To the extent our products do not qualify for regulation as human cells, tissues and cellular and tissue-based products solely under Section. 361 of the Public Health Service Act, his could result in removal of the applicable products from the market, would make the introduction of new tissue products more expensive and sould “significantly delay the expansion of our tissue product offerings and subject us fo additional post-market ‘regulatory requirements. _Ine roc we manufacture ond proces ar derived from human have Fhe FDArherapeciic i Amniotic and. other birth tissu = solely devas a Section 36: a be a6 HEE RS ane prota estonse rappoval aqurenameel 1 HCT/P depending on whether the specific product at issue and the claims made frit are consistent withthe applicable criteria, HCT/Ps that do not mest these criteria _afe subject to less stringent pest merket reulatory-more excensive regulation as drugs, medical devices, ical products, or combination products. These HC1/Ps must comply both with the requirements exclusivel ok applicable to HCT/Ps and with requirements: Jicabe to biolosice, devises or drugs, includ st clearance or approval from the EDA A product -deemedthat dos not ee bequlif ai Section 361 HCT/Psseauises FDA TE “ [promarket,presmarket learace of approval abisvolveand involves significant tne and cost eta of our mscronized products as more fully diseussed under “Business Government Regulation” beginning ‘oupage 38 of this Proxy Statement, ‘Theve.can be no assurance that the FDA will not, at some future point, modify the scope of its _—{ Formate enforcement discretion or change its position on which current or future products a —— wroducts qualify as Section 361 HCT/Ps, or determine that some or all of our [formate micronized products may not be lawiully marketed under FDA's policy of enforcement discretion, Any regulatory Formate changes could have adverse consequences for us and make it more difficult or expensive for us to conduct our po business by requiring-peesmeelee pre-market clearance or approval and compliance with additional post-market_—__—-ror™ate regulatory requirements with respect to those products. Meseoverinereasod-sogulatonyacrusinjwithinsho | Format qualifas 261 HCE/Ps. “cevernment Regulation i HEE oe ‘productedt is also possible that the FDA could decide jt will not allow the Company to market any form of a spacing: ‘micronized product dusing the rest of the 36-mouth enforcement discretion period without a bioloaies license, and it es could even require the Company to recall its micronized products, Further. under the November 2017 guidance, the EDA expressed its expectation that following the expiration of its 36-month enforcement diseretion (and an extension), our sales of micronized amniotic tissue will be limited to those products and indications for which wehave initiated or received a BLA. On April 11, 2019, we announced that we will need more time to file and ‘commercialize our BLAs with the EDA. and that clinical rial protocol enhancements, further resources and, sonal canals nd experise wil bromine or comma auch, We we donot ck alles four indications th those or soich we resus itendo pusue BLAS If the FDA does allo the Company _——{ Formate ‘continue to market a micronized form of its sheet allogratis without a biologics license-ithenpehonto-onatten iaation-of the dis $8EDA may impose conditions, such as laboling restrictions and the Format ‘eauirement that he product he manufactured in compliance with cGMP. Although the Company is preparing for ; these requirements in connection with its pursuit ofa BLA for certain ofits micronized products, earlier compliance | Formate “with these conditions would require significant additional time and cost investments by the Company. Hei-etee Formatt i EDA = —_ wnofa micron regulation of HCT/Ds_ including Section 361 HCT/Ps, which could ultimately increase our costs an adversely impact our business, results of operations and financial condition. Obtaining and maintaining the necessary regulatory approvals for certain of our products will be expensive and * time-consuming and may impede our ability 10 fully exploit our tecinologies. ‘The process of obtaining regulatory clearances or approvals to market a biologic or medical deve from the. FDA or similar regulatory authorities outside ofthe United States is costly and time constaning. and there-canbe no-acourneethetauch clearances or approvals wilimay not be granted ona timely basis. or at all-Aa-disenaaed sboweyavesntonddopursie We are puri approval ofa Bielogcebiewnoe Application {BLA} for certain of our ncronized products_but have yot vet submitted|s BLA for review, Additionally the FDA may take the position that \\\ some of the other products that we currently market require a BLA as wel. Some ofthe future products and enhancements to our current products that we expect to develop and market may require marketing clearance or approval from the FDA. There cenrbene sssuranee however thatHlowever, clearance or approval wiimay not be granted with espect