15% of their earnings (as defined in the ESPP) for the purchase of our common stock under the ESPP. Unless otherwise determined by our board of directors, common stock

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will be purchased for the accounts of employees participating in the ESPP at a price per share that is at least the lesser of (1) 85% of the fair market value of a share of our common stock on the first date of an offering, or (2) 85% of the fair market value of a share of our common stock on the date of purchase.

Limitations. Employees may have to satisfy one or more of the following service requirements before participating in the ESPP, as determined by our board of directors, including: (1) being customarily employed for more than 20 hours per week, (2) being customarily employed for more than five months per calendar year, or (3) continuous employment with us or one of our affiliates for a period of time (not to exceed two years). No employee may purchase shares under the ESPP at a rate in excess of $25,000 worth of our common stock based on the fair market value per share of our common stock at the beginning of an offering for each calendar year such a purchase right is outstanding. Finally, no employee will be eligible for the grant of any purchase rights under the ESPP if immediately after such rights are granted, such employee has voting power over 5% or more of our outstanding capital stock measured by vote or value under Section 424(d) of the Code.

Changes to capital structure. In the event that there occurs a change in our capital structure through such actions as a stock split, merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, liquidating dividend, combination of shares, exchange of shares, change in corporate structure, or similar transaction, the board of directors will make appropriate adjustments to: (1) the class(es) and maximum number of shares reserved under the ESPP, (2) the class(es) and maximum number of shares by which the share reserve may increase automatically each year, (3) the class(es) and number of shares subject to and purchase price applicable to outstanding offerings and purchase rights, and (4) the class(es) and number of shares that are subject to purchase limits under ongoing offerings.

Corporate transactions. In the event of certain significant corporate transactions, any then-outstanding rights to purchase our stock under the ESPP may be assumed, continued, or substituted for by any surviving or acquiring entity (or its parent company). If the surviving or acquiring entity (or its parent company) elects not to assume, continue, or substitute for such purchase rights, then the participants' accumulated payroll contributions will be used to purchase shares of our common stock within 10 business days before such corporate transaction, and such purchase rights will terminate immediately after such purchase.

Under the ESPP, a corporate transaction is generally the consummation of: (1) a sale of all or substantially all of our assets, (2) the sale or disposition of more than 50% of our outstanding securities, (3) a merger or consolidation where we do not survive the transaction, and (4) a merger or consolidation where we do survive the transaction but the shares of our common stock outstanding immediately before such transaction are converted or exchanged into other property by virtue of the transaction.

ESPP amendment or termination. Our board of directors has the authority to amend or terminate our ESPP, provided that except in certain circumstances such amendment or termination may not materially impair any outstanding purchase rights without the holder's consent. We will obtain stockholder approval of any amendment to our ESPP as required by applicable law or listing requirements.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS

Our amended and restated certificate of incorporation that will be in effect on the completion of this offering will contain provisions that limit the liability of our current and former directors for monetary damages to the fullest extent permitted by Delaware law. Delaware law provides that directors of a

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corporation will not be personally liable for monetary damages for any breach of fiduciary duties as directors, except liability for:

(1): any breach of the director's duty of loyalty to the corporation or its stockholders;
(2): any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
(3): unlawful payments of dividends or unlawful stock repurchases or redemptions; or
(4): any transaction from which the director derived an improper personal benefit.

Such limitation of liability does not apply to liabilities arising under federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.

Our amended and restated certificate of incorporation that will be in effect on the completion of this offering will authorize us to indemnify our directors, officers, employees and other agents to the fullest extent permitted by Delaware law. Our amended and restated bylaws that will be in effect on the completion of this offering will provide that we are required to indemnify our directors and officers to the fullest extent permitted by Delaware law and may indemnify our other employees and agents. Our amended and restated bylaws will also provide that, on satisfaction of certain conditions, we will advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the provisions of Delaware law. We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by our board of directors. With certain exceptions, these agreements provide for indemnification for related expenses including attorneys' fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe these provisions in our amended and restated certificate of incorporation and amended and restated bylaws and these indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain customary directors' and officers' liability insurance.

The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder's investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors, executive officers or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

RULE 10b5-1 SALES PLANS

Our directors and officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades under parameters established by the director or officer when entering into the plan, without further direction from them. The director or officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a plan at any time. Our directors and executive officers may also buy or sell additional shares outside of a Rule 10b5-1 plan when they do not possess of material nonpublic information, subject to compliance with the terms of our insider trading policy.

