UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the

Quarterly Period Ended

~~September 30, 2023~~March 31, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________to______________________

Commission File Number 001-35887

MIMEDX GROUP, INC.

(Exact name of registrant as specified in its charter)


Florida						26-2792552
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


1775 West Oak Commons Ct NE Marietta, GA						30062
(Address of principal executive offices)						(Zip Code)

(770) 651-9100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	MDXG	The Nasdaq Stock Market

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No ¨

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 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 ¨x

Accelerated filer x¨

Non-accelerated filer ¨

Smaller reporting company ☐

Emerging growth company ☐

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 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No x

There were ~~116,376,583~~147,603,955 shares of the registrant’s common stock, par value $0.001 per share, outstanding as of ~~October 26, 2023.~~April 24, 2024.

Table of Contents


Part I FINANCIAL INFORMATION
Item 1	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Operations	7
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) ~~Equity~~	8
	Condensed Consolidated Statements of Cash Flows	109
	Notes to the Condensed Consolidated Financial Statements	1110
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2720
Item 3	Quantitative and Qualitative Disclosures About Market Risk	3524
Item 4	Controls and Procedures	3524
Part II OTHER INFORMATION
Item 1	Legal Proceedings	3626
Item 1A	Risk Factors	3626
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	3626
Item 3	Defaults upon Senior Securities	3626
Item 4	Mine Safety Disclosures	3626
Item 5	Other Information	3626
Item 6	Exhibits	3727
Signatures		3727

Explanatory Note and Important Cautionary Statement Regarding Forward-Looking Statements

As used herein, the terms “MIMEDX,” the “Company,” “we,” “our” and “us” refer to MiMedx Group, Inc., a Florida corporation, and its consolidated subsidiaries as a combined entity, except where it is clear that the terms mean only MiMedx Group, Inc.

Certain statements made in this Quarterly Report on Form 10-Q (this “Quarterly Report”) are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and ~~Section~~section 21E of the Securities Exchange Act of 1934, as amended. All statements relating to events or results that may occur in the future are forward-looking statements, including, without limitation, statements regarding the following:

•our strategic focus and current business priorities, and our ability to implement these priorities, including as a result of our no longer being able to market our micronized products and certain other products;

•~~our expectations regarding future revenue growth, margins, and cash flows;~~

•the advantages of our products and development of new products;

•our expectations regarding the size of potential markets for our products and any growth in such markets;

•~~our expectations regarding the regulatory pathway for our products;~~

•our expectations regarding ongoing regulatory obligations and oversight and the changing nature thereof impacting our products, research and clinical programs, and business, including those relating to patient privacy;

•our expectations regarding our ability to procure sufficient supplies of human tissue to manufacture and process our products;

•our expectations regarding costs relating to compliance with regulatory ~~requirements, including those arising from maintaining current Good Tissue Practice compliance;~~

•~~the likelihood, timing, and scope of possible regulatory approval and commercial launch of new products;~~

requirements;

•our expectations regarding government and other third-party coverage and reimbursement for our existing and new products;

•our expectations regarding capital allocation;

•our expectations regarding future revenue growth;

•our expectations regarding the outcome of pending litigation and investigations;

•our belief in the sufficiency of our intellectual property rights in our technology;

•our expectations regarding ~~our ability to procure sufficient supplies of human tissue to manufacture and process our products;~~

•our expectations regarding our ability to fund our ongoing operations and future operating costs and the sufficiency of our liquidity and existing capital resources to implement our current business priorities;

•~~our expectations regarding~~ future income tax liability;

•~~our expectations regarding the outcome of pending litigation and investigations;~~

•demographic and market trends; and

•our ability to compete effectively.

Forward-looking statements generally can be identified by words such as “expect,” “will,” “change,” “intend,” “seek,” “target,” “future,” “plan,” “continue,” “potential,” “possible,” “could,” “estimate,” “may,” “anticipate,” “to be” and similar expressions. These statements are based on numerous assumptions and involve known and unknown risks, uncertainties and other factors that could significantly affect the Company’s operations and may cause the Company’s actual actions, results, financial condition, performance or achievements to differ materially from any future actions, results, financial condition, performance or achievements expressed or implied by any such forward-looking statements. Factors that may cause such a difference include, without limitation, those discussed under the heading “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 (our “~~2022~~2023 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on February 28, ~~2023~~2024 and those discussed in Part II, Item 1A, Risk Factors, if any.

Unless required by law, the Company does not intend, and undertakes no obligation, to update or publicly release any revision to any forward-looking statements, whether as a result of the receipt of new information, the occurrence of subsequent events, a change in circumstances or otherwise. Each forward-looking statement contained in this Quarterly Report is specifically qualified in its entirety by the aforementioned factors. Readers are advised to carefully read this Quarterly Report in conjunction

with the important disclaimers set forth above prior to reaching any conclusions or making any investment decisions and not to place undue reliance on forward-looking statements, which speak only as of the date of the filing of this Quarterly Report with the SEC.

Estimates and Projections

This Quarterly Report includes certain estimates, projections and other statistical data. These estimates and projections reflect management’s best estimates based upon currently available information and certain assumptions we believe to be reasonable as of the date of this Quarterly Report. These estimates are inherently uncertain, subject to risks and uncertainties, many of which are not within our control, have not been reviewed by our independent auditors and may be revised as a result of management’s further review. In addition, these estimates and projections are not a comprehensive statement of our financial results, and our actual results may differ materially from these estimates and projections due to developments that may arise between now and the time the results are final. There can be no assurance that the estimates will be realized, and our results may vary significantly from the estimates, including as a result of unexpected issues in our business and operations. Accordingly, you should not place undue reliance on such information. Projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

MIMEDX GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(unaudited)


		September 30, 2023		December 31, 2022			March 31, 2024	December 31, 2023
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash		$	81,164	$	65,950
Cash and cash equivalents
Accounts receivable, net	Accounts receivable, net	49,005		43,084
Inventory	Inventory	19,068		13,183
Prepaid expenses	Prepaid expenses	2,954		8,646

Other current assets	Other current assets	2,311		3,335
Other current assets
Other current assets
Total current assets	Total current assets	154,502		134,198

Property and equipment, net	Property and equipment, net	7,094		7,856
Property and equipment, net
Property and equipment, net
Right of use asset	Right of use asset	2,441		3,400
Deferred tax asset, net
Goodwill	Goodwill	19,441		19,976
Intangible assets, net	Intangible assets, net	5,395		5,852
Other assets

Other assets		149		148
Total assets	Total assets	$	189,022	$	171,430
LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY (DEFICIT)
Total assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY						LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Current portion of long term debt
Accounts payable	Accounts payable	$	9,170	$	8,847
Accrued compensation	Accrued compensation	23,159		21,852
Accrued expenses	Accrued expenses	9,444		11,024

Current liabilities of discontinued operations
Current liabilities of discontinued operations
Current liabilities of discontinued operations
Other current liabilities	Other current liabilities	1,854		1,834
Total current liabilities	Total current liabilities	43,627		43,557
Long term debt, net	Long term debt, net	48,966		48,594
Other liabilities	Other liabilities	2,605		4,773
Total liabilities	Total liabilities	$	95,198	$	96,924
Commitments and contingencies (Note 13)
Convertible preferred stock Series B; $0.001 par value; 100,000 shares authorized, issued and outstanding at September 30, 2023 and December 31, 2022		$	92,494	$	92,494
Stockholders' equity (deficit)
Preferred stock Series A; $0.001 par value; 5,000,000 shares authorized, 0 issued and outstanding at September 30, 2023 and December 31, 2022		$	—	$	—
Common stock; $0.001 par value; 250,000,000 shares authorized, 116,359,748 issued and outstanding at September 30, 2023 and 187,500,000 shares authorized, 113,705,447 issued and outstanding at December 31, 2022		116		114
Commitments and contingencies (Note 12)						Commitments and contingencies (Note 12)

Stockholders' equity
Stockholders' equity
Stockholders' equity

Common stock; $0.001 par value; 250,000,000 shares authorized; 147,528,596 issued and outstanding at March 31, 2024 and 146,227,639 issued and outstanding at December 31, 2023

Common stock; $0.001 par value; 250,000,000 shares authorized; 147,528,596 issued and outstanding at March 31, 2024 and 146,227,639 issued and outstanding at December 31, 2023

Common stock; $0.001 par value; 250,000,000 shares authorized; 147,528,596 issued and outstanding at March 31, 2024 and 146,227,639 issued and outstanding at December 31, 2023
Additional paid-in capital	Additional paid-in capital	188,369		173,804

Accumulated deficit	Accumulated deficit	(187,155)		(191,906)
Total stockholders' equity (deficit)		1,330		(17,988)
Total liabilities, convertible preferred stock, and stockholders’ equity (deficit)		$	189,022	$	171,430
Accumulated deficit
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders’ equity

See notes to unaudited condensed consolidated financial statements

MIMEDX GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)






		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022

Net sales	Net sales	$	81,712	$	67,689	$	234,645	$	193,466

Net sales

Net sales
Cost of sales
Cost of sales
Cost of sales	Cost of sales	14,790		12,188		40,792		33,947
Gross profit	Gross profit	66,922		55,501		193,853		159,519
Gross profit
Gross profit

Operating expenses:

Operating expenses:

Operating expenses:	Operating expenses:

Selling, general and administrative	Selling, general and administrative	52,571		53,475		156,773		158,838

Selling, general and administrative

Selling, general and administrative
Research and development	Research and development	3,175		5,953		18,168		17,429
Restructuring (Note 16)		208		—		3,464		—
Research and development
Research and development
Investigation, restatement and related	Investigation, restatement and related	(38)		3,001		4,652		8,771

Investigation, restatement and related
Investigation, restatement and related
Amortization of intangible assets	Amortization of intangible assets	190		175		570		519
Amortization of intangible assets
Amortization of intangible assets
Impairment of intangible assets
Impairment of intangible assets
Impairment of intangible assets
Operating income (loss)
Operating income (loss)
Operating income (loss)	Operating income (loss)	10,816		(7,103)		10,226		(26,038)

Other expense, net	Other expense, net

Other expense, net

Other expense, net

Interest expense, net	Interest expense, net	(1,680)		(1,270)		(4,864)		(3,566)
Other expense, net		(11)		—		(42)		(1)
Income (loss) before income tax provision		9,125		(8,373)		5,320		(29,605)
Income tax provision expense		(591)		(53)		(569)		(178)

Interest expense, net

Interest expense, net
Other (expense) income, net
Other (expense) income, net
Other (expense) income, net
Income (loss) from continuing operations before income tax
Income (loss) from continuing operations before income tax
Income (loss) from continuing operations before income tax
Income tax expense from continuing operations
Income tax expense from continuing operations
Income tax expense from continuing operations
Net income (loss) from continuing operations
Net income (loss) from continuing operations
Net income (loss) from continuing operations
Income (loss) from discontinued operations, net of tax
Income (loss) from discontinued operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss)
Net income (loss)
Net income (loss)	Net income (loss)	$	8,534	$	(8,426)	$	4,751	$	(29,783)

Net income (loss) available to common shareholders (Note 9)		$	6,761	$	(10,096)	$	(433)	$	(34,667)
Net income (loss) from continuing operations available to common stockholders

Net income (loss) from continuing operations available to common stockholders

Net income (loss) per common share - basic		$	0.06	$	(0.09)	$	(0.00)	$	(0.31)
Net income (loss) per common share - diluted		$	0.06	$	(0.09)	$	(0.00)	$	(0.31)
Net income (loss) from continuing operations available to common stockholders

Basic net income (loss) per common share:

Basic net income (loss) per common share:

Basic net income (loss) per common share:
Continuing operations
Continuing operations
Continuing operations
Discontinued operations
Discontinued operations
Discontinued operations
Basic net income (loss) per common share
Basic net income (loss) per common share
Basic net income (loss) per common share

Diluted net income (loss) per common share:

Diluted net income (loss) per common share:

Diluted net income (loss) per common share:
Continuing operations
Continuing operations
Continuing operations
Discontinued operations
Discontinued operations
Discontinued operations
Diluted net income (loss) per common share
Diluted net income (loss) per common share
Diluted net income (loss) per common share

Weighted average common shares outstanding - basic

Weighted average common shares outstanding - basic

Weighted average common shares outstanding - basic	Weighted average common shares outstanding - basic	116,298,146		113,448,251		115,528,067		112,650,713
Weighted average common shares outstanding - diluted	Weighted average common shares outstanding - diluted	119,327,709		113,448,251		115,528,067		112,650,713
Weighted average common shares outstanding - diluted
Weighted average common shares outstanding - diluted

See notes to unaudited condensed consolidated financial statements

MIMEDX GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) ~~EQUITY~~
(in thousands, except share data)
(unaudited)


	Common Stock Issued
		Shares
		Shares
		Shares												Amount	Capital	Shares	Amount	Deficit	Total
Balance at December 31, 2023

Share-based compensation expense
Share-based compensation expense
Share-based compensation expense
Exercise of stock options
Employee stock purchase plan
Issuance of restricted stock, net

		Common Stock Issued			Additional Paid-In		Treasury Stock			Accumulated
		Shares	Amount		Capital		Shares	Amount		Deficit		Total
Balance at June 30, 2023		116,109,125	$	116	$	182,907	—	$	—	$	(195,689)	$	(12,666)
Net income

Share-based compensation expense		—	—		4,388		—	—		—		4,388
Exercise of stock options		41,233	—		274		(17,032)	112		—		386
Employee stock purchase plan		209,390	—		688		—	—		—		688
Issuance of restricted stock		—	—		(73)		(11,080)	73		—		—
Restricted stock shares canceled/forfeited		—	—		185		28,112	(185)		—		—

Net income	Net income	—	—		—		—	—		8,534		8,534
Balance at September 30, 2023		116,359,748	$	116	$	188,369	—	$	—	$	(187,155)	$	1,330

Net income
Balance at March 31, 2024

Common Stock Issued Additional Paid-In Treasury Stock Accumulated
Shares Amount Capital Shares Amount Deficit Total
Balance at June 30, 2022 113,609,274 $ 114 $ 169,352 1,003 $ (3) $ (183,066) $ (13,603)
Share-based compensation expense — — 2,372 — — — 2,372
Exercise of stock options 49,666 — 132 (1,001) 5 — 137
Issuance of restricted stock 11,077 — — — — — —
Restricted stock shares canceled/forfeited — — 9 1,836 (9) — —
Net loss — — — — — (8,426) (8,426)
Balance at September 30, 2022 113,670,017 $ 114 $ 171,865 1,838 $ (7) $ (191,492) $ (19,520)


		Common Stock Issued			Additional Paid-In		Treasury Stock			Accumulated
		Shares	Amount		Capital		Shares	Amount		Deficit		Total
	Common Stock Issued
		Shares
		Shares
		Shares												Amount	Capital	Shares	Amount	Deficit	Total
Balance at December 31, 2022	Balance at December 31, 2022	113,705,447	$	114	$	173,804	—	$	—	$	(191,906)	$	(17,988)

Share-based compensation		—	—		12,793		—	—		—		12,793
Employee stock purchase plan		444,809	—		1,368		—	—		—		1,368
Share-based compensation expense
Share-based compensation expense
Share-based compensation expense

Issuance of restricted stock
Issuance of restricted stock
Issuance of restricted stock	Issuance of restricted stock	2,163,925	2		(268)		(73,335)	266		—		—
Restricted stock shares canceled/forfeited	Restricted stock shares canceled/forfeited	—	—		378		90,367	(378)		—		—
Exercise of stock options		45,567	—		294		(17,032)	112		—		406

Net income		—	—		—		—	—		4,751		4,751
Balance at September 30, 2023		116,359,748	$	116	$	188,369	—	$	—	$	(187,155)	$	1,330
Employee stock purchase plan
Employee stock purchase plan
Employee stock purchase plan
Net loss