fo any of our produets or enhancements ox thatand FDA review will notsnvolve delays that ‘wouldanay.adversely affect our ability to: market such products or enbancements, \ he process of obtaining an approved BLA requires the expenditure of substantial time, effort and financial resources and may take years to complete, The fee for filing a BLA and the anual user fees payable with respect to any establishment that manufactures biologics and with respect to each approved product are substantial \ ‘Additionally, there are significant costs associated with clinical trials that cannot be estimated until the IND is \ approved. Moreover, data obtained from clinical activities are not always conclusive and may be susceptible to ‘varying interpretations, which could delay, limit or prevent regulatory approval. The FDA may not grant approval ‘ona timely basis, or at all. Additionally, the FDA may limit the indications for use or place other conditions on any approvals that could restrict the commercial application of the products. After approval, some types of changes 10 the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval, _Like the process of obtaining an approved BLA, the process of obtaining a PMA requires the expenditure of substantial time, effort and financial resources and may take years to complete. The FDA may aot grant approval on timely basis, or at all. Additionally, the FDA may limit the indications for use or place other conditions on any approvals that could restrict the commercial application of the products. After approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval. ‘usther, on April 11, 2019, we announced that we will need more time to file and commercialize our BLAs with the ‘EDA. and that clinical trial protocol enhancements further resources and additional capabilities and expertise will be ‘required for commercial launch. The trials were developed and overseen by managers who are no longer with theCompany. and we have concluded the tials nust be improved if they are to support BLA approvals, We expect that time to the overall BLA approval process Dur business is subject to continuing regulatory compliance by the FDA and other authorities, which is costly, ‘and our failure to comply could result in negativeadverse, effects on our business, results of operations and financial condition, As discussed above. the FDA has specific regulations governing our tssue-based products. or HCT/Ps...The FDA has broad post-market and regulatory and enforcement powers even for Section 361 HCT/Ps, The FDA'SEDA\s regulation of HCT/Ps includes requirements for registration and listing of products, donor screening and testing. processing and distribution-(#Ghevent Good-Fisowe Practices), labeling. record keeping and adverse- reaction reporting and inspection and enforcement, BiologiesHCDPs that are regulated as biologics and medical devices are subject to even more stringent regulation by the FDA.- Even if, pre-market clearancemarketclearance or approval is obtained, the approval or ‘clearance may place substantial restrictions on the indications for which the product may be marketed or to whom it may be marketed, may require wamings to accompany the product or impose additional restrictions on the sale ‘anetdor use of the product—Jn addition, regulatory approval is subject to continuing compliance with regulatory standards, ineluding the FD.‘eEDA"s quality system regulations. fe fal to comply with the FDA regulations regarding ou tissue products-ormodicaldoviees, the FDA | «ould take enforcement action, including, without limstation, any of the following sanctions and the manufacture of ‘our products or processing of ou issue could be delayed or terminated: Aon ‘Untisleduntitled leters, waming letters, fines, injunctions, and civil penalties: eos ‘Reeelrocall or seizure of our; ao: ting restrictions, partial suspension or total shutdown of te fusing our requests for clearance or approval of new products: te ‘Withdrewingwithdrawing or suspending current applications for approval or approvals already granted; vsThe FDA's regulation of HCT/?s willmay continue to evolvein-the futuro, Complying with any such new regulatory requirements may entail significant time delays and expense, which could ‘have a material adverse effect on our business, results of operations and financial condition The Amerioan Association of Hesue Banks (“AATB"} has issued operating standards for tissue banking Compliance with these standards is a requirement in order to become an accredited tissue bank. Tn ‘addition, Some states have their own tissue banking regulations. Jnaddition, procurement of certain human organs and tissue for transplantation is subject tothe restrictions of the etione: GraetFroneplante NOTA NOTA, which prohibits the transfer of certain human organs, including skin and related tissue for valuable consideration, but permits the reasonable payment associated with the removal, transportation, implantation, processing, preservation, quality control and storage of human tissue and