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Certain relationships and related party transactions

Other than compensation arrangements for our directors and executive officers, which are described elsewhere in this prospectus, below we describe transactions since January 1, 2017 to which we were a participant or will be a participant, in which:

➤: the amounts involved exceeded or will exceed $120,000; and
➤: any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family of, or person sharing the household with, the foregoing persons, had or will have a direct or indirect material interest.

PROMISSORY NOTES

In connection with the satisfaction of indemnification obligations in favor of Kyle C. Kerbawy, a member of our board of directors, in October 2016 we entered into a promissory note with Mr. Kerbawy. Pursuant to the terms of the promissory note, we made payments to Mr. Kerbawy in an aggregate amount of $344,469 in installments which commenced in October 2016 and continued through December 2019. The note was fully paid as of December 31, 2019 and no payment obligations remain outstanding under the note. The note was non-interest bearing, subject to certain specified exceptions which did not occur.

In connection with obligations pursuant to a settlement arrangement between us and our former director John J. McDonnell, in September 2016 we entered into a promissory note with Mr. McDonnell. The terms of the promissory note provided for payments by us to Mr. McDonnell, who served on the board until his passing in February 2020, in an aggregate amount of $879,155 in installments. From September 2016 through August 2017, we made payments to Mr. McDonnell pursuant to the note in an aggregate amount of $439,655. In August 2017, we entered into an agreement with Mr. McDonnell providing for a lump sum payment of $395,550 in satisfaction of the settlement agreement and note in full. The note was fully paid in 2017 and no payment obligations remain outstanding under the note. The note was non-interest bearing, subject to certain specified exceptions which did not occur.

In connection with obligations pursuant to a settlement arrangement between us and our director Martin Pfinsgraff, in September 2016 we entered into a promissory note with Mr. Pfinsgraff. Pursuant to the terms of the promissory note, we made payments to Mr. Pfinsgraff in an aggregate amount of $89,190 in installments, which commenced in September 2016 and continued through December 2019. As of December 31, 2019, the note was fully paid and no payment obligations remain outstanding under the note. The note was non-interest bearing, subject to certain specified exceptions which did not occur.

EQUITY GRANTS TO DIRECTORS AND EXECUTIVE OFFICERS

We have granted stock options to certain of our directors and executive officers. For more information regarding the stock options and stock awards granted to our directors and named executive officers, see the sections titled "Management—Non-Employee Director Compensation" and "Executive compensation."

INDEMNIFICATION AGREEMENTS

Our amended and restated certificate of incorporation that will be in effect on the completion of this offering will contain provisions limiting the liability of directors, and our amended and restated bylaws that will be in effect on the completion of this offering will provide that we will indemnify each of our

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directors and officers to the fullest extent permitted under Delaware law. Our amended and restated certificate of incorporation and amended and restated bylaws that will be in effect on the completion of this offering will also provide our board of directors with discretion to indemnify our employees and other agents when determined appropriate by the board. In addition, we have entered into an indemnification agreement with each of our directors and executive officers, which requires us to indemnify them. For more information regarding these agreements, see the section titled "Executive compensation—Limitations on Liability and Indemnification Matters."

POLICIES AND PROCEDURES FOR TRANSACTIONS WITH RELATED PERSONS

Prior to the completion of this offering, we intend to adopt a policy that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock and any members of the immediate family of any of the foregoing persons are not permitted to enter into a related person transaction with us without the approval or ratification of our board of directors or our audit committee. Any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of our common stock or any member of the immediate family of any of the foregoing persons, in which the amount involved exceeds $120,000 and such person would have a direct or indirect interest, must be presented to our board of directors or our audit committee for review, consideration and approval. In approving or rejecting any such proposal, our board of directors or our audit committee is to consider the material facts of the transaction, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person's interest in the transaction.

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Principal and selling stockholders

The following table sets forth information with respect to the beneficial ownership of our shares as of June 1, 2020 by:

➤: each named executive officer;
➤: each of our directors;
➤: our directors and executive officers as a group;
➤: each of the selling stockholders; and
➤: each person or entity known by us to own beneficially more than 5% of our common stock.