Balance at March 31, 2023
Balance at March 31, 2023
Balance at March 31, 2023

Common Stock Issued Additional Paid-In Treasury Stock Accumulated
Shares Amount Capital Shares Amount Deficit Total
Balance at December 31, 2021 112,703,926 $ 113 $ 165,695 778,710 $ (4,017) $ (161,709) $ 82
Share-based compensation expense — — 10,798 — — — 10,798
Exercise of stock options 133,762 — (697) (151,239) 1,271 — 574
Issuance of restricted stock 832,329 1 (3,960) (880,749) 3,959 — —
Restricted stock shares canceled/forfeited — — 29 5,338 (29) — —
Shares repurchased for tax withholding — — — 249,778 (1,191) — (1,191)
Net loss — — — — — (29,783) (29,783)
Balance at September 30, 2022 113,670,017 $ 114 $ 171,865 1,838 $ (7) $ (191,492) $ (19,520)

~~See notes to unaudited condensed consolidated financial statements~~

MIMEDX GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

~~(in~~ (in thousands)

(unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2023		2022			2024	2023
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net income (loss)		$	4,751	$	(29,783)
Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:
Net income (loss) from continuing operations
Adjustments to reconcile net income (loss) from continuing operations to net cash flows provided by (used in) operating activities from continuing operations:						Adjustments to reconcile net income (loss) from continuing operations to net cash flows provided by (used in) operating activities from continuing operations:
Share-based compensation	Share-based compensation	12,793		10,798
Impairment of clinical trial assets		1,974		—
Change in deferred income taxes
Loss on extinguishment of debt
Depreciation	Depreciation	2,054		2,549
Non-cash lease expenses	Non-cash lease expenses	959		931
Bad debt expense	Bad debt expense	737		2,817
Amortization of intangible assets	Amortization of intangible assets	570		519
Impairment of goodwill		535		—
Loss on fixed asset disposal
Accretion of asset retirement obligation

Amortization of deferred financing costs	Amortization of deferred financing costs	373		348
Accretion of asset retirement obligation		70		69
Gain on fixed asset disposal		—		(17)

Amortization of deferred financing costs
Amortization of deferred financing costs
Increase (decrease) in cash resulting from changes in:	Increase (decrease) in cash resulting from changes in:					Increase (decrease) in cash resulting from changes in:
Accounts receivable	Accounts receivable	(6,659)		(3,295)
Inventory	Inventory	(5,885)		(2,586)
Prepaid expenses	Prepaid expenses	3,718		1,467

Other assets	Other assets	1,024		(287)
Other assets
Other assets
Accounts payable	Accounts payable	323		1,090
Accrued compensation	Accrued compensation	1,511		495
Accrued expenses	Accrued expenses	(1,289)		1,711
Other liabilities	Other liabilities	(1,041)		905
Net cash flows provided by operating activities from continuing operations
Net cash flows used in operating activities of discontinued operations
Net cash flows provided by (used in) operating activities	Net cash flows provided by (used in) operating activities	16,518		(12,269)

Cash flows from investing activities:	Cash flows from investing activities:
Cash flows from investing activities:
Cash flows from investing activities:

Consideration paid pursuant to TELA APA (Note 12)
Consideration paid pursuant to TELA APA (Note 12)
Consideration paid pursuant to TELA APA (Note 12)
Purchases of equipment	Purchases of equipment	(1,560)		(847)

Patent application costs	Patent application costs	(114)		(128)

Proceeds from sale of equipment		—		24
Patent application costs

Patent application costs
Net cash flows used in investing activities	Net cash flows used in investing activities	(1,674)		(951)

Cash flows from financing activities:	Cash flows from financing activities:
Cash flows from financing activities:
Cash flows from financing activities:

Proceeds from Citizens Revolving Credit Facility

Proceeds from Citizens Revolving Credit Facility

Proceeds from Citizens Revolving Credit Facility
Proceeds from Citizens Term Loan Facility
Proceeds from exercise of stock options	Proceeds from exercise of stock options	406		574
Principal payments on finance lease	Principal payments on finance lease	(36)		(29)
Stock repurchased for tax withholdings on vesting of restricted stock		—		(1,191)
Prepayment premium on Hayfin term loan
Deferred financing cost
Repayment of Hayfin term loan
Repayment of Citizens Revolving Credit Facility
Principal payments on Citizens Term Loan Facility
Stock repurchased for tax withholdings on vesting of restricted stock units
Net cash flows used in financing activities

Net cash flows provided by (used in) financing activities		370		(646)

Net change in cash
Net change in cash
Net change in cash	Net change in cash	15,214		(13,866)

Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	65,950		87,083
Cash and cash equivalents, beginning of period
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	81,164	$	73,217

See notes to unaudited condensed consolidated financial statements

109

MIMEDX GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2024 AND 2023 ~~AND 2022~~

1.Nature of Business

MiMedx Group, Inc. (together with its subsidiaries, except where the context otherwise requires, ““MIMEDX,”,” or the “~~Company~~“Company””) is a pioneer and leader in placental biologics focused on ~~delivering innovative~~helping humans heal. With more than a decade of helping clinicians manage chronic and other hard-to-heal wounds, MIMEDX is dedicated to providing a leading portfolio of products for applications in the wound care, burn, and surgical sectors of healthcare. The Company’s vision is to be the leading global provider of healing solutions through relentless innovation to ~~patients and the healthcare professionals who treat them.~~restore quality of life. All of ~~the Company’s~~our products sold in the United States are regulated by the United States Food &and Drug Administration (“(~~FDA~~“FDA””).

The Company’s product portfolio and product development focuses on Wound and Surgical markets.

The Company’s business is focused primarily on the United States of America but the Company ~~is pursuing opportunities for~~also has a small commercial presence in several international ~~expansion, with specific focus on the sale of its placental tissue products in~~locations, including Japan.

During the three and nine months ended September 30, 2023, the Company operated as two defined, internal business units: Wound & Surgical and Regenerative Medicine. On June 20, 2023, the Company announced that it would disband its Regenerative Medicine business unit and suspended its associated Knee Osteoarthritis clinical trial program. All activities in Regenerative Medicine during the three months ended September 30, 2023 were part of the wind-down of the unit, primarily related to regulatory obligations associated with its clinical trial, and it is expected that these activities will materially conclude during the fourth quarter of 2023.

2.Significant Accounting Policies

Please see Note 2, Significant Accounting Policies, to the Company’s Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 (the “~~2022~~2023 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on February 28, ~~2023~~2024 for a description of all significant accounting policies.

Basis of Presentation

~~These~~The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations for the periods presented have been included. The operating results for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ are not necessarily indicative of the results that may be expected for the full fiscal year. The balance sheet as of December 31, ~~2022~~2023 was derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

These unaudited condensed consolidated financial statements should be read in conjunction with the historical consolidated financial statements of the Company included in the ~~2022~~2023 Form 10-K.

Reclassifications

Current portion of long term debt of $1.0 million as of December 31, 2023, which was presented in other current liabilities in previously-issued financial statements, has been reclassified to be presented in a separate line item still within current liabilities in the March 31, 2024 balance sheet presentation.

Principles of Consolidation

The consolidated financial statements include the accounts of MiMedx Group, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

Use of Estimates

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported consolidated statements of operations during the reporting period. Actual results could differ from those estimates. Significant estimates include estimated useful lives and potential impairment of property and equipment, estimates of impairment for goodwill and intangible assets, estimates of useful lives for intangible assets, estimates of loss for contingent liabilities, estimate of allowance for doubtful accounts, ~~management’s assessment of the Company’s ability to continue as a going concern,~~ estimate of fair value and the probable achievement of share-based payments, estimates of returns and allowances, and valuation of deferred tax assets.

~~Share-Based Compensation~~

~~The Company grants share-based awards to employees and members of the Company’s Board of Directors (the “Board”). Awards to employees and the Board are generally made annually. Grants are issued outside of the annual cadence for certain new hires, promotions, and other events.~~

The amount of expense to be recognized is determined by the fair value of the award using inputs available as of the grant date. The fair value of non-option share awards that are not subject to a market condition is the value of the common stock on the grant date. For non-option share awards that are subject to a market condition, the fair value of the common stock on the grant date is adjusted to reflect the value of the market condition, generally using a path-dependent pricing model, such as a Monte Carlo simulation.

The fair value of stock option grants is estimated using an option pricing model, as appropriate based on the terms of the grant. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs, which generally follows the inputs to a Black-Scholes option pricing model. Absent the availability of an option market with similar terms to the awarded options, the Company infers an expectation for volatility using the historical volatility of daily price changes in its share price for a period equal to the contractual or expected term of the option, as applicable, subject to adjustment for price activity associated with certain events which are not expected to recur during the relevant term. The expected term is derived based on the Company’s expectations for option exercise by the recipients. The Company uses U.S. Treasury yields with a maturity similar to the expected or contractual term, as applicable, as the basis for its risk-free interest rate assumption. The Company has never declared a dividend on its common stock and, therefore, assumes a dividend yield of 0%.

Expense is recognized over the requisite service period to achieve a vesting condition associated with an award, which can either be explicitly defined by the award, implied by its terms, or derived from potential market movements. In situations where multiple vesting conditions must be achieved, the longest service period is used as a basis for expense recognition. Derived service periods associated with market conditions are accelerated if such market conditions are met prior to the initially-assessed derived service period, but are not deferred if the market conditions are not met prior to the end of the initially-assessed derived service period.

For awards with only service-based vesting conditions, the Company recognizes share-based compensation expense on a straight-line basis through the vesting date of the last tranche of the award. For awards which vest based on more than service conditions, the Company recognizes share-based compensation expense using a graded-vesting method, treating each tranche as if it were a separately-granted award and recognizing expense through the vesting date of each individual tranche. In each scenario, the Company recognizes share-based compensation expense to the extent that the associated service and performance conditions are considered probable to occur. Determinations of probability are made each reporting period and the Company uses available evidence considered relevant for evaluating the performance conditions. The Company recognizes the cumulative effect of changes in the probability of occurrence in the period of re-evaluation. The probability of occurrence and ultimate resolution of a market condition is not considered in expense recognition. Consequently, the Company could recognize expense for awards that do not ultimately vest.

~~Basic and Diluted Net Income (Loss) Per Common Share~~

Basic net income (loss) per common share is calculated as net income (loss) available to common stockholders divided by weighted average common shares outstanding for the applicable period. Net income (loss) available to common stockholders is calculated by adjusting net income (loss) for periodic accumulated dividends on the Company’s Series B Convertible Preferred Stock (“~~Series B Preferred Stock”). This amount is divided by the weighted average common shares outstanding during the period.~~

Weighted average common shares outstanding is calculated as shares of the Company outstanding adjusted for the portion of the period for which they are outstanding. Unvested non-option share awards are excluded from the calculation of weighted average common shares outstanding until they have vested. Unexercised stock options are excluded from the calculation of weighted average common shares outstanding until they are exercised. Shares issuable pursuant to the Company’s Employee Stock Purchase Plan (“~~ESPP”) are included for the minimum number of shares issuable beginning at the point in time that all contingencies for share issuance are resolved.~~

Diluted net income (loss) per common share adjusts basic net income (loss) per common share for convertible securities, options, equity incentive awards, and other share-based payment awards which have yet to vest and vest only on the satisfaction of a service condition. Equity incentive awards and options that are subject to a performance or market condition are included only if the performance or market condition would be satisfied if the end of the applicable period were the end of the performance period. In any case, these adjustments are reflected in the calculation of diluted net income (loss) per common share to the extent that they reduce basic net income (loss) per common share.

The Company uses the if-converted method to calculate the dilutive effect of the Series B Preferred Stock and other convertible securities to the extent they are outstanding. The if-converted method assumes that convertible securities are converted at the later of the issuance date and the beginning of the period. If the hypothetical conversion of convertible securities, and the consequential avoidance of any accumulated preferred dividends, would decrease basic net income (loss) per common share,

~~these effects are incorporated in the calculation of diluted net income (loss) per common share, adjusted for the portion of the period the securities were outstanding.~~

The Company uses the treasury stock method to calculate the dilutive effect of options, non-option share awards, and certain other share-based payments. The treasury stock method assumes that the proceeds from exercise are used to repurchase common shares at the weighted average market price during the period, increasing the denominator for the net effect of shares issued upon exercise less hypothetical shares repurchased.

Shares issuable pursuant to the ESPP are included in the calculation of diluted net loss per common share to the extent that such shares would be issued based on the share price at the conclusion of the period, to the extent such shares are not already included in the calculation of weighted average common shares outstanding.

Recently ~~Adopted~~Issued Accounting ~~Pronouncements~~Standards Not Yet Adopted

In ~~March 2020,~~November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2020-04,~~2023-07, “~~Reference Rate Reform~~Segment Reporting: Improvements to Reportable Segment Disclosures (Topic ~~848): Facilitation of~~280)”. The standard improves disclosures about a public entity’s reportable segments and addresses requests from investors for additional, more detailed information about a reportable segment’s expenses. Additionally, ASU 2023-07 extends the ~~Effects of Reference Rate Reform on Financial Reporting.~~” ASU 2020-04 provides temporary expedients to accounting guidance for certain contract modifications and hedging arrangements to ease financial reporting burdens as a result of market transitions from certain reference rates, including the London Interbank Offered Ratedisclosure requirements under Accounting Standards Codification (“~~LIBOR~~ASC”)~~. The updates are~~ Topic 280 to entities with a single reportable segment. ASU 2023-07 is effective ~~immediately~~for annual reporting periods beginning after December 15, 2023, and ~~may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated~~interim periods in fiscal years beginning after December 15, 2024. As of March 31, 2024, the Company is evaluating the impact of this standard on ~~or before December 31, 2024.~~its consolidated financial statements.

In ~~June~~December 2023, the ~~Company entered into Amendment No. 2 (the~~FASB issued ASU 2023-09, “~~Second Amendment~~Improvement to Income Tax Disclosures (Topic 740)”~~) to the loan agreement, dated as of June 30, 2020, by and among the Company, Hayfin Services, LLP (“Hayfin~~”), ~~an affiliate of Hayfin Capital Management LLP,~~which requires additional disclosures for income tax rate reconciliations, income taxes paid, and certain other ~~parties, (as amended,~~tax disclosures. ASU 2023-09 is intended to enhance the “~~Hayfin Loan Agreement”), pursuant to which the reference rate used to determine the interest rate was changed from the London Interbank Offered Rate (“LIBOR~~”)transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the ~~Secured Overnight Financing Rate (“SOFR”). Because~~rate reconciliation and income taxes paid information. Adoption is required for annual periods beginning after December 15, 2024. The Company is currently evaluating the ~~only terms~~impact of ~~the Second Amendment that affected the Company’s contractual cash flows were related to the changes in the reference rate, the Company adopted the optional guidance prescribed by Topic 848 to~~ this ~~transaction. The adoption of ASU 2020-04 and~~standard on its ~~application to the Second Amendment did not materially impact the Company’s unaudited condensed~~ consolidated financial statements ~~as of or for the three or nine months ended September 30, 2023.~~and related disclosures.

~~Recently Issued Accounting Pronouncements Not Yet Adopted~~

All other ASUs issued and not yet effective ~~for the three and nine months ended September 30, 2023,~~as of March 31, 2024, and through the date of this report, were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s current and future financial position and results of operations.

