MANUFACTURING AND RAW MATERIALS

We currently perform product assembly, calibration, pre- and post-assembly quality control inspection and testing, and final packaging for all of our products at our Chester, NY facility.facility and expect to continue such activities for certain of our products at our newly leased facility in Mahwah, NJ commencing on or about June 2022.  In the fourth quarter of 2020, we entered into an agreement with Command Medical Products, Inc. (“Command”), to manufacture and supply the Company’s subassemblies, needle sets and tubing products for supply continuity and cost savings. We expect the transition to Command to be completed in July 2022.

Our ability to meet customer demand depends, in part, on our ability to obtain timely and adequate delivery of components for our products. All of the components that go into the manufacturing of our products and accessories are sourced from third-party suppliers and some of these components areon a single source including subassembliesbasis. We believe alternative sources of supply for all equivalent materials are available from Command Medical Products, Inc., molded plastic parts from aother sources or can be produced by the Company, and the Company does not believe it is substantially dependent on any suppliers. The Company uses single-source suppliers in part due to governmental approval and validation requirements. A change in supplier, in Taiwanor the use of multiple suppliers of the same materials, often would necessitate additional approvals and tubing from Natvar, a Tekni-Plex Co., Inc.validations, which the Company seeks to avoid unless and until the need arises. The Company does not have any contracts with suppliers that impose material binding obligations on the Company or provide the Company with any material rights or benefits, other than the agreement with Command.

RESEARCH AND DEVELOPMENT

We recognize the importance of innovation to our long-term success and are committed to research and new product development activities.  Our product development team along with outside engineering resources isare engaged in continuously improving existing product performance and researching new product opportunities to increaseenhance our pipeline.product portfolio.  We spent $0.7$2.5 million and $1.3 million on research and development for the yearyears ended December 31, 2019,2021 and $0.2 million for the year ended December 31, 2018.2020, respectively.  We intend to make additional investments in research and development over the next twelve months.

REGULATORY

Our medical devices and technologies, as well as our business activities, are subject to a complex set of regulations and rigorous enforcement, includingprincipally by the U.S. Department of Justice, Health and Human Services-Office of the Inspector General,FDA, and numerous other federal, state, and non-U.S. governmental authorities.  To varying degrees, each of these agencies requires us to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing and distribution of our products.

BothThe FDA regulates, among other things, the research, development, testing, manufacturing, approval, labeling, storage, recordkeeping, advertising, promotion and marketing, distribution, post approval monitoring and reporting and import and export of medical devices in the U.S. to assure the safety and effectiveness of medical products for their intended use.  Thus, both before and after a product is commercially released, we have ongoing responsibilities under the FDA and other applicable non-U.S. government agency regulations.FDA. For instance, all medical devices marketed in the U.S. must be manufactured in accordance with the FDA’s quality system regulations.regulations (“QSRs”).  Accordingly, our facility and procedures and those of our suppliers are also subject to periodic inspections by the FDA to determine compliance with applicable laws and regulations.  The Federal Trade Commission also regulates the advertising of our products.  Further, we are subject to laws directed at preventing fraud and abuse, which subject our sales and marketing, training and other practices to government scrutiny.

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Our business is also affected by patient privacy laws and government payor cost containment initiatives, as well as environmental health and safety laws and regulations.

U.S. Device Classification and Clearance

Except where an exemption applies, each new or significantly modified medical device we seek to commercially distribute in the U.S. will require either a premarket notification to the FDA requesting permission for commercial distribution under Section 510(k) of the Federal Food, Drug and Cosmetic Act (“FFDCA”), also known as a 510(k) clearance, or approval of a pre-market approval (“PMA”) application.  For example, the use of our FREEDOM System with therapies not covered by the existing FDA clearance will require additional 510(k) clearance or PMA approval.

Under the 510(k) process, applicants must demonstrate to the FDA that a device is as safe and effective as, or substantially equivalent to, a legally marketed device, known as the “predicate” device.  Applicants must submit performance data to establish substantial equivalence.  In some instances, data from human clinical trials must also be submitted in support of a 510(k), and these data must be collected in a manner that conforms to the applicable Investigational Device Exemption (“IDE”) regulations.  The FDA must issue a substantial equivalence determination before commercial distribution can occur.  Changes to cleared devices that will not significantly affect the safety or effectiveness of the device can generally be made without additional 510(k) submissions.  Changes that will significantly affect the safety or effectiveness of the device will require a new 510(k) prior to marketing of the modified device. Notably, the FDA has announced its intention to pursue comprehensive reforms to its current 510(k) clearance pathway which is used for clearance of low- to moderate-risk devices that are substantially equivalent to a device already on the market, and to its post-market safety monitoring process.  We cannot predict with any certainty how these reforms may impact our business.  See ITEM“ITEM 1A. RISK FACTORS.”