We have determined beneficial ownership in accordance with the rules and regulations of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power with respect to all shares that they beneficially own, subject to applicable community property laws.

Applicable percentage ownership before this offering is based on 17,675,510 shares of common stock outstanding as of March 31, 2020, assuming the automatic conversion of all outstanding shares of convertible preferred stock into 12,869,466 shares of common stock, which will occur immediately prior to the completion of this offering. Applicable percentage ownership after this offering, both with and without full exercise of the underwriters' option to purchase additional shares, is based on 22,675,510 shares of common stock outstanding immediately after the completion of this offering. In computing the number of shares beneficially owned by a person and the percentage ownership of such person, we deemed to be outstanding all shares subject to options held by the person that are currently exercisable, or exercisable or would vest based on service-based vesting conditions within 60 days of June 1, 2020. However, except as described above, we did not deem such shares outstanding for the purpose of computing the percentage ownership of any other person.

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Unless otherwise indicated, the address for each beneficial owner listed in the table below is c/o ACell, Inc. 6640 Eli Whitney Drive, Columbia, Maryland 21046.

											Beneficial ownership after this offering (assuming full exercise of underwriters' option to purchase additional shares)

						Beneficial ownership after this offering (assuming no exercise of underwriters' option to purchase additional shares)
	Beneficial ownership before this offering
	Beneficial ownership before this offering								Number of shares being offered
Name of beneficial owner	Shares		%			%			Number of shares being offered		Shares		%

*5% Stockholders:*
James DeFrancesco (1)		2,635,059		14.9	%		11.6	%		145,295		2,489,764		11.0	%
Flemming Velin (2)		1,506,382		8.5			6.6			83,061		1,423,321		6.3
Haugo, LLC (3)		1,321,208		7.5			5.8			70,599		1,250,609		5.5
John J. McDonnell, III (4)		889,817		5.0			3.9			54,013		835,804		3.7
*Directors and Named Executive Officers:*
Patrick A. McBrayer (5)		291,336		1.6			1.3			—		291,336		1.3
Edward O'Brien (6)		326,100		1.8			1.4			17,981		308,119		1.4
Christopher F. Branch (7)		23,383		*			*			—		23,383		*
Louis S. Baldino (8)		69,566		*			*			—		69,566		*
David W. Anderson (9)		66,184		*			*			—		66,184		*
Kyle C. Kerbawy (10)		711,596		4.0			3.1			—		711,596		3.1
Sally L. Maher (11)		49,711		*			*			—		49,711		*
Martin Pfinsgraff (12)		335,721		1.9			1.5			—		335,721		1.5
All directors and executive officers as a group (9 persons) (13)		1,928,307		10.5			8.3			17,981		1,910,326		8.2
*Additional Selling Stockholders*
Pamela Malamphy		749,577		4.2			3.3			41,331		708,246		3.1
Kenneth DeFrancesco		727,145		4.1			3.2			40,158		686,987		3.0
The Alan R. Spievack Family Irrevocable Trust		496,569		2.8			2.2			33,161		463,408		2.0
Presquile Family Limited Partnership		546,552		3.1			2.4			32,916		513,636		2.3
Phillip Meikle		525,846		3.0			2.3			28,995		496,851		2.2
Rodney Bosley Revocable Trust		498,054		2.8			2.2			27,462		470,592		2.1
Brian J Bates		199,473		1.1			*			16,907		182,566		*
Miles Grody (14)		282,209		1.6			1.2			15,560		266,649		1.2
Stephen Graham		153,944		*			*			8,489		145,455		*
Jon Steiger+		148,635		*			*			8,195		140,440		*
Teri L Fenner Revocable Trust		37,767		*			*			7,545		30,222		*
Kerry McDonnell Mudd		131,164		*			*			7,232		123,932		*
RNR I, LLC		128,677		*			*			7,095		121,582		*
Fred Lange		127,329		*			*			7,020		120,309		*
Teri Fenner		219,096		1.2			1.0			6,618		212,478		*
Roger Campos		110,310		*			*			6,082		104,228		*

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			Beneficial ownership after this offering (assuming no exercise of underwriters' option to purchase additional shares)
	Beneficial ownership before this offering
	Beneficial ownership before this offering			Number of shares being offered
Name of beneficial owner	Shares	%		Number of shares being offered

ACELL INC S-1/A