3. Accounts Receivable, Net

Accounts receivable, net, consisted of the following (in thousands):


		September 30, 2023		December 31, 2022		March 31, 2024	December 31, 2023
Accounts receivable, gross	Accounts receivable, gross	$	51,579	$	46,867
Less: allowance for doubtful accounts	Less: allowance for doubtful accounts	(2,574)		(3,783)
Accounts receivable, net	Accounts receivable, net	$	49,005	$	43,084

Activity related to the Company’s allowance for doubtful accounts for the three months ended ~~September 30, 2023 and 2022 were~~March 31, 2024 was as follows (in thousands):

2023 2022
Balance at July 1 $ 2,196 $ 3,471
Bad debt expense 447 426
Write-offs (69) (67)
Balance at September 30 $ 2,574 $ 3,830


	Allowance for Doubtful Accounts
Balance at December 31, 2023	$	3,144
Bad debt expense	199
Write-offs	(77)
Balance at March 31, 2024	$	3,266

~~Activity related to the Company’s allowance for doubtful accounts for the nine months ended September 30, 2023 and 2022 were as follows (in thousands):~~

2023 2022
Balance at January 1 $ 3,783 $ 1,187
Bad debt expense 737 2,817
Write-offs (1,946) (174)
Balance at September 30 $ 2,574 $ 3,830


	Allowance for Doubtful Accounts
Balance at December 31, 2022	$	3,783
Bad debt expense reversal	(60)
Write-offs	(122)
Balance at March 31, 2023	$	3,601

4. Inventory

Inventory consisted of the following (in thousands):


		September 30, 2023		December 31, 2022		March 31, 2024	December 31, 2023
Raw materials	Raw materials	$	838	$	810
Work in process	Work in process	10,547		6,855
Finished goods	Finished goods	7,683		5,518

Inventory	Inventory	$	19,068	$	13,183

Inventory

Inventory

5. Property and Equipment, Net

Property and equipment, net, consisted of the following (in thousands):

September 30, 2023 December 31, 2022
Laboratory and clean room equipment $ 17,551 $ 16,422
Furniture and equipment 15,255 15,016
Leasehold improvements 9,418 9,190
Construction in progress 1,656 1,983
Asset retirement cost 960 983
Finance lease right-of-use asset 189 189
Property and equipment, gross 45,029 43,783
Less: accumulated depreciation and amortization (37,935) (35,927)
Property and equipment, net $ 7,094 $ 7,856

~~Depreciation expense for the three and nine months ended September 30, 2023 and 2022 is summarized in the table below (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Depreciation expense $ 653 $ 831 $ 2,054 $ 2,549

Depreciation expense is allocated amongst cost of sales, research and development expense, and selling, general, and administrative expense on the unaudited condensed consolidated statements of operations.


	March 31, 2024		December 31, 2023
Laboratory and clean room equipment	$	14,504	$	13,954
Furniture and equipment	2,205		1,989
Leasehold improvements	8,141		8,141
Construction in progress	1,870		1,791
Asset retirement cost	889		938
Finance lease right-of-use asset	189		189
Property and equipment, gross	27,798		27,002
Less: accumulated depreciation and amortization	(20,458)		(20,028)
Property and equipment, net	$	7,340	$	6,974

6. ~~Goodwill and Intangible Assets, Net~~

~~Goodwill~~

~~The following table provides a summary of goodwill activity for the nine months ended September 30, 2023 (in thousands):~~

Wound & Surgical Regenerative Medicine Goodwill
Balance as of December 31, 2022 $ 19,441 $ 535 $ 19,976
Impairment of goodwill — (535) (535)
Balance as of September 30, 2023 $ 19,441 $ — $ 19,441

~~There was no goodwill activity during the three months ended September 30, 2023 or during the three or nine months ended September 30, 2022.~~

~~Impairment of Regenerative Medicine Business Unit~~

On June 20, 2023, the Company announced the disbanding of its Regenerative Medicine business unit and the suspension of its Knee Osteoarthritis clinical trial program. As a result of this event, the Company evaluated goodwill associated with the Regenerative Medicine reporting unit for potential impairment. The Company estimated fair value for the reporting unit using the income approach; specifically, a discounted cash flow method. As a result of this assessment, management concluded that the carrying value of the reporting unit exceeded its carrying value by an amount that exceeded its goodwill balance. Accordingly, the Company recognized an impairment loss for the full amount of the goodwill ascribed to the Regenerative Medicine reporting unit. The impairment loss is included as a component of restructuring expense in the unaudited condensed statement of operations for the nine months ended September 30, 2023.

Intangible Assets, Net

Intangible assets, net, are summarized as follows (in thousands):


		September 30, 2023						December 31, 2022
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	March 31, 2024															March 31, 2024			December 31, 2023
	Gross Carrying Amount													Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount	Gross Carrying Amount	Accumulated Amortization	Net Carrying Amount
Amortized intangible assets	Amortized intangible assets
Patents and know-how	Patents and know-how	$	9,969	$	(7,638)	$	2,331	$	9,923	$	(7,106)	$	2,817
Patents and know-how
Patents and know-how
Licenses	Licenses	1,000		(42)		958		1,000		(4)		$	996
Distribution rights

Total amortized intangible assets
Total amortized intangible assets
Total amortized intangible assets	Total amortized intangible assets	$	10,969	$	(7,680)	$	3,289	$	10,923	$	(7,110)	$	3,813

Unamortized intangible assets:	Unamortized intangible assets:
Unamortized intangible assets:
Unamortized intangible assets:
Tradenames and trademarks
Tradenames and trademarks
Tradenames and trademarks	Tradenames and trademarks	$	1,008			$	1,008	$	1,008			$	1,008
Patents in Process	Patents in Process	1,098				1,098		1,031				1,031
Total intangible assets	Total intangible assets	$	13,075			$	5,395	$	12,962			$	5,852

The Company recognized $0.1 million of impairment of intangible assets during the three months ended March 31, 2024 related to patents which were abandoned.

Expected future amortization of intangible assets as of ~~September 30, 2023,~~March 31, 2024, is as follows (in thousands):


Year ending December 31,	Estimated Amortization Expense
2024 (excluding the three months ended March 31, 2024)	$	1,708
2025	1,883
2026	1,729
2027	1,728
2028	1,726
Thereafter	1,780
Total amortized intangible assets	$	10,554

Year ending December 31, Estimated
Amortization
Expense
2023 (excluding the nine months ended September 30, 2023) $ 190
2024 759
2025 364
2026 210
2027 209
Thereafter 1,557
Total amortized intangible assets $ 3,289

7. Accrued Expenses

Accrued expenses consisted of the following (in thousands):


		September 30, 2023		December 31, 2022
	March 31, 2024					March 31, 2024	December 31, 2023
Commissions to sales agents	Commissions to sales agents	$	3,213	$	2,941

Accrued rebates	Accrued rebates	1,244		707
Legal and settlement costs	Legal and settlement costs	1,025		4,447
Accrued Group Purchasing Organization fees
Estimated sales returns	Estimated sales returns	910		659
Accrued group purchasing organization fees		713		638
Accrued clinical trials		694		90
Accrued contract termination costs		547		—
Accrued travel	Accrued travel	259		566

Other	Other	839		976
Accrued expenses	Accrued expenses	$	9,444	$	11,024

8. Long Term Debt, Net

~~Hayfin Loan~~Citizens Credit Agreement

On ~~June 30, 2020,~~January 19, 2024, the Company entered into ~~the Hayfin Loan~~a Credit Agreement ~~which provided the Company~~(the “Citizens Credit Agreement”) with certain lenders party thereto, and Citizens Bank, N.A., as administrative agent (the “Agent”). The Citizens Credit Agreement provides for senior secured credit facilities in an aggregate principal amount of up to $95.0 million consisting of: (i) a $75.0 million senior secured revolving credit facility (the “Revolving Credit Facility”) with a ~~$50~~$10.0 million letter of credit sublimit and a $10.0 million swingline loan sublimit, and (ii) a $20.0 million senior secured term loan facility (the “Term Loan Facility” and, together with the Revolving Credit Facility, the “Credit Facilities”). ~~The Term Loan matures~~All obligations are required to be paid in full on ~~June 30, 2025~~January 19, 2029 (the “Maturity Date”). ~~Interest on~~The Company has the option to obtain one or more incremental Term Loan Facilities and/or increase the commitments under the Revolving Credit Facility in an aggregate principal amount equal to the greater of (i) $50.0 million and (ii) 1.00 times the Company’s Consolidated EBITDA (as defined therein), each subject to the existing or any new lenders’ election to extend additional term loans or revolving commitments.

At the Company’s option, borrowings ~~is based on~~under the Citizens Credit Agreement (other than any swingline loan) will bear interest at a rate per annum equal to (i) the Alternate Base Rate, as defined therein, or (ii) a Term SOFR as defined therein, in each case plus an applicable margin ranging from 1.25% and 2.50% with respect to Alternate Base Rate borrowings and 2.25% and 3.50% for Term SOFR borrowings, plus a fallback provision of ~~0.15%, subject~~0.1%. Swingline loans will bear interest at a ~~floor~~rate per annum equal to one-month Term SOFR plus the applicable margin. The applicable margin will be determined based on the Company’s consolidated total net leverage ratio.

The Company is required to pay a quarterly commitment fee on any unused portion of ~~1.5% (the~~ ~~“Floor”),~~ ~~plus a Margin~~the Revolving Credit Facility, letter of ~~6.75% (the~~ ~~“Margin”~~).credit fees, and other customary fees to the Agent and the Lenders. The Term Loan ~~carried an~~Facility will amortize on a quarterly basis at 1.25% (for year one and two), 1.88% (for year three and four), and 2.5% (for year five) based on the aggregate principal amount outstanding under the Term Loan Facility, with the remainder due on the Maturity Date. The Company must make mandatory prepayments in connection with certain asset dispositions and casualty events, subject in each case to customary reinvestment rights. The Company may prepay borrowings under the Credit Facilities at any time, without premium or penalty, and may, at its option, reduce the aggregate unused commitments under the Revolving Credit Facility in whole or in part, in each case subject to the terms of the Credit Agreement. The Company must also comply with certain financial covenants, including a maximum total net leverage ratio and a minimum consolidated fixed charge coverage ratio, as well as other customary restrictive covenants.

On January 19, 2024, the Company borrowed $30.0 million under the Revolving Credit Facility and $20.0 million under the Term Loan Facility. Proceeds from the initial drawings under the Credit Facilities together with cash on hand were used to repay in full the $50.0 million principal amount and other outstanding obligations under the Company’s prior senior secured term loan with Hayfin (the “Hayfin Loan Agreement”) and to pay related fees, premiums, costs and expenses (collectively with the entry into the Citizens Credit Agreement and the initial borrowings thereunder, the “Debt Refinancing Transactions”). The Company recorded a loss on extinguishment of debt of $1.4 million. This amount is reflected as a part of interest ~~rate~~expense, net on the unaudited condensed consolidated statement of ~~12.3%~~operations for the three months ended March 31, 2024. The composition of the loss on extinguishment of debt was as follows (amounts in thousands):


	January 19, 2024
Unamortized deferred financing costs	$	781
Unamortized original issue discount	120
Prepayment premium	500
Loss on extinguishment of debt	$	1,401

In addition, on February 27, 2024, the Company repaid the initial $30.0 million drawing under the Revolving Credit Facility and had no outstanding borrowings under this facility as of ~~September 30, 2023.~~March 31, 2024. Deferred financing costs and original issue discount allocated to the Revolving Credit Facility are amortized straight-line through the expiration of the commitment term. The Revolving Credit Facility is currently subject to a commitment fee of 0.25% per annum of the amount undrawn, which is recognized as interest expense.

AsOriginal issue discount and deferred financing costs incurred as part of ~~September 30, 2023,~~ the ~~Company was in compliance with all applicable financial covenants~~Credit Facilities were allocated between the Term Loan Facility and the Revolving Credit Facility on the basis of the maximum potential principal outstanding permitted under the ~~Hayfin~~Citizens Credit Agreement. The allocation of the deferred financing costs and original issue discount between the Term Loan ~~Agreement.~~Facility and the Revolving Credit Facility were as follows (in thousands):


	January 19, 2024
	Term Loan Facility		Revolving Credit Facility		Total
	Long term debt		Other assets
Original issue discount	$	224	$	839	$	1,063
Deferred financing	54		202		256

The balances of the Term Loan Facility as of ~~September 30, 2023~~March 31, 2024 and the Hayfin Loan Agreement as of December 31, ~~2022~~2023 were as follows (in thousands):

September 30, 2023

December 31, 2022

March 31, 2024

Current portion of long term debt

Outstanding principal

50,000

Deferred financing costs

(896)

(1,219)

Deferred financing costs

Original issue discount

(138)

(187)

Long term debt, net

48,966

48,594

Long term debt, net

The Citizens Term Loan Facility bears interest at a rate per annum equal to (i) the Alternate Base Rate, as defined therein, or (ii) a Term SOFR as defined therein, in each case plus an applicable margin ranging from 1.25% and 2.50% with respect to Alternate Base Rate borrowings and 2.25% and 3.50% for Term SOFR borrowings, plus a fallback provision of 0.1%. The applicable margin is determined based on the Company’s consolidated total net leverage ratio. The Term Loan Facility carried an interest rate of 7.9% as of March 31, 2024. Interest expense related to the Term Loan Facility and the Hayfin Loan Agreement included in interest expense, net in the unaudited condensed consolidated statements of operations, was as follows ~~(in~~(amounts in thousands):


	Three Months Ended March 31,
	2024		2023
Stated interest	$	661	$	1,436
Amortization of deferred financing costs	29		105
Accretion of original issue discount	13		16
Interest expense	$	703	$	1,557

Interest expense related to the Revolving Credit Facility included in interest expense, net in the unaudited condensed consolidated statements of operations, was as follows (amounts in thousands):

1614

Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Stated interest $ 1,554 $ 1,151 $ 4,498 $ 3,225
Amortization of deferred financing costs 111 103 323 302
Accretion of original issue discount 17 16 50 46
Interest expense $ 1,682 $ 1,270 $ 4,871 $ 3,573


	Three Months Ended March 31,
	2024
Commitment fee	$	30
Amortization of deferred financing costs	16
Accretion of original issue discount	42
Interest expense	$	88

A summary of principal payments due on the Term Loan Facility, by year, from ~~September 30, 2023~~March 31, 2024 through maturity are as follows (in thousands):


Year ending December 31,	Year ending December 31,	Principal		Year ending December 31,	Principal
2023 (excluding the nine months ended September 30, 2023)		$	—
2024		—
2024 (excluding the three months ended March 31, 2024)
2025	2025	50,000
2026	2026	—
2027	2027	—
2028
Thereafter	Thereafter	—
Outstanding principal	Outstanding principal	$	50,000

As of ~~September 30, 2023,~~March 31, 2024, the fair value of the Term Loan Facility was ~~$47.7~~$19.3 million. This valuation was calculated based on a series of Level 2 and Level 3 inputs, including a discount rate based on the credit risk spread of debt instruments of similar risk character in reference to U.S. Treasury instruments with similar maturities, with an incremental risk premium for risk factors specific to the Company. Fair value was calculated by discounting the remaining cash flows associated with the Term Loan Facility to ~~September 30, 2023~~March 31, 2024 using this discount rate.

9. Net Income (Loss) Per Common Share

Net income (loss) per common share is calculated using two methods: basic and diluted.