Under the PMA application process, the applicant must demonstrate that the device is safe and effective for its intended use.  This approval process applies to most Class III devices, and generally requires clinical data to support the safety and effectiveness of the device, obtained in conformance with IDE regulations.  The FDA will approve a PMA application if it finds that there is a reasonable assurance that the device is safe and effective for its intended purpose, and that the proposed manufacturing is in compliance with the QSRs.  For novel technologies, the FDA will seek input from an advisory panel of medical experts regarding the safety and effectiveness of, and their benefit-risk analysis for the device.  The PMA process is generally more detailed, lengthier and more expensive than the 510(k) process, though both processes can be expensive and lengthy, and requires payment of significant user fees, unless an exemption is available.

We are also required to comply with the regulations of every other country where we commercialize products before we can launch or maintain new products on the market.  Many countries that previously did not have medical device regulations, or had minimal regulations, are now introducing them.

International sales of medical devices manufactured in the U.S. that are not approved by the FDA for use in the U.S., or that are banned or deviate from lawful performance standards, are subject to FDA export requirements.  Additionally, exported devices are subject to the regulatory requirements of each country to which the device is exported.  Some countries do not have medical device regulations, but in most foreign countries, medical devices are regulated.  Frequently, regulatory approval may first be obtained in a foreign country prior to application in the U.S. due to differing regulatory requirements; however, other countries require approval in the country of origin first.  Most countries outside of the U.S. require that product approvals be recertified on a regular basis, generally every five years.  The recertification process requires that we evaluate any device changes and any new regulations or standards relevant to the device and, where needed, conduct appropriate testing to document continued compliance.  Where recertification applications are required, they must be approved in order to continue selling our products in those countries.

Post-Approval Regulation

Even after a device is cleared or approved by FDA for marketing, numerous regulatory requirements continue to apply.  The FDA and other worldwide regulatory agencies and competent authorities actively monitor compliance to local laws and regulations through review and inspection of design and manufacturing practices, record-keeping, reporting of adverse events, labeling and promotional practices.  The FDA can ban certain medical devices, detain or seize adulterated or misbranded medical devices, order repair, replacement or refund of these devices and require notification of health professionals and others with regard to medical devices that present unreasonable risks of substantial harm to the public health.  The FDA may also enjoin and restrain a company for certain violations of the FFDCA and the Safe Medical Devices Act pertaining to medical devices or initiate action for criminal prosecution of such violations.  In addition, FDA and other governmental agencies such as the Department of Justice can take action against a company that promotes “off-label” uses.  Regulatory agencies and authorities in the countries where we do business can halt production in or distribution within their respective country or otherwise take action in accordance with local laws and regulations.  Any adverse regulatory action, depending on its magnitude, may restrict a company from effectively marketing and selling its products, may limit a company’s ability to obtain future premarket clearances or approvals, and could result in a substantial modification to a company’s business practices and operations.

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Manufacturing Regulation

We must also comply with FDA and foreign agency regulations governing medical device manufacturing practices.  The FDA and foreign agencies require manufacturers to register their establishments, and they monitor compliance with device manufacturing requirements through inspections of manufacturing facilities.  If an investigator observes conditions that might be violative, the manufacturer must correct those conditions or explain them satisfactorily or face potential regulatory action that might include physical removal of the product from the marketplace.  We are an FDA-registered medical device manufacturer and must demonstrate that we comply with the FDA’s QSR and Current Good Manufacturing Practices (“cGMPs”).

We believe that our products and procedures are in compliance with all applicable FDA and international regulations.  There is no assurance, however, that other products we are developing or products that we may develop in the future will be cleared by the FDA and classified as Class II products, or that additional regulations restricting the sale of our present or proposed products will not be promulgated by the FDA or other foreign agencies.  In addition, changes in FDA, or other federal or state health, environmental or safety regulations or their applications could adversely affect our business.