Basic Net Income (Loss) Per Common Share

The following table provides a reconciliation of net ~~loss~~income (loss) to net ~~loss~~income (loss) available to common stockholders and calculation of basic net ~~loss~~income (loss) per common share for each of the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022~~ (in thousands, except share and per share amounts):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Net income (loss)		$	8,534	$	(8,426)	$	4,751	$	(29,783)

Accumulated dividends on Series B Preferred Stock		1,773		1,670		5,184		4,884
Net income (loss) available to common stockholders		$	6,761	$	(10,096)	$	(433)	$	(34,667)

Net income (loss) from continuing operations
Net income (loss) from continuing operations
Net income (loss) from continuing operations
Income (loss) from discontinued operations, net of tax
Income (loss) from discontinued operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss)
Net income (loss)
Net income (loss)
Adjustments to reconcile to income (loss) available to common stockholders:
Adjustments to reconcile to income (loss) available to common stockholders:
Adjustments to reconcile to income (loss) available to common stockholders:
Accumulated dividend on previously converted Series B Preferred Stock
Accumulated dividend on previously converted Series B Preferred Stock
Accumulated dividend on previously converted Series B Preferred Stock

Net income (loss) available to common stockholders from continuing operations

Net income (loss) available to common stockholders from continuing operations

Net income (loss) available to common stockholders from continuing operations
Weighted average common shares outstanding	Weighted average common shares outstanding	116,298,146		113,448,251		115,528,067		112,650,713
Weighted average common shares outstanding
Weighted average common shares outstanding
Basic net income (loss) per common share:
Basic net income (loss) per common share:
Basic net income (loss) per common share:
Continuing operations
Continuing operations
Continuing operations
Discontinued operations
Discontinued operations
Discontinued operations
Basic net income (loss) per common share	Basic net income (loss) per common share	$	0.06	$	(0.09)	$	(0.00)	$	(0.31)
Basic net income (loss) per common share
Basic net income (loss) per common share

Diluted Net Income (Loss) Per Common Share

The following table sets forth the computation of diluted net ~~loss~~income (loss) per common share (in thousands, except share and per share amounts):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
Net income (loss) available to common stockholders		$	6,761	$	(10,096)	$	(433)	$	(34,667)




Net income (loss) available to common stockholders from continuing operations
Net income (loss) available to common stockholders from continuing operations
Net income (loss) available to common stockholders from continuing operations
Adjustments:	Adjustments:
Accumulated dividends on Series B Convertible Preferred Stock		1,773		1,670		5,184		4,884
Adjustments:
Adjustments:
Dividends on Series B Preferred Stock
Dividends on Series B Preferred Stock
Dividends on Series B Preferred Stock

Less: antidilutive adjustments

Less: antidilutive adjustments

Less: antidilutive adjustments	Less: antidilutive adjustments	(1,773)		(1,670)		(5,184)		(4,884)
Total adjustments	Total adjustments	—		—		—		—
Total adjustments
Total adjustments
Numerator	Numerator	$	6,761	$	(10,096)	$	(433)	$	(34,667)
Numerator
Numerator
Net income (loss) available to common shareholders from continuing operations
Net income (loss) available to common shareholders from continuing operations
Net income (loss) available to common shareholders from continuing operations
Income (loss) from discontinued operations, net of tax
Income (loss) from discontinued operations, net of tax
Income (loss) from discontinued operations, net of tax
Weighted average shares outstanding
Weighted average shares outstanding
Weighted average shares outstanding	Weighted average shares outstanding	116,298,146		113,448,251		115,528,067		112,650,713
Adjustments:	Adjustments:
Adjustments:
Adjustments:
Potential common shares (a)
Potential common shares (a)
Potential common shares (a)	Potential common shares (a)

Restricted stock unit awards	Restricted stock unit awards	1,845,832		—		—		—

Restricted stock unit awards

Restricted stock unit awards
Outstanding stock options
Outstanding stock options
Outstanding stock options	Outstanding stock options	1,131,410		—		—		—
Performance stock unit awards	Performance stock unit awards	35,441		—		—		—
Restricted stock awards		15,767		—		—		—
Performance stock unit awards
Performance stock unit awards
Employee stock purchase plan	Employee stock purchase plan	1,113		—		—		—
Employee stock purchase plan
Employee stock purchase plan

Total adjustments

Total adjustments

Total adjustments	Total adjustments	3,029,563		—		—		—
Weighted average shares outstanding adjusted for potential common shares	Weighted average shares outstanding adjusted for potential common shares	119,327,709		113,448,251		115,528,067		112,650,713
Weighted average shares outstanding adjusted for potential common shares
Weighted average shares outstanding adjusted for potential common shares
Diluted net income (loss) per common share:
Diluted net income (loss) per common share:
Diluted net income (loss) per common share:
Continuing operations
Continuing operations
Continuing operations
Discontinued operations
Discontinued operations
Discontinued operations
Diluted net income (loss) per common share	Diluted net income (loss) per common share	$	0.06	$	(0.09)	$	(0.00)	$	(0.31)
Diluted net income (loss) per common share
Diluted net income (loss) per common share

(a) Weighted average common shares outstanding for the calculation of diluted net income (loss) per common share does not include the following adjustments for potential common shares below because their effects were determined to be antidilutive for the periods presented.


		Three Months Ended September 30,		Nine Months Ended September 30,
		2023	2022	2023	2022
Series B Convertible Preferred Stock		30,445,997	28,685,739	29,559,946	27,850,916
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
Series B Preferred Stock
Series B Preferred Stock
Series B Preferred Stock
Restricted stock unit awards	Restricted stock unit awards	—	474,355	1,219,776	574,507
Restricted stock unit awards
Restricted stock unit awards
Restricted stock awards
Restricted stock awards
Restricted stock awards
Employee stock purchase plan
Employee stock purchase plan
Employee stock purchase plan
Performance stock unit awards	Performance stock unit awards	—	59,996	13,425	40,141
Employee stock purchase plan		—	4,536	372	1,517
Restricted stock awards		—	22,327	23,733	293,778
Performance stock unit awards
Performance stock unit awards
Outstanding stock options
Outstanding stock options
Outstanding stock options	Outstanding stock options	—	22,528	107,897	97,190
Potential common shares	Potential common shares	30,445,997	29,269,481	30,925,149	28,858,049
Potential common shares
Potential common shares

10. ~~Equity~~Income Taxes

~~Series B Convertible Preferred Stock~~

~~The~~On a continuing operations basis, the effective tax rates for the Company ~~has not declared or paid any dividends on~~were 20.6% and (2.7)% for the ~~Series B Preferred Stock since issuance. Dividends accumulated but not paid as of September 30,~~three months ended March 31, 2024 and 2023, respectively. Restricted stock vestings impacted the effective tax rate for the three months ended March 31, 2024. Net operating losses generated for the three months ended March 31, 2023 were ~~$19.0 million. As this amount has not been declared, the Company has not recorded this amount on its unaudited condensed consolidated balance sheet as of September 30, 2023.~~

~~Based on accumulated dividends as of September 30, 2023, the Series B Preferred Stock was convertible into an aggregate of 30,906,441 shares of the Company’s common stock as of that date.~~

~~Equity Incentive Awards~~

~~The Company has issued restricted stock awards (“RSAs”), restricted stock unit awards (“RSUs”), and performance stock unit awards (“PSUs”, together with RSAs and RSUs, collectively, the~~ ~~“Equity Incentive Awards”) to its employees. The following is summary information for Equity Incentive Awards for the nine months ended September 30, 2023.~~offset by a valuation allowance.

As of September 30, 2023, there was $24.1 million of unrecognized share-based compensation expense related to the Equity Incentive Awards. This expense is expected to be recognized over a weighted-average period of 2.33 years, which approximates the remaining vesting period of these grants. The table below summarizes activity of unvested Equity Incentive Awards by award type from January 1, 2023 through September 30, 2023.

RSA RSU PSU
Number of
Shares Weighted-Average Grant Date
Fair Value Number of
Shares Weighted-Average Grant Date
Fair Value Number of
Shares Weighted-Average Grant Date
Fair Value
Unvested at January 1, 2023 122,755 $ 6.13 4,774,971 $ 6.28 241,072 $ 4.62
Granted — — 3,266,244 4.65 3,851,427 3.83
Vested (13,624) 6.18 (2,237,260) 6.20 — —
Forfeited (90,367) 5.83 (1,715,136) 5.45 (365,227) 4.24
Unvested at September 30, 2023 18,764 $ 7.55 4,088,819 $ 5.38 3,727,272 $ 3.84

~~Stock Options~~

~~A summary of stock option activity for the nine months ended September 30, 2023 is presented below:~~

Number of
Shares Weighted-
Average
Exercise
Price Weighted-
Average
Remaining
Contractual
Term
(in years) Aggregate
Intrinsic
Value
Outstanding at January 1, 2023 933,894 $ 6.46
Granted 3,694,000 3.77
Exercised (62,599) 6.50
Vested options expired (423,213) 5.81
Outstanding at September 30, 2023 4,142,082 4.13 6.31 13,178,214
Exercisable at September 30, 2023 448,082 $ 7.06 0.60 $ 174,314

As of September 30, 2023, there was $5.5 million of unrecognized share-based compensation expense related to Stock Options. This expense is expected to be recognized over a weighted-average period of 2.22 years.

~~CEO Performance Grant~~

On January 27, 2023, the Company’s Board of Directors appointed Joseph H. Capper to serve as Chief Executive Officer. The Company entered into a Letter Agreement with Mr. Capper that included, among other things, a grant of 3,300,000 PSUs (the “~~CEO Performance PSUs”) and a non-qualified stock option (the “CEO Performance Option”, collectively with the CEO Performance PSUs, the “CEO Performance Grant~~”) for 3,600,000 shares of the Company’s common stock. In addition to continued employment with the Company, the occurrence and extent of vesting of each component of the CEO Performance Grant is dependent upon the Company’s operating and share price performance: the CEO Performance PSUs vest on the basis of achieved revenue growth, while the CEO Performance Option vests on the basis of share price appreciation.

~~CEO Performance PSUs~~

The CEO Performance PSUs vest in a single tranche on the earlier of the filing date of the Company’s 2026 Annual Report on Form 10-K and March 15, 2027. The occurrence and extent of vesting depends on the Company’s compound annual growth rate (“~~CAGR~~”) achieved with respect to its revenue growth between the year ended December 31, 2022 and the year ending December 31, 2026. The PSUs may vest with respect to 50% to 200% of the granted number of PSUs, depending on the extent of CAGR achievement. Failure to achieve the CAGR associated with 50% of achievement would result in no vesting.

Management determined the probable level of vesting using internally-developed forecasts for the relevant period representing the Company’s best estimate for revenue, with a factor applied to calculate the highest level of CAGR evaluated to be probable of occurrence based on that estimate. The Company recognized $0.4 million and $1.1 million of expense related to the CEO Performance PSUs during the three and nine months ended September 30, 2023, respectively.

~~CEO Performance Option~~

The CEO Performance Option grants Mr. Capper the right to purchase up to 3,600,000 shares of common stock for $3.70 per share. The CEO Performance Option vests based on the satisfaction of service and market conditions. Mr. Capper may vest in 25% of the CEO Performance Option on each of the first four anniversary dates of the date of grant provided that he remains employed by the Company and provided that specified share price goals are achieved at any point between the date of grant and January 31, 2027. There are three separate share price goals associated with the CEO Performance Option. If specified share price goals are met at one level, one-third of the option may vest, at a second level, a further one-third may vest, and at a third level, the full amount of the option may vest. Satisfaction of the share price goals is based on the average of the closing price of the Company’s common stock during any 20 consecutive trading days through January 31, 2027 exceeding the stipulated share price goal. The CEO Performance Option expires on February 1, 2030.

~~The Company estimated the fair value of the awards using a Monte Carlo simulation using the following assumptions:~~


	~~Assumption~~
~~Stock price on grant date~~	$	~~3.70~~
~~Exercise price~~	$	~~3.70~~
~~Risk-free interest rate~~	~~3.58~~		%
~~Expected volatility (annualized)~~	~~75.00~~		%
~~Dividend yield~~	—		%
~~Weighted average grant date fair value~~	$	~~1.93~~

The risk-free interest rate was derived based on the U.S. Treasury Yield curve in effect at the date of grant for maturities of similar periods to the contractual term. The expected volatility was estimated principally based on the Company’s historical daily stock price movements for a term similar in length to the contractual term. The dividend yield was based on the Company’s history of dividends on its common stock. The fair value was determined using an expected term which reflects the anticipated holding and post-vesting behavior pattern, calculated for each individual simulation.

The total grant date fair value of the CEO Performance Option was $7.0 million. The fair value associated with each tranche of the award will be recognized, straight-line, over the associated requisite service period for that tranche, subject to acceleration if the market condition is met prior to the end of the derived service period. Failure to meet the market condition for an award does not result in reversal of previously-recognized expense, so long as the service is provided for the duration of the required service period. The Company recognized $0.7 million and $2.0 million of expense related to the CEO Performance Option during the three and nine months ended September 30, 2023, respectively.

~~CFO Inducement Grant~~

On July 5, 2023, the Company announced that Doug Rice was appointed to serve as Chief Financial Officer of the Company, effective that day. Mr. Rice’s compensation included, among other things, a grant of 162,000 PSUs, 97,200 RSUs, and 94,000 stock options (the “~~CFO Options”), as a material inducement to his hiring.~~

The PSUs vest based on a three-year performance period ending on December 31, 2025 based upon the achievement of specified performance conditions, subject to Mr. Rice’s continued employment, except in the case of Mr. Rice’s death or disability. The awards can vest between 50% and 150% of the original number of PSUs, depending on actual performance. Vesting is limited to 100% of the award in the event that certain share price conditions are not achieved. The total grant date fair value of the PSUs was $1.5 million.

The RSUs vest in three equal tranches on each of the first three anniversary dates of the grant date, provided Mr. Rice remains in continuous service with the Company. The total grant date fair value of the RSUs was $0.6 million.

The CFO Options vest in four equal tranches on each of the first four anniversary dates of the grant date, subject to Mr. Rice’s continued employment. The CFO Options expire on July 5, 2030. The total grant date fair value of the CFO Options was $0.4 million.

2016

11. ~~Income Taxes~~

The effective tax rates for the Company were 6.5% and (0.6)% for the three months ended September 30, 2023 and 2022, respectively. The effective tax rates for the Company were 10.7% and (0.6)% for the nine months ended September 30, 2023 and 2022, respectively. The effective tax rates for 2023 reflect the utilization of net operating losses and certain tax credits. The effective tax rates for 2022 reflect net operating losses offset by a valuation allowance.

~~12.~~ Supplemental Disclosure of Cash Flow and Non-cash Investing and Financing Activities

Selected cash payments, receipts, and non-cash activities are as follows (in thousands):


		Nine Months Ended September 30,
	Three Months Ended March 31,							Three Months Ended March 31,
		2023		2022		2024	2023
Cash paid for interest	Cash paid for interest	$	4,496	$	3,233
Cash paid for income taxes	Cash paid for income taxes	210		184
Non-cash activities:	Non-cash activities:
Present value of minimum earn out
Present value of minimum earn out
Present value of minimum earn out
Right of use assets arising from operating lease liabilities

Issuance of shares pursuant to employee stock purchase plan
Issuance of shares pursuant to employee stock purchase plan
Issuance of shares pursuant to employee stock purchase plan	Issuance of shares pursuant to employee stock purchase plan	1,368		—
Purchases of equipment in accounts payable	Purchases of equipment in accounts payable	126		353
Right of use assets arising from operating lease liabilities		—		(37)
Consideration payable to TELA
Unpaid deferred financing costs

~~13.~~12. Commitments and Contingencies

~~Nordic Agreement~~TELA and Regenity Agreements

~~In June 2022,~~On March 15, 2024, the Company entered into ~~a collaboration agreement~~an Asset Purchase Agreement (the “~~Nordic~~TELA APA”) with TELA Bio, Inc. (“TELA”) to obtain exclusive rights to sell and market a 510(k)-cleared collagen particulate xenograft product in the United States pursuant to a preexisting Manufacturing and Supply Agreement (the “TELA-Regenity Supply Agreement”) between TELA and Regenity Biosciences, Inc. (“Regenity”), which retains all intellectual property rights and regulatory clearances related to the product. Pursuant to the TELA APA, the Company paid $5.0 million of initial consideration to TELA and will be required to make future payments of $0.4 million to acquire TELA’s remaining product inventory, as well as future profit share payments (the “Profit Share Payments”) of between a minimum of $3.0 million and a maximum of $7.0 million based on MIMEDX’s net sales of the product over the two-years following its commercialization of the product.

Simultaneously with entry into the TELA APA, the Company executed a new Manufacturing and Supply Agreement (the “Supply Agreement”) with ~~Nordic Bioscience Clinical Development A/S (“NBCD~~”)Regenity, replacing the previous TELA-Regenity Supply Agreement. The Supply Agreement maintains MIMEDX’s exclusive right to ~~provide full operational support~~sell and market the product in the United States and requires MIMEDX to purchase a minimum amount of the xenograft product from Regenity annually through December 31, 2033. Should MIMEDX fail to meet a purchasing minimum in any one period, it has the option (among others) to amend its distribution rights under the Supply Agreement to be non-exclusive.

The transaction was accounted for as an acquisition of assets. The cost to acquire the assets on the transaction date was assessed to be $8.1 million, reflecting the $5.0 million of initial consideration, $0.4 million to acquire inventory, and $2.7 million, reflecting the fair value of the minimum amount of the Profit Share Payments, were allocated amongst the assets acquired. The Company assigned $7.6 million to the distribution rights acquired and $0.5 million to inventory. These amounts are reflected in the consolidated balance sheets as part of intangible assets, net and inventory, respectively, on the unaudited condensed consolidated balance sheet as of March 31, 2024.

The $2.7 million fair value for the minimum amount of Profit Share Payments reflects the anticipated timing of such Profit Share Payments, discounted to present value at a discount rate approximating the Company’s ~~KOA clinical trial program. Under~~borrowing rate plus a risk premium.

Of the ~~terms~~minimum Profit Share Payment, $1.1 million is reflected as part of other current liabilities in the unaudited condensed consolidated balance sheet as of March 31, 2024, reflecting the extent of the ~~Nordic Agreement, the Company was obligated~~obligation that is anticipated to ~~pay $10.2 million upon the achievement~~be repaid within twelve months of specified milestones over the course of the clinical trial. In July 2023, the Company terminated the Nordic Agreement, in accordance with which the Company is obligated to reimburse NBCD for services performed through the effective termination date and for non-cancelable obligations reasonably incurred prior to that date. ~~In addition, the Company and NBCD have certain regulatory obligations for all trial participants enrolled~~The remaining balance is reflected in ~~the study prior to the suspension of clinical trial activities. Refer to Note 16, “Restructuring,” for additional discussion.~~other liabilities.

Litigation and Regulatory Matters

In the ordinary course of business, the Company and its subsidiaries may be a party to pending and threatened legal, regulatory, and governmental actions and proceedings (including those described below). In view of the inherent difficulty of predicting the outcome of such matters, particularly where the plaintiffs or claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Company generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the

eventual recovery, loss, fines or penalties related to each pending matter may be. The ~~Company’s~~Company's unaudited condensed consolidated balance sheet as of ~~September 30, 2023~~March 31, 2024 reflects the ~~Company’s~~Company's current best estimate of probable losses associated with these matters, including costs to comply with various settlement agreements, where applicable. For more information regarding the Company’s legal proceedings, refer to Note 16, “Commitments and Contingencies” in the ~~2022~~2023 Form 10-K.

The Company has not accrued for any potential losses related to legal matters as of ~~September 30,~~March 31, 2024. The Company made no payments toward the resolution of legal matters involving the Company during the three months ended March 31, 2024. The Company paid $0.2 million during the three months ended March 31, 2023.

The following is a description of certain litigation and regulatory matters to which the Company is a party:

~~Securities Class Action~~

On January 16, 2019, the United States District Court for the Northern District of Georgia entered an order consolidating two purported securities class actions (MacPhee v. MiMedx Group, Inc., et al. filed February 23, 2018 and Kline v. MiMedx Group, Inc., et al. filed February 26, 2018). The order also appointed Carpenters Pension Fund of Illinois (“~~CPFI~~”) as lead plaintiff. On May 1, 2019, CPFI filed a consolidated amended complaint, naming as defendants the Company, Michael J. Senken, Parker H. “Pete” Petit, William C. Taylor, Christopher M. Cashman and Cherry Bekaert & Holland LLP. The amended complaint (the “~~Securities Class Action Complaint”) alleged violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act~~”), Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act. It asserted a class period of March 7, 2013 through June 29, 2018. Following the filing of motions to dismiss by the various defendants, CPFI was granted

leave to file an amended complaint. CPFI filed its amended complaint against the Company, Michael J. Senken, Parker H. Petit, William C. Taylor, and Cherry Bekaert & Holland (Christopher Cashman was dropped as a defendant) on March 30, 2020. The defendants filed motions to dismiss on May 29, 2020. On March 25, 2021, the Court granted defendants’ respective motions to dismiss, finding that CPFI lacked standing to bring the underlying claims and also could not establish loss causation because it sold all of its shares in the Company prior to any corrective disclosures, and dismissed the case. On April 22, 2021, CPFI filed a motion for reconsideration of the dismissal and for leave to amend to add a new plaintiff to attempt to cure the standing and loss causation issues. On January 28, 2022, the Court denied CPFI’s motion to reconsider and motion to substitute class representative. On February 25, 2022, CPFI filed a Notice of Appeal in the 11th Circuit Court of Appeals. On July 10, 2023, the Court of Appeals affirmed the District Court’s dismissal of the case and the denial of the motion for leave to amend. On July 31, 2023, CPFI filed a petition for rehearing ~~en banc, which was denied on September 6, 2023.~~

Welker v. MiMedx, et. al.

On November 4, 2022, Troy Welker and Min Turner, former ~~option holders~~optionholders of the Company, brought a lawsuit in Fulton County State Court against the Company, former directors Terry Dewberry and Charles Evans, and former officers Parker H. “Pete” Petit, William C. Taylor, and Michael Senken alleging violations of the Georgia Racketeer Influenced and Corrupt Organizations (“RICO”) Act against all defendants, and conspiracy to violate the Georgia RICO Act and breach of fiduciary duty against the individual defendants. On motion by the Company, the case has been moved to the Fulton County Business Court. The Company and the individual defendants filed answers and motions to dismiss, which were denied on the RICO claims, but granted with respect to the breach of fiduciary duty claims against the individual defendants. The Company is defending against the allegations and ~~removed the case~~is obligated to ~~the United States District Court for the Northern District~~indemnify certain of ~~Georgia. Plaintiffs filed a motion~~its current and former officers and directors who are party to ~~remand back to state court, which was granted. The Company has filed its answer and a motion to dismiss, which is currently pending.~~this proceeding.

Former Employee Litigation and Related Matters

On January 12, 2021, the Company filed suit in the Circuit Court of the Eleventh Judicial District in and for Miami-Dade County, Florida (MiMedx Group, Inc. v. Petit, et. al.) against its former CEO, Parker H. “Pete” Petit, and its former COO, William C. Taylor, seeking a determination of its rights and obligations under indemnification agreements with Petit and Taylor following a federal jury’s guilty verdict against Petit for securities fraud and Taylor for conspiracy to commit securities fraud. On March 26, 2024, the Company filed an amended complaint against only Petit as the Company previously reached as settlement with Taylor. The Company is seeking a declaratory judgment that itPetit is not ~~obligated~~entitled to ~~indemnify or advance expenses to Petit and Taylor~~indemnification in connection with certain cases ~~to which Petit~~ and ~~Taylor are parties and~~the Company is also seeking to recoup amounts previously paid on behalf of Petit ~~and Taylor~~ in connection with such cases. On April 22, 2021, Petit and Taylor filed an answer and asserted counterclaims against the Company alleging breach of their indemnification agreements, breach of the covenant of good faith and fair dealing with respect to their indemnification agreements, and seeking a declaration that the Company remains obligated to indemnify and advance fees in connection with certain cases. Petit and Taylor simultaneously also filed a motion seeking to compel the Company to advance and reinstate its payments of Petit and Taylor’s legal expenses. The Company opposed Petit and Taylor’s motion and a hearing was set for June 23, 2021. At the joint request of the parties, the hearing was cancelled to allow the parties to attend a mediation to attempt a resolution of this matter; such mediation was held on August 11, 2021.

~~Following the mediation,~~As noted above, the Company and Mr. Taylor reached an agreement to settle the matter between them. Negotiations with Mr. Petit are ongoing.

~~Other Matters~~

Under the Florida Business Corporation Act and agreements with its current and former officers and directors, the Company is obligated to indemnify its current and former officers and directors who are made party to a proceeding, including a proceeding brought by or in the right of the corporation, with certain exceptions, and to advance expenses to defend such matters. The Company has previously borne substantial costs to satisfy these indemnification and expense advance obligations and may continue to incur such costs in the future. Costs incurred pursuant to these agreements are included in investigation, restatement and related expense in the unaudited condensed consolidated statements of operations.

In addition to the matters described above, the Company is a party to a variety of other legal matters that arise in the ordinary course of the Company’s business, none of which are deemed to be individually material at this time. Due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s business, results of operations, financial position or liquidity.

~~14.~~13. Revenue

Net Sales by Site of Service

~~The Company~~MIMEDX has three main sites of service for its products (1) Hospital settings and wound care clinics, which are stable reimbursement settings in which products are used for surgical applications, (2) Private offices, which generally represents

doctors and practitioners with independent operations, and (3) Other, which includes federal facilities, international sales, and other sites of service.

Below is a summary of net sales by site of service (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
		Three Months Ended March 31,
		Three Months Ended March 31,
		Three Months Ended March 31,
		2024
		2024
		2024
Hospital
Hospital
Hospital	Hospital	$	47,350	$	40,174	$	136,108	$	116,081
Private Office	Private Office	22,951		19,572		68,188		54,768
Private Office
Private Office
Other
Other
Other	Other	11,411		7,943		30,349		22,617
Total	Total	$	81,712	$	67,689	$	234,645	$	193,466
Total
Total

Net Sales by Product Line

MIMEDX has two product lines (1) Wound, which reflects products typically used in Advanced Wound Care settings, including the treatment of chronic, non-healing wounds, and (2) Surgical, which reflects products principally used in surgical

settings, including the closure of acute wounds or to protect and reinforce tissues and/or regions of interest. The Company manages its product portfolio and pipeline, based upon opportunities in each of these settings.

Below is a summary of net sales by product line (in thousands):


	Three Months Ended March 31,
	2024		2023
Wound	$	57,049	$	45,206
Surgical	27,660		26,470
Total	$	84,709	$	71,676

The Company did not have significant foreign operations or a single external customer from which 10% or more of revenues were derived during the three ~~or nine~~ months ended ~~September 30, 2023~~March 31, 2024 or ~~2022.~~2023.

AXIOFILL

~~Net Sales by Product~~

The Company ~~has two primary classes~~received a determination letter on March 25, 2024 reaffirming the FDA’s position that AXIOFILL does not meet the regulatory classification requirements of ~~products: (1) Advanced Wound Care,~~a Human Cell, Tissue or ~~Section 361, products, consisting of its tissue and cord sheet allograft products as well as certain particulate products subject to regulation~~Cellular or Tissue-based Product under Section 361 of the Public Health Service ~~Act~~Act. The Company strongly disagrees with this determination and ~~related regulations (“Section 361”), and (2) Section 351 products, consisting of~~has filed suit in the ~~Company’s micronized and certain other particulate products subject to regulation under Section 351 of the Public Health Service Act and related regulations (“Section 351”). Advanced Wound Care is further disaggregated between the Company’s Tissue/Other and Cord products.~~

~~Below is a summary of net sales by class of product (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
Advanced Wound Care
Tissue/Other $ 75,570 $ 61,131 $ 216,825 $ 174,256
Cord 6,066 5,678 17,259 17,165
Total Advanced Wound Care 81,636 66,809 234,084 191,421
Section 351(1)
76 880 561 2,045
Total $ 81,712 $ 67,689 $ 234,645 $ 193,466

(1) Revenue recognized from collections relating to revenue transactions for which performance obligations were fulfilled prior to October 1, 2019, the date at which the Company changed its pattern of revenue recognition,U.S. District Court for the ~~three and nine months ended September 30, 2022~~Northern District of ~~$0.1 million and $0.2 million, respectively, which were separately presented in previously-issued financial statements, are presented as part of Section 351 in~~Georgia against the ~~table above.~~FDA on this matter.

~~15. Segment Information~~14. Discontinued Operations

~~The Company had two reportable segments during the three and nine months ended September 30, 2023: Wound & Surgical and Regenerative Medicine.~~

•~~Wound & Surgical~~ ~~focused on the Advanced Wound Care and Surgical Recovery markets through the sale~~Disbanding of the Company’s portfolio of products and product development to serve these primary end markets. Its platform technologies include tissue allografts derived from human placental membrane (EPIFIX®, AMNIOFIX®, and AMNIOEFFECT®), tissue allografts derived from human umbilical cord (EPICORD® and AMNIOCORD®), and a particulate extracellular matrix derived from human placental disc (AXIOFILL®). This segment is also responsible for international sales of the Company’s Section 351 products.

•~~Prior to June 20, 2023,~~ Regenerative Medicine ~~focused solely on Regenerative Medicine technologies, specifically progressing the Company’s placental biologics platform towards registration as an FDA-approved biological drug.~~ Business Unit

On June 20, 2023, the Company announced ~~a plan to disband~~ the disbanding of its Regenerative Medicine business unit and ~~suspended~~the suspension of its Knee Osteoarthritis clinical trial program. ~~The~~During the fourth quarter of 2023, the Company ~~is actively managing wind-down activities for its Regenerative Medicine business unit, primarily related to~~materially completed the regulatory obligations associated with ~~its~~the clinical trial.

Financial Statement Impact of Discontinued Operations

The ~~Company expects that these activities will materially conclude~~income and expenses of the discontinued operation have been classified as income (loss) from discontinued operations in the ~~fourth quarter of 2023.~~

~~The accounting policies of the segments were the same as the Company’s accounting policies. See Note 2, “Significant Accounting Policies,” included in the 2022 Form 10-K.~~

The Company evaluated the performance of its segments and allocated resources based on segment contribution, defined as net sales less (i) cost of sales, (ii) selling, general and administrative expense, (iii) research and development expense, (iv) amortization of intangible assets, and (v) restructuring. The only components which comprised income (loss) before income tax provision that were not included in operating income (loss) were interest expense, net and other expense, net.

~~The Company did not allocate any assets to the reportable segments. No asset information was reported or disclosed to the chief operating decision maker in the financial information for each segment.~~

~~Net sales and segment contribution by each reportable segment for the three months ended September 30, 2023 were as follows (in thousands):~~

Wound & Surgical Regenerative Medicine Corporate & Other Consolidated
Net sales $ 80,376 $ — $ 1,336 $ 81,712
Cost of sales 13,305 — 1,485 14,790
Selling, general and administrative expense 38,687 — 13,884 52,571
Research and development expense 3,175 — — 3,175
Restructuring — 208 — 208
Amortization of intangible assets — — 190 190
Segment contribution $ 25,209 $ (208)
Investigation, restatement and related expense (38)
Operating income $ 10,816
Supplemental information
Depreciation expense $ 423 $ — $ 230 $ 653
Share-based compensation $ 1,902 $ — $ 2,486 $ 4,388

~~Net sales and segment contribution by each reportable segment for the three months ended September 30, 2022 were as follows (in thousands):~~

Wound & Surgical Regenerative Medicine Corporate & Other Consolidated
Net sales $ 66,873 $ — $ 816 $ 67,689
Cost of sales 11,159 — 1,029 12,188
Selling, general and administrative expense 35,530 — 17,945 53,475
Research and development expense 1,680 4,273 — 5,953
Amortization of intangible assets — — 175 175
Segment contribution $ 18,504 $ (4,273)
Investigation, restatement and related expense 3,001
Operating loss $ (7,103)
Supplemental information
Depreciation expense $ 451 $ 36 $ 344 $ 831
Share-based compensation $ 1,945 $ 347 $ 80 $ 2,372

~~Net sales and segment contribution by each reportable segment for the nine months ended September 30, 2023 were as follows (in thousands):~~

Wound & Surgical Regenerative Medicine Corporate & Other Consolidated
Net sales $ 231,466 $ — $ 3,179 $ 234,645
Cost of sales 37,373 — 3,419 40,792
Selling, general and administrative expense 114,853 — 41,920 156,773
Research and development expense 6,330 11,838 — 18,168
Restructuring — 3,464 — 3,464
Amortization of intangible assets — — 570 570
Segment contribution $ 72,910 $ (15,302)
Investigation, restatement and related expense 4,652
Operating income $ 10,226
Supplemental information
Depreciation expense $ 1,208 $ 135 $ 711 $ 2,054
Share-based compensation $ 5,130 $ 259 $ 7,404 $ 12,793

~~Net sales and segment contribution by each reportable segment for the nine months ended September 30, 2022 were as follows (in thousands):~~

Wound & Surgical Regenerative Medicine Corporate & Other Consolidated
Net sales $ 191,297 $ — $ 2,169 $ 193,466
Cost of sales 31,126 — 2,821 33,947
Selling, general and administrative expense 108,256 — 50,582 158,838
Research and development expense 6,068 11,361 — 17,429
Amortization of intangible assets — — 519 519
Segment contribution $ 45,847 $ (11,361)
Investigation, restatement and related expense 8,771
Operating loss $ (26,038)
Supplemental information
Depreciation expense $ 1,364 $ 120 $ 1,065 $ 2,549
Share-based compensation $ 5,609 $ 910 $ 4,279 $ 10,798

~~16. Restructuring~~

On June 20, 2023, the Company announced that it was suspending all activities associated with its knee osteoarthritis clinical trial program and disbanding its Regenerative Medicine business unit (the “~~Restructuring~~”). This was the result of the Company’s decision to focus on its Wound & Surgical business to drive profitability and cash flows. The Company anticipates that activities related to the Restructuring will materially conclude in the fourth quarter of 2023. Expenses associated with the Restructuring are recognized as the associated liabilities are incurred in an amount equal to the fair value to settle the liability.