Other Healthcare Laws

We are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which we conduct our business.  These laws include:

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Violations of any of the laws described above include civil and criminal penalties, damages, fines, the curtailment or restructuring of an entity’s operations, the debarment, suspension or exclusion from federal and state healthcare programs and/or imprisonment.

Coverage and Reimbursement

Our profitability and operations are subject to changes in legislative, regulatory and reimbursement policies and decisions as well as changes in private payer reimbursement coverage and payment decisions and policies.  Our products are purchased by specialty pharmacies and ambulatory service providers or hospitals that typically bill various third-party payors, such as governmental programs (e.g., Medicare, Medicaid, and comparable non-U.S. programs), private insurance plans and managed care plans, for the healthcare services and products provided to their patients.  The ability of our customers to obtain appropriate coverage and reimbursement for our products and the drugs they administer is critical because it affects which products customers purchase and the price they are willing to pay.  Third-party payors are increasingly reducing coverage and reimbursement for certain healthcare services and products and challenging prices charged for healthcare services and products.

Environmental Health and Safety Laws

We are required to comply with federal, state, and local environmental laws; however, there is no significant effect of compliance on capital expenditures, earnings, or competitive position.  We do not use significant amounts of hazardous materials in the assembly of our products.

COMPETITION AND THE MARKET

Competition for the FreedomFREEDOM System includes electronic (volumetric) pumps, elastomeric (“infuser”) pumps, and at least one other fully mechanical pump.pumps as well as other types of pumps.  Safety, ease of use, familiarity, cost effectiveness, accuracy, pressure, etc. are driving influencers of pump selection.  Electronic pumps deliver drugs at a programmed flow rate.  They are expensivemore costly and require electricity or batteries, extensive training and maintenance and must be programmed by a qualified pharmacist or clinician. Elastomeric pumps are one-time-use balloon type devices used for infusion of drugs in intravenous (“IV”) and surgical wound site applications.  Pharmacies are required to fill them with drugs and deliver them to the patient.  They are easy to use from the patient point of view but can be more costly and time consuming to fill, are temperature sensitive and have larger residual volumes than other delivery systems. Other

Competition for infusion devices for new drugs includes a variety of technologies and companies. No single technological approach—autoinjectors, electronic (volumetric pumps), mechanical pumps, can be less expensive but may have larger residualneedle-free injectors, on-body wearable pumps, pen injectors, and pre-filled syringes—will meet the needs of all or even a majority of drugs. For drugs requiring infusion volumes over 3 ml, the segment most similar to the SCIg drugs currently delivered by the FREEDOM System, the most relevant approaches include mechanical pumps, on-body wearable pumps, and lower performance than ours.simple electronic pumps. Challenges to their successful commercialization include high costs per infusion, increased environmental impact, complexity for users, and complex mechanisms with multiple failure modes.

EMPLOYEESHUMAN CAPITAL RESOURCES

As of December 31, 2019,2021, we had 7177 full time employees and 0no part time employees.  As of December 31, 2021, approximately 57% of the Company’s workforce was female and approximately 20% of the Company’s employees in managerial roles were female.  Approximately 41% were minorities (non-White) in the Company workforce as of December 31, 2021.  None of our employees are represented by a collective bargaining agreement.

To help drive consistent execution of our business strategy, including our customer focused philosophy, and support their development, we provide training opportunities to our employees that align with their responsibilities over their career with us.  We maintain a dedicated Internet-based learning platform with a broad portfolio of written, audio-visual and interactive enterprise-wide and discipline-specific policy and training materials.  This platform includes a library of self-directed courses and virtual, instructor-led programs for employees at all levels of our organization.  Managers and supervisors are provided training to help their employees progress in their professional development.

We believe our employees are key to achieving our business objectives.  We have COVID-19 prevention protocols in place to minimize the spread of COVID-19 in our workplace.  These protocols, which remain in place, meet or exceed the Centers for Disease Control guidelines and where applicable, state mandates.

Our key human capital measures include employee safety, turnover, absenteeism and production.  We frequently benchmark our compensation practices and benefits programs against those of comparable industries and in the geographic areas where our facilities are located.  We believe that our compensation and employee benefits are competitive and allow us to attract and retain skilled and unskilled labor throughout our organization.  Our notable health, welfare and retirement benefits include:

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