~~Severance~~

As part of the Restructuring, the Company separated from certain employees whose primary responsibilities were toward the advancement of the Company’s knee osteoarthritis clinical trial program. The Company offered an aggregate of severance arrangements of $2.1 million to separated employees during the nine months ended September 30, 2023. This amount was recognized as part of research and development expense on the unaudited condensed consolidated statements of operations for the nine months ended September 30, 2023, as these arrangements were determined not to qualify for accounting as a one-time separation benefit under ASC 420. Of the total severance amount, $1.8 million was paid out during the three months ended September 30, 2023. The remaining $0.3 million is reflected in accrued compensation on the unaudited condensed consolidated balance sheet as of September 30, 2023.

~~Impairments~~

On June 23, 2023, the Company provided notice to NBCD of the termination of the Nordic Agreement. As part of the Restructuring, the Company no longer anticipated that it would receive any benefits pursuant to the clinical trial program. Accordingly, it recognized an impairment of clinical trial assets related to the Nordic Agreement and all pass-through vendors of $2.1 million during the nine months ended months ended September 30, 2023, respectively. This amount is reflected as part of restructuring expense on the unaudited condensed consolidated statements of operations for the nine months ended months September 30, 2023.

In addition, the Company recorded goodwill impairment for $0.5 million, reflecting all goodwill assigned to the Regenerative Medicine reporting unit. This amount is reflected as part of restructuring expense on the unaudited condensed consolidated statements of operations for the nine months ended September 30, 2023. See Note 6,“~~Goodwill and Intangible Assets, Net,” for further information regarding the impairment of goodwill due to the disbanding of the Company’s Regenerative Medicine business unit.~~

~~Contract Termination Costs~~

The Company incurred $0.2 million and $0.8 million in expenses to wind-down certain contracts related to the knee osteoarthritis clinical trial program for the three and nine months ended September 30, 2023, respectively. This amount generally reflects the Company’s expectation both for its obligation to carry out the protocol for the patients enrolled in the trial prior to the suspension of activities and close-out costs related to the trial. During the three months ended September 30, 2023, the Company incurred additional charges $0.2 million under certain contracts that was offset by a decrease in the number of visits required to wind-down the study and payments totaling $0.2 million. Contract termination costs are reflected as part of accrued expenses on the unaudited condensed consolidated balance sheet as of September 30, 2023 and as part of restructuring expense on the unaudited condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30, 2023.~~March 31, 2024 and 2023 as follows (in thousands):


	Three Months Ended March 31,
	2024		2023


Selling, general and administrative expense	—		29

Research and development expense	$	(200)	3,012


Income (loss) from discontinued operations	$	200	$	(3,041)

~~17.~~ ~~Subsequent Events~~

~~Hayfin Preferred Share Repurchase~~

~~On October 27, 2023, the Company executed a Securities Purchase Agreement with certain entities managed by or affiliated with Hayfin Capital Management LLP (the “Hayfin Shareholders”) to repurchase 5,000 shares of the Company’s Series B Preferred Stock for $9.5 million (the “Repurchase”). As part of the Repurchase, the Hayfin Shareholders entered into customary lock-up provisions requiring them to retain the balance of their equity positions for a period of at least one year.~~

2619

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Executive Summary

During the first quarter of 2024, the Company continued its trend of strong commercial performance, delivering 18.2% growth in net sales year-over-year. This growth was driven by execution across all care settings.

Operating and financial highlights during the quarter included:

•Net sales of $84.7 million, reflecting 18.2% growth over the prior year period.

•GAAP net income from continuing operations and net margin for the first quarter of 2024 of $9.1 million and 10.7%, respectively.

•Improved capital structure with new senior secured credit facilities and debt refinancing.

•Announced surgical portfolio expansion through a distribution agreement with Regenity Biosciences for a 510(k)-cleared collagen particulate xenograft product.

•Appointed two new independent directors to the Company’s Board of Directors.

•Introduced an online product ordering and account management platform for our customers.

Overview

MIMEDX is a pioneer and leader in placental biologics focused on delivering innovative solutions to patients and the healthcare professionals who treat them. With more than a decade of experience helping clinicians manage acute and chronic wounds, MIMEDX has been dedicated to providing a leading portfolio of products for applications in the wound care, burn, and surgical sectors of healthcare. All of our products sold in the United States are regulated by the U.S. Food & Drug Administration(“ (“FDA”). We apply Current Good Tissue Practices (“CGTP”) and other applicable quality standards in addition to terminal sterilization to produce our allografts.

~~During the three and nine months ended September 30, 2023, we operated under two defined internal business units: Wound & Surgical and Regenerative Medicine.~~

The Wound & Surgical business focuses on the Advanced Wound Care and Surgical Recovery markets through sales of our existing product portfolio and product development to serve these primary end markets. This business unit is responsible for substantially all sales of our Advanced Wound Care products, as well as the sale outside the United States of America of our micronized and certain other particulate products subject to regulation under Section 351 of the Public Health Service Act and related regulations (“~~Section 351”).~~

~~On June 20, 2023, we announced a plan to disband our Regenerative Medicine business unit and the suspension of our knee osteoarthritis (“KOA”) clinical trial program (the “Restructuring~~”) given the substantial uncertainties surrounding clinical trial costs and outcomes, as well as regulatory pathways and timing. The Company anticipates that Restructuring-related activities will materially conclude in the fourth quarter of 2023.

This discussion, which presents our results for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2024 and 2023, ~~and 2022,~~ should be read in conjunction with ~~our~~the financial statements and accompanying notes included in this Form 10-Q and the financial statements and accompanying notes ~~thereto~~ and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022.~~2023.

~~Executive Summary~~

During the third quarter ended September 30, 2023, the Company experienced broad-based growth in net sales, with contributions from each of its site-of-service categories. Much of this momentum was driven by strong commercial execution, including the acquisition of new customers and continued uptake in new products we launched in the second half of 2022, despite uncertainty in reimbursement policy for Medicare billings in the Private Office care setting. Recent operating and financial highlights include:

•~~Third quarter 2023 net sales of $81.7 million, an increase of 20.7% over third quarter 2022.~~

•~~GAAP net income of $8.5 million for third quarter 2023.~~

•~~Launched EPIEFFECT™, the latest addition to MIMEDX’s portfolio of Advanced Wound Care products.~~

•~~Announced $9.5 million repurchase of 5,000 shares of Series B Preferred Stock held by Hayfin Services, LLP (“Hayfin”) and its affiliates.~~

Results of Operations

Three Months Ended ~~September 30, 2023~~March 31, 2024 Compared to the Three Months Ended ~~September 30, 2022~~March 31, 2023

~~Total Company~~


	Three Months Ended March 31,
	(in thousands)
	2024		2023		$ Change		% Change
Net sales	$	84,709	$	71,676	$	13,033	18.2	%
Cost of sales	12,987		12,419		568		4.6	%
Gross profit	71,722		59,257		12,465		21.0	%


Selling, general and administrative	55,129		52,250		2,879		5.5	%
Research and development	2,841		3,484		(643)		(18.5)	%
Investigation, restatement and related	311		3,673		(3,362)		(91.5)	%
Amortization of intangible assets	189		190		(1)		(0.5)	%
Impairment of intangible assets	54		—		54		—	%

Interest expense, net	(1,690)		(1,553)		(137)		8.8	%
Other (expense) income, net	(99)		2		(101)		nm
Income tax provision expense	(2,348)		(51)		(2,297)		nm
Net income (loss) from continuing operations	9,061		(1,942)		11,003		nm

Three Months Ended September 30,
(in thousands)
2023 2022 $ Change % Change
Net sales $ 81,712 $ 67,689 $ 14,023 20.7 %
Cost of sales 14,790 12,188 2,602 21.3 %
Gross profit 66,922 55,501 11,421 20.6 %
Selling, general and administrative 52,571 53,475 (904) (1.7) %
Research and development 3,175 5,953 (2,778) (46.7) %
Restructuring 208 — 208 — %
Investigation, restatement and related (38) 3,001 (3,039) nm
Amortization of intangible assets 190 175 15 8.6 %
Interest expense, net (1,680) (1,270) (410) 32.3 %
Income tax provision benefit (expense) (591) (53) (538) nm
Net income (loss) $ 8,534 $ (8,426) $ 16,960 nm
1Changes noted as “nm” in the table above indicate that the percentage change is not meaningful.

Net Sales

We recorded net sales for the three months ended ~~September 30, 2023~~March 31, 2024 of ~~$81.7~~$84.7 million, a ~~$14.0~~$13.0 million, or ~~20.7%~~18.2%, increase compared to the three months ended ~~September 30, 2022,~~March 31, 2023, in which we recognized net sales of ~~$67.7~~$71.7 million. ~~Net sales in all care settings had one fewer shipping day during the three months ended September 30, 2023 compared to the same period in 2022.~~

Our sales by ~~care setting~~product line were as follows ~~(in~~(amounts in thousands):

Three Months Ended September 30, Change
2023 2022 $ %
Hospital $ 47,350 $ 40,174 $ 7,176 17.9 %
Private Office 22,951 19,572 3,379 17.3 %
Other 11,411 7,943 3,468 43.7 %
Total $ 81,712 $ 67,689 $ 14,023 20.7 %


	Three Months Ended March 31,				Change
	2024		2023		$		%
Wound	$	57,049	$	45,206	$	11,843	26.2	%
Surgical	27,660		26,470		1,190		4.5	%
Total	$	84,709	$	71,676	$	13,033	18.2	%

Net sales ~~in the Hospital care setting~~of our Wound product portfolio were ~~$47.4~~$57.0 million for the three months ended ~~September 30, 2023,~~March 31, 2024, a ~~$7.2~~$11.8 million or ~~17.9%~~26.2% increase compared to ~~$40.2~~$45.2 million for the three months ended ~~September 30, 2022.~~March 31, 2023. The increase was driven by strong sales, particularly in the private office subsegment of the market.

Net sales of our Surgical products totaled $27.7 million, reflecting growth of $1.2 million, or 4.5% compared to the three months ended March 31, 2023. The increase was primarily driven by, ~~sales of our new products introduced during the third quarter of 2022.~~

~~Net sales in the Private Office care setting grew by $3.4 million, or 17.3%,~~growing contributions from AMNIOEFFECT® and, to ~~$23.0 million~~a lesser degree, AXIOFILL®. In addition, Surgical sales for the three months ended ~~September 30,~~March 31, 2023 ~~compared to $19.6~~reflects approximately $1 million ~~for the three months ended September 30, 2022. The increase reflects general increases in~~of sales ~~volume, driven by strong commercial execution.~~

Net sales in Other care settings increased by $3.5 million, or 43.7%, to $11.4 million for the three months ended September 30, 2023, compared to $7.9 million for the three months ended September 30, 2022. The increase was the result of ~~the addition of new customers and general increases in sales volume, driven by strong commercial execution.~~our dental product which we have since discontinued.

Cost of Sales and Gross Profit Margin

Cost of sales for the three months ended ~~September 30,~~March 31, 2024 and 2023 ~~and 2022 were $14.8~~was $13.0 million and ~~$12.2~~$12.4 million, respectively, an increase of ~~$2.6~~$0.6 million, or ~~21.3%.~~4.6%, year-over-year. Gross profit margin for the three months ended March 31, 2024 was 84.7% compared to 82.7% for the three months ended March 31, 2023. The year-over-year improvement in gross margin was driven by favorable product mix and our continued execution on yield improvement projects. Increases in cost of sales were driven by increases in sales volume as noted above.

Gross profit margin for the three months ended September 30, 2023 was 81.9% compared to 82.0% for the three months ended September 30, 2022. Gross profit margin was roughly flat versus the prior year period due to improvements in yield, partially offset by production variances.

1 ~~nm=not meaningful~~

2821

Selling, General and Administrative Expense

Selling, general and administrative (“SG&A”) expense for the three months ended ~~September 30, 2023~~March 31, 2024 was ~~$52.6~~$55.1 million, compared to ~~$53.5~~$52.3 million for the three months ended ~~September 30, 2022, a decrease~~March 31, 2023, an increase of ~~$0.9~~$2.9 million, or ~~1.7%.~~5.5%, year-over-year. The ~~decrease~~increase in SG&A ~~expense~~ was driven by year-over-year increases in commissions due to ~~decreases in professional service costs and personnel costs. Lower professional services expense resulted from~~greater sales volume, as well as a ~~decline in fees paid to third party advisers~~larger proportion of sales through sales agents during the three months ended September 30, 2022. The decrease in personnel costs reflects the results of our continued cost reduction efforts which began during the third quarter of 2022, together with the impact of higher comparative severance expense associated with the departure of our former CEO in the third quarter of 2022, as well as lower stock-based compensation. These decreases were offset by increases in commissions due to higher sales volumes for three months ended September 30, 2023.March 31, 2024.

Research and Development Expense

Our research and development (“R&D”) expense decreased ~~by $2.8~~$0.6 million, or ~~46.7%~~18.5%, to ~~$3.2~~$2.8 million for the three months ended ~~September 30, 2023,~~March 31, 2024, compared to ~~$6.0~~$3.5 million for the three months ended ~~September 30, 2022.~~March 31, 2023. The ~~decline resulted from~~decrease was driven primarily by lower headcount and the ~~disbanding~~timing of ~~our Regenerative Medicine business unit lowering personnel and clinical trial expenses for three months ended September 30, 2023 and from decreases in expenses associated with~~R&D activities compared to the ~~testing and development of new products launched during the three months ended September 30, 2022.~~prior year.

~~Restructuring Expense~~

Restructuring expense of $0.2 million for the three months ended September 30, 2023 reflects certain charges related to our Regenerative Medicine business unit wind-down activities, primarily associated with clinical trial regulatory obligations.

Investigation, Restatement and Related Expense

Investigation, restatement and related expense for the three months ended ~~September 30, 2023~~March 31, 2024 was ~~immaterial~~$0.3 million compared to ~~$3.0~~$3.7 million for the three months ended ~~September 30, 2022.~~March 31, 2023. The decrease was ~~primarily~~ related to ~~negotiated reductions in legal fees previously incurred under indemnification agreements with certain former members of management year-over-year. In addition, following the end of a legal proceeding,~~ expenses under our last proceeding entailing material obligations under an indemnification agreement, ~~with our former chief financial officer~~which substantially ceased ~~during the third quarter of~~in 2023.

Amortization of Intangible Assets

Amortization expense related to intangible assets was $0.2 million for each of the three months ended ~~September 30, 2023~~March 31, 2024 and ~~2022.~~2023.

Interest Expense, Net

Interest expense, net was $1.7 million for the three months ended ~~September 30, 2023~~March 31, 2024 compared to ~~$1.3~~$1.6 million for the three months ended ~~September 30, 2022,~~March 31, 2023, an increase of ~~$0.4~~$0.1 million, or ~~32.3%.~~8.8%, year-over-year. The increase was the result of ~~year-over-year increases~~the loss on extinguishment of debt due to repaying and terminating our Hayfin Loan Agreement during the first quarter of 2024 ($1.4 million), offset by decreases in ~~the reference market~~outstanding debt and lower interest rates onunder the Citizens Credit Facilities as well as improvement in our ~~outstanding debt.~~treasury management.

Income Tax Provision ~~Benefit (Expense)~~Expense

The effective tax rates for the Company were ~~6.5%~~20.6% and ~~(0.6)~~(2.7)% for the three months ended ~~September 30,~~March 31, 2024 and March 31, 2023, ~~and September 30, 2022,~~ respectively. The ~~Company's net income is partially offset~~effective tax rate for the three months ended March 31, 2024 was favorably impacted by ~~net~~vestings of restricted stock units. Net operating losses ~~and research and development tax credits, in accordance with the 2018 Tax & Jobs Act legislation.~~

~~Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022~~

~~Total Company~~

Nine Months Ended September 30,
(in thousands)
2023 2022 $ Change % Change
Net sales $ 234,645 $ 193,466 $ 41,179 21.3 %
Cost of sales 40,792 33,947 6,845 20.2 %
Gross profit 193,853 159,519 34,334 21.5 %
Selling, general and administrative 156,773 158,838 (2,065) (1.3) %
Research and development 18,168 17,429 739 4.2 %
Restructuring 3,464 — 3,464 — %
Investigation, restatement and related 4,652 8,771 (4,119) (47.0) %
Amortization of intangible assets 570 519 51 9.8 %
Interest expense, net (4,864) (3,566) (1,298) 36.4 %
Other expense, net (42) (1) (41) nm
Income tax provision benefit (expense) (569) (178) (391) nm
Net income (loss) $ 4,751 $ (29,783) $ 34,534 nm

~~Net Sales~~

~~We recorded net sales~~generated for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 of $234.6 million, a $41.2 million, or 21.3%, increase compared to the nine months ended September 30, 2022, for which we recorded net sales of $193.5 million. Net sales for the nine months ended September 30, 2023 in all sites of service benefited from the alleviation of the Omicron wave of the Covid-19 Pandemic, which adversely impacted sales during the nine months ended September 30, 2022. There was one fewer shipping day during the nine months ended September 30, 2023 compared to the same period in 2022.

~~Our sales by care setting were as follows (in thousands):~~

Nine Months Ended September 30, Change
2023 2022 $ %
Hospital $ 136,108 $ 116,081 $ 20,027 17.3 %
Private Office 68,188 54,768 13,420 24.5 %
Other 30,349 22,617 7,732 34.2 %
Total $ 234,645 $ 193,466 $ 41,179 21.3 %

Net sales in the Hospital care setting were $136.1 million for the nine months ended September 30, 2023, a $20.0 million or 17.3% increase compared to $116.1 million for the nine months ended September 30, 2022. The increase was primarily driven by sales of our new products introduced during the third quarter of 2022.

Net sales in the Private Office care setting grew by $13.4 million, or 24.5%, to $68.2 million for the nine months ended September 30, 2023, compared to $54.8 million for the nine months ended September 30, 2022. The increase reflects general increases in sales volume, driven by strong commercial execution.

Net sales in Other care settings increased by $7.7 million, or 34.2%, to $30.3 million for the nine months ended September 30, 2023 compared to $54.8 million for the nine months ended September 30, 2022. The increase was primarily driven by the addition of new customers in certain sites of service and sales of EPIFIX in Japan.

~~Cost of Sales and Gross Profit Margin~~

Cost of sales for the nine months ended September 30, 2023 was $40.8 million, an increase of $6.8 million, or 20.2%, compared to $33.9 million for the nine months ended September 30, 2022. Increases in cost of sales were driven by increases in sales volume noted above.

~~Gross profit margin for the nine months ended September 30, 2023 and 2022 was 82.6% and 82.5%, respectively.~~

~~Selling, General and Administrative Expense~~

SG&A expense for the nine months ended September 30, 2023 decreased by $2.1 million, or 1.3%, to $156.8 million, compared to $158.8 million for the nine months ended September 30, 2022. The decrease was driven by decreases in professional services expenses, personnel costs and bad debt expense. The decrease in professional services expenses reflects $2.1 million in consulting and advisory expenses related to a withhold the vote campaign launched by a shareholder together with fees paid to other third-party advisers in 2022. There were no similar activities during 2023. The decrease in personnel costs reflects the results of our continued cost reduction efforts that began in the third quarter of 2022. Increases in stock based compensation were offset by reduced severance expense in 2023 compared to the expense associated with the departure of our former CEO in 2022. Finally, the decrease in bad debt expense was the result of the greater deterioration of credit for certain specific customers in 2022 compared to 2023.

These decreases were offset in part by increases in sales commissions, driven by increases in sales volumes, as well as, greater travel expenses, reflecting the removal of COVID-19 travel restrictions that were in place in 2022.

~~Research and Development Expense~~

Our research and development expenses increased by $0.7 million, or 4.2%, to $18.2 million for the nine months ended September 30, 2023, compared to $17.4 million for the nine months ended September 30, 2022. The increase reflects clinical trial expenses ramping up in the first half of 2023, including associated personnel costs offset in part by the disbanding of our Regenerative Medicine business unit from June 20, 2023.

~~Investigation, Restatement and Related Expense~~

Investigation, restatement and related expenses for the nine months ended September 30, 2023 decreased by $4.1 million, or 47.0%, to $4.7 million compared to $8.8 million for the nine months ended September 30, 2022. The decrease was primarily related to negotiated reductions in legal fees previously incurred under indemnification agreements with certain former members of management year-over-year. In addition, following the end of a ~~legal proceeding, expenses under our last material indemnification agreement substantially ceased during the third quarter of 2023.~~

~~Amortization of Intangible Assets~~

~~Amortization expense increased from $0.5 million for the nine months ended September 30, 2022 to $0.6 million for the nine months ended September 30, 2023.~~

~~Restructuring Expense~~

Restructuring expense of $3.5 million for the nine months ended September 30, 2023 reflects certain charges related to the disbanding of our Regenerative Medicine business unit, including write-downs of prepaid clinical trial assets of $2.1 million, charges for the wind-down of our KOA clinical trial program of $0.8 million, and impairment of goodwill of $0.5 million.

~~Interest Expense, Net~~

Interest expense, net was $4.9 million for the nine months ended September 30, 2023 compared to $3.6 million for the nine months ended September 30, 2022. The increase was the result of year-over-year increases in the reference market interest rates on our outstanding debt.

~~Income Tax Provision Benefit (Expense)~~

The effective tax rates for the Company were 10.7% and (0.6)% for the nine months ended September 30, 2023 and 2022, respectively. The Company's net income is partially offset by prior net operating losses and research and development tax credits, in accordance with the 2018 Tax & Jobs Act legislation.valuation allowance.

Discussion of Cash Flows

Operating Activities

Net cash provided by operating activities from continuing operations during the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 was ~~$16.5~~$6.8 million, compared to cash ~~used~~provided by operating activities from continuing operations of ~~$12.3~~$0.6 million for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. The change was primarily the result of year-over-year increases in net sales, which drove increases in collections from ~~customers, as well as~~customers. These increases were partially offset by year-over-year ~~decreases~~increases in operating expenses.

Investing Activities

Net cash used for investing activities during the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 was ~~$1.7~~$6.0 million, compared to ~~$1.0~~$0.7 million for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. This increase ~~reflects a $0.7 million year-over-year increase~~was largely the result of our investment to expand our product portfolio through the TELA and Regenity agreements as described below in ~~capital expenditures.~~“Liquidity and Capital Resources”.

Financing Activities

Net cash ~~provided by~~used for financing activities during the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 was ~~$0.4~~$33.5 million. Cash used in financing activities was ~~$0.6 million~~immaterial during the ~~nine~~three months ended ~~September 30, 2022. We ceased withholding shares~~March 31, 2023. The increase during the three months ended March 31, 2024 was due to ~~satisfy employee~~the Company repaying the initial $30.0 million drawing under the Revolving Credit Facility, as described below in “Liquidity and Capital Resources,” deferred financing costs incurred under the Citizens Credit Agreement, and stock repurchases for tax ~~obligations~~witholdings upon vesting of equity awards in 2022. Accordingly, we did not have any cash paid for tax withholdings during the nine months ended September 30, 2023, compared to $1.2 million for the nine months ended September 30, 2022. This effect was offset by $0.6 million of cash receipts from option exercises in the nine months ended September 30, 2022, compared to $0.4 million of cash receipts from option exercises in the nine months ended September 30, 2023.employee restricted share units.

Liquidity and Capital Resources

~~Our business requires~~We require capital for our operating activities, including costs associated with the sale of product through direct and indirect sales channels, ~~the conduct of~~ research and development activities, compliance costs, costs to sell and market our products, regulatory fees, and legal and consulting fees in connection with ongoing litigation and other matters. We generally fund our operating capital requirements through our operating activities and cash reserves. We expect to use capital to invest in the broadening of our product portfolio, including through potential acquisitions, licensing agreements or other arrangements, the international expansion of our business and certain capital projects.

As of ~~September 30, 2023,~~March 31, 2024, we had ~~$81.2~~$48.5 million of cash and cash equivalents, total current assets of ~~$154.5~~$138.9 million and total current liabilities of ~~$43.6~~$42.2 million, reflecting a current ratio of ~~3.5.~~3.3, and we had no borrowings outstanding and $75 million of availability under our Revolving Credit Facility (as defined below).

~~We are~~The Company is currently paying ~~our~~its obligations in the ordinary course of business.

We ~~anticipate cash requirements related to the following items within one year of the date of the filing of this Quarterly Report:~~

•~~investments to advance and expand our existing product portfolio;~~

•~~expenditures required to achieve necessary regulatory approval and establish operations in new markets deemed strategically important toward the enhancement of our global footprint;~~

•~~costs to wind-down certain contracts associated with our KOA clinical trial program; and~~

•~~severance payments related to certain former members of management and other employees.~~

We have analyzed our ability to address these commitments and potential liabilities for the 12 months extending from the date of the filing of this Quarterly Report. After completing this analysis, which included a review of expectations of revenue, margins, and expenses, we believe that our cash from operating activities, existing cash and cash ~~from operations~~equivalents, and available credit under the Citizens Credit Agreement, as defined below, will ~~be sufficient~~enable us to meet our ~~obligations as they come due.~~operational liquidity needs for the twelve months following the filing date of this Quarterly Report.

~~Term Loan~~Citizens Credit Facilities

On ~~June 30, 2020,~~January 19, 2024, we entered into a Credit Agreement (the “Citizens Credit Agreement”) with a syndicate of banks comprised of Citizens Bank, N.A. as administrative agent (the “Agent”), and Bank of America, N.A. The Citizens Credit Agreement was designed to simultaneously improve our capital structure, providing the ability to refinance our prior $50 million senior secured term loan under the Hayfin Loan Agreement (as defined below) at lower interest rates and have access to additional borrowing capacity that could be deployed in the future in support of our organic and potential inorganic growth objectives.

The Citizens Credit Agreement provides for senior secured credit facilities in an aggregate principal amount of up to $95.0 million consisting of: (i) a $75.0 million senior secured revolving credit facility (the “Revolving Credit Facility”) with a $10.0 million letter of credit sublimit and a $10.0 million swingline loan sublimit, and (ii) a $20.0 million senior secured term loan facility (the “Term Loan Facility” and, together with the Revolving Credit Facility, the “Credit Facilities”). All obligations are required to be paid in full on January 19, 2029 (the “Maturity Date”), and are guaranteed by certain of the our subsidiaries, and secured by substantially all of the assets of the Company and the guarantors pursuant to a customary security agreement. Subject to the terms of the Citizens Credit Agreement, we have the option to obtain one or more incremental term loan facilities and/or increase the commitments under the Revolving Credit Facility in an aggregate principal amount equal to the greater of (i) $50.0 million and (ii) 1.00 times our Consolidated EBITDA as defined therein, each subject to the existing or any new lenders’ election to extend additional term loans or revolving commitments.

At our option, borrowings under the Citizens Credit Agreement (other than any swingline loan) will bear interest at a rate per annum equal to (i) the Alternate Base Rate, as defined therein, or (ii) a Term SOFR as defined therein, in each case plus an applicable margin ranging from 1.25% and 2.50% with respect to Alternate Base Rate borrowings and 2.25% and 3.50% for Term SOFR borrowings. Swingline loans will bear interest at a rate per annum equal to one-month Term SOFR plus the applicable margin. The applicable margin will be determined based on the Company’s consolidated total net leverage ratio.

We are required to pay a quarterly commitment fee on any unused portion of the Revolving Credit Facility, letter of credit fees, and other customary fees to the Agent and the Lenders. The Term Loan Facility will amortize on a quarterly basis at 1.25% (for year one and two), 1.875% (for year three and four), and 2.5% (for year five) based on the aggregate principal amount outstanding under the Term Loan Facility, with the remainder due on the Maturity Date. We must make mandatory prepayments in connection with certain asset dispositions and casualty events, subject in each case to customary reinvestment rights. We may prepay borrowings under the Credit Facilities at any time, without premium or penalty, and may, at its option, reduce the aggregate unused commitments under the Revolving Credit Facility in whole or in part, in each case subject to the terms of the Credit Agreement. We must also comply with certain financial covenants, including a maximum total net leverage ratio and a minimum consolidated fixed charge coverage ratio, as well as other customary restrictive covenants.

On January 19, 2024, we borrowed $30.0 million under the Revolving Credit Facility and $20.0 million under the Term Loan Facility. Proceeds from the initial drawings under the Credit Facilities, together with cash on hand, were used to repay in full the $50.0 million principal amount and other obligations under that certain Loan Agreement, dated as of June 30, 2020 (as amended from time to time), by and among ~~others,~~the Company, the guarantors party thereto, the lenders party thereto and Hayfin Services LLP, (“~~Hayfin”) an affiliate of Hayfin Capital Management, LLP~~as administrative and collateral agent (as amended from time to time, the “Hayfin Loan Agreement”), and to pay related fees, premiums, costs and expenses (collectively with the entry into the Citizens Credit Agreement and the initial borrowings thereunder, the “Debt Refinancing Transactions”).

On February 27, 2024, we repaid the initial $30.0 million drawing under the Revolving Credit Facility.

Hayfin Term Loan

In June 2020, we entered into the Hayfin Loan Agreement, pursuant to which Hayfin provided us with a senior secured term loan of $50 million (the “Hayfin Term Loan”). The Hayfin Term Loan ~~matures~~was to mature on June 30, ~~2025 (the “Maturity Date”).~~

~~No principal payments are due on the Term Loan until the Maturity Date.~~2025. Interest ~~is payable on the Term Loan for principal outstanding quarterly through the Maturity Date. Pursuant to Amendment No. 2 to the Loan Agreement entered into in June 2023, interest~~ on any borrowings ~~under the Term Loan is equal to the Secured Overnight Finance Rate (“~~was based on SOFR,~~”),~~ plus a fallback provision of 0.15%, subject to a floor of 1.5%, plus a margin of 6.75%. ~~An additional 3.0% margin would be applied to~~

As noted above, in January 2024, we repaid the ~~interest rate upon the occurrence of an Event of Default, as defined~~Hayfin Term Loan in full and terminated the Hayfin Loan Agreement. ~~As of September 30, 2023, the Term Loan carried an interest rate of 12.3%.~~

The Hayfin Loan Agreement contains certain financial covenants, including a Minimum Consolidated Total Net Sales covenant, tested quarterly, and a Minimum Liquidity covenant, tested monthly (each as defined). In addition, the Hayfin Loan Agreement includes certain negative covenants and events of default customary for facilities of this type. Upon the occurrence of such events of default, all outstanding loans under the Hayfin Loan Agreement may be accelerated or the lenders’ commitments terminated. The Hayfin Loan Agreement also specifies mandatory prepayments based on a percentage of Excess Cash Flow (as defined in the Hayfin Loan Agreement, if such is generated), as well as upon the occurrence of other events specified in the Hayfin Loan Agreement.

As of September 30, 2023, we were in compliance with all financial covenants under the Hayfin Loan Agreement. A breach of a financial covenant in the Hayfin Loan Agreement, if uncured or unable to be cured, would likely result in an event of default that could trigger the lenders’ remedies, including acceleration of the entire principal balance of the loan as well as any applicable prepayment premiums.

~~Series B Preferred Stock~~

~~We have 100,000 shares of Series B Preferred Stock outstanding as of September 30, 2023.~~

The Series B Preferred Stock accumulates dividends at a rate of 6.0% per annum. Dividends are declared at the sole discretion of our Board of Directors. Dividends, if declared, are paid in cash at the end of each quarter based on dividend amounts that accumulate beginning on the last payment date through the day prior to the end of each quarter. In lieu of paying a dividend, we may elect to accrue the dividend owed to shareholders. Dividend balances accumulate at the prevailing dividend rate for each dividend period during which they are outstanding.

Each share of Series B Preferred Stock, including any accrued and unpaid dividends, is convertible into our common stock at any time at the option of the holder at a conversion price of $3.85 per common share. The Series B Preferred Stock converts automatically at any time after July 2, 2023, provided that the volume-weighted average price of a share of our common stock is $7.70 or higher (i) for 20 out of 30 consecutive trading days, and (ii) on such date of conversion.

If we undergo a change of control, we will have the option to repurchase some or all of the then-outstanding shares of Series B Preferred Stock for cash in an amount equal to the liquidation preference and any accumulated and unpaid dividends. If we do not exercise this right, holders of the Series B Preferred Stock will have the option to (1) require us to repurchase any or all of their then-outstanding shares of Series B Preferred Stock in an amount equal to the liquidation preference plus unpaid dividends, or (2) convert the Series B Preferred stock into common stock and receive their pro rata consideration thereunder.

We have not declared or paid any cash dividends on our Series B Preferred Stock since issuance. Dividends accumulated but not paid as of September 30, 2023 were $19.0 million. The Series B Preferred Stock was convertible into 30,906,441 shares of common stock as of September 30, 2023

~~Share Repurchases~~

We did not repurchase any shares of our common stock during the three months ended September 30, 2023. The timing and amount of future repurchases, if any, will depend upon our stock price, economic and market conditions, regulatory requirements, and other corporate considerations. We may initiate, suspend or discontinue purchases at any time.

~~On October 27, 2023, we repurchased 5,000 shares of Series B Preferred Stock held by certain entities managed by or affiliated with Hayfin Capital Management, LLP for $9.5 million in cash.~~

Contractual Obligations

Except as described below, ~~and as previously disclosed in our Quarterly Report for the three months ended March 31, 2023,~~ there were no significant changes to our contractual obligations during the ~~nine~~three months ended ~~September 30, 2023~~March 31, 2024 from those disclosed in the section Item 7, “Management’s Discussion and Analysis of Financial Condition and Results from Operations”, in our ~~2022~~2023 Form 10-K.

~~Nordic Agreement~~TELA and Regenity Agreements

~~In June 2022, we~~On March 15, 2024, the Company entered into an Asset Purchase Agreement (the “TELA APA”) with TELA Bio, Inc. (“TELA”) and a ~~collaboration~~manufacturing and supply agreement (the “~~Nordic~~Supply Agreement”) with ~~Nordic Bioscience Clinical Development A/S~~Regenity Biosciences, Inc. (“~~NBCD~~Regenity”), adding to the Company’s product portfolio a 510(k)-cleared collagen particulate xenograft product (the “Xenograft Product”) indicated for the management of moderately to ~~provide full operational support for our KOA clinical trial program.~~heavily exudating wounds and to control minor bleeding. Under the terms of the ~~Nordic Agreement, we were obligated~~TELA APA, the Company made an initial $5.0 million payment to ~~pay $10.2~~TELA and will be required to make additional future payments aggregating between a minimum of $3.0 million ~~upon~~and a maximum of $7.0 million based on net sales of the ~~achievement of specified milestones~~Xenograft Product over the ~~course~~next two years.

The Supply Agreement maintains MIMEDX’s exclusive right to sell and market the Xenograft Product in the United States and requires MIMEDX to purchase a minimum amount of the ~~clinical trial.~~Xenograft Product from Regenity annually through December 31, 2033. Should MIMEDX fail to meet a purchasing minimum in any one period, it has the option (among others) to amend its distribution rights under the Supply Agreement to be non-exclusive.

During the three months ended September 30, 2023, the Company terminated the Nordic Agreement. Pursuant to the Nordic Agreement, the Company is obligated to reimburse NBCD for services performed through the effective termination date and for non-cancelable obligations reasonably incurred prior to that date. In addition, the Company and NBCD have certain regulatory obligations to all trial participants enrolled in the study prior to the suspension of clinical trial activities. Refer to Note 16, “~~Restructuring,” for additional discussion.~~

Critical Accounting Estimates

In preparing financial statements, we follow accounting principles generally accepted in the United States, which require us to make certain estimates and apply judgments that affect our financial position and results of operations. We regularly review our accounting policies and financial information disclosures. A summary of critical accounting estimates in preparing the financial statements was provided in our ~~2022~~2023 Form 10-K.

~~In addition, during the period covered by this Quarterly Report, we identified the following critical accounting estimates which were not material to the 2022 Form 10-K.~~

~~Share-Based Compensation Expense~~

~~Description~~

We measure stock options and other stock-based awards granted to employees based on their fair value on the date of the grant and recognize the assessed fair value as share-based compensation expense, straight-line, over the requisite service period to achieve the award based on the vesting requirements, to the extent that the achievement of performance conditions associated with such awards, as applicable, are determined to be “probable.”

~~Judgments and Uncertainties~~

Share-based payment arrangements are measured at fair value on the grant date. The fair value of equity incentive awards, which are usually shares of our common stock, are generally measured at the last trading price on the grant date.

The fair value of stock options is calculated using an appropriate valuation technique. The valuation technique generally requires us to make certain assumptions, including (1) the fair value of the common stock, (2) the expected volatility of our stock price, (3) the expected term of the award, (4) the risk-free interest rate, and (5) expected dividends. Our expectation for volatility is generally based on historical daily share price movements, with certain adjustments for abnormal share price activity associated with events which are not expected to recur during the expected term. The expected term of the award requires us to make assumptions regarding the post-vesting behavior of the recipients, which is based off available evidence. Our assumption for the risk-free rate is derived from prevailing U.S. Treasuries with similar terms to the award on the grant date. Our assumption for dividends is derived from our own dividend history.

To the extent that any such awards are subject to a market condition, the resolution of the market condition is reflected in the fair value of the grant date. Further, the requisite service period associated with an award containing a market condition must derive the service period over which the market condition is expected to be met. Fair value and derived service periods are generally determined using a Monte Carlo simulation.

Subsequent to the determination of fair value, we recognize expense to the extent we evaluate that performance conditions associated with share-based payment arrangements are probable of occurring. In certain cases where the extent of vesting is based on the extent of achievement, we are required to determine the extent to which achievement is probable. We determine probable performance based on actual performance to date, internally-developed budgets and forecasts for periods covered by the relevant performance condition, and other evidence deemed relevant to this determination. We re-evaluate our probability assessments at least quarterly, with any revisions reflected as a cumulative adjustment to expense. Because of the cumulative nature of adjustments, during any period in which we re-evaluate probability, the adjustments could significantly impact our results of operations.

~~Sensitivity of Estimate to Change~~

During the nine months ended September 30, 2023, we granted stock options with a fair value on the grant date of $7.0 million. This estimate was determined using a Monte Carlo simulation using the following inputs:


	~~Assumption~~
~~Stock price on grant date~~	$	~~3.70~~
~~Exercise price~~	$	~~3.70~~
~~Risk-free interest rate~~	~~3.58~~		%
~~Expected volatility (annualized)~~	~~75.00~~		%
~~Dividend yield~~	—		%
~~Weighted average grant date fair value~~	$	~~1.93~~

The granted stock options reflected an expected term based on our expectations for exercise activity. Changes in any of these assumptions could result in a revised estimate of fair value of the granted stock options, which would impact the amount of expense recognized over the requisite service period, and could materially affect the total fair value or the amount of expense recognized in a particular period.

In addition, cumulative expense recognized for unvested performance stock unit awards was $1.6 million as of September 30, 2023. This is based on determinations regarding probable resolution or the extent of probable resolution of relevant performance conditions to earn such awards. If it is subsequently determined that the performance conditions associated with these awards are no longer probable of being met, or performance conditions which were determined to be probable of occurring do not actually occur, we could reverse up to this amount of expense in the period such determination is made. Furthermore, if probable levels of achievement are later determined to be greater, or actual achievement exceeds the level of achievement assessed as probable, we could record increases to expense to reflect this level of achievement. The amount of any incremental expense recognition or reversal will depend on the magnitude and timing of such change in estimate.

Recent Accounting Pronouncements

For the effect of recent accounting pronouncements, see Note 2, “Significant Accounting Policies”, to the unaudited condensed consolidated financial statements contained herein.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to risks associated with changes in interest rates that could adversely affect our results of operations and financial condition. We do not hedge against interest rate risk.

The interest rate on our Term Loan Facility is determined quarterly based on the ~~3-month SOFR rate, subject to a floor of 1.5%.~~1-month term SOFR. As of ~~September 30, 2023,~~March 31, 2024, the interest rate on our Term Loan Facility was ~~12.3%~~7.9%. A 100 basis point change in SOFR ~~to the extent that such change would not cause SOFR to be below the 1.5% floor,~~ would change our interest expense by ~~$0.5~~$0.2 million on an annualized basis.

During the three ~~and nine~~ months ended ~~September 30, 2023,~~March 31, 2024, we incurred ~~$0.4 million and $1.3 million~~an immaterial decrease in incremental interest expense compared to the equivalent ~~periods~~period in the prior year resulting from ~~increases~~lower interest rates in ~~the relevant reference rate~~our new term loan facility during the intervening period.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our Chief

Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective at a reasonable assurance level in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure. We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the fiscal quarter ended ~~September 30, 2023~~March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

3525

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The Company and its subsidiaries are parties to numerous claims and lawsuits arising in the ordinary course of its business activities, some of which involve claims for substantial amounts. The ultimate outcome of these suits cannot be ascertained at this time. The description of ~~our~~ the Welker v. MiMedx, et. Al ~~case~~case contained in Note ~~13,~~1 2 , “Commitments and Contingencies,” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report, is incorporated herein by reference.

Item 1A. Risk Factors

There have been no material changes to the Company’s risk factors included in its ~~2022~~2023 Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) None.

(b) None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

~~Insider trading arrangements~~In March 2024, the Company made annual grants of restricted stock units (“RSUs”), performance stock units (“PSUs”) and ~~policies~~stock options to its executive officers other than Joe Capper, its Chief Executive Officer. The forms of grant agreements are included as exhibits to this Quarterly Report.The following is a summary of certain of the key provisions of these agreements.

The RSUs granted to our executive officers in March 2024 vest on a “cliff” basis at the end of a three-year period and require the recipient to provide continuous service through the end of such period.

The PSUs granted to our executive officers other than Mr. Capper in March 2024 vest based on and to the extent that stipulated revenue targets for the year ended December 31, 2026 are achieved.Achievement of the performance goals allows for vesting of 50%, 100% and 150% (based on threshold, target or excellence performance) of the PSUs granted. If performance is below threshold, the PSUs do not vest. The PSUs also include a modifier on payments if the Company’s relative total shareholder return (“TSR”) percentile ranking over the three-year performance period is at or below the 50th percentile ranking, in which case vesting is limited to the target level, regardless of actual achievement against the stipulated revenue targets.In addition, vesting may increase if the Company’s relative TSR percentile ranking over the three-year performance period is above the 50th percentile ranking, up to a maximum of 20% if the Company’s relative TSR percentile ranking over the three-year performance period is at the 75th percentile ranking or above.The PSUs require recipients to continue employment with the Company through the vesting date, which will occur upon approval of the results with respect to the established targets by the Company’s Compensation Committee after December 31, 2026, but no later than March 15, 2027. The TSR is calculated as the average trading price of the Company’s common stock during the final 20 trading days of 2026, adjusted for dividends paid on the Company’s common stock, less the average trading price during the final 20 trading days of 2023, and the Company’s relative TSR percentile ranking is as compared to the TSR achieved by the Russell 2000 Index during the same period.

The stock options granted to our executive officers in March 2024 vest ratably annually over a period of four years and require the recipient to provide continuous service through the end of each applicable vesting period.

Insider Trading Arrangements and Policies

During the three months ended ~~September 30, 2023,~~March 31, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Item 6. Exhibits


Exhibit Number						Description
10.1*10.1#						~~Offer Letter~~Form of Restricted Stock Unit Agreement under the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan.
10.2#						Form of Performance Stock Unit Agreement under the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan.
10.3#						Form of Nonqualified Stock Option Agreement under the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan.
10.4#						Credit Agreement , dated ~~June 30, 2023,~~as of January 19, 2024, among MIMEDX GROUP, INC., a Florida corporation, as the Borrower, MIMEDX TISSUE SERVICES LLC, as a Guarantor, MIMEDX PROCESSING SERVICES, LLC, as a Guarantor, MIMEDX SUPPLY LLC, as a Guarantor, BANK OF AMERICA, NATIONAL ASSOCIATION, as a Lender and CITIZENS BANK, N.A., as Administrative Agent, the L/C Issuer, the Swingline Lender, and as a Lender.
10.5*						Fourth Amendment to Lease made as of January 26, 2024 between ~~the Company~~Georgia RE Fields, LLC, successor in interest to HUB Properties GA, LLC, and ~~Doug Rice~~CPVF II West Oak LLC, and MiMedx Group, Inc., dated January 26, 2024 (incorporated by reference to Exhibit ~~10.1~~10.2D to the Registrant’s ~~Current~~Annual Report on Form ~~8-K~~10-K filed on ~~July~~5 ~~, 202~~3February 28, 2024).
10.2*						~~Key Employee Retention and Restrictive Covenant Agreement dated July 5, 2023, between the Company and Doug Rice (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on July 5, 2023~~).
10.3*						~~Inducement Performance Stock Unit Agreement dated June 30, 2023, between the Company and Doug Rice (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on July 5, 2023~~).
10.4*						~~Inducement Restricted Stock Unit Agreement dated June 30, 2023, between the Company and Doug Rice (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on July 5, 2023~~).
10.5*						~~Inducement Stock Option Agreement dated June 30, 2023, between the Company and Doug Rice (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on July 5, 2023~~).
~~10.6#~~						~~Separation Agreement and General Release between MiMedx Group, Inc. and Robert Stein, dated as of July 1, 2023.~~
~~10.7#~~						~~Separation Agreement and General Release between MiMedx Group, Inc. and Peter Carlson, dated as of July 14, 2023.~~
31.1 #						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 #						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 #						Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 #						Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS #						XBRL Instance Document
101.SCH #						XBRL Taxonomy Extension Schema Document
101.CAL #						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF #						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB #						XBRL Taxonomy Extension Label Linkbase Document
101.PRE #						XBRL Taxonomy Extension Presentation Linkbase Document


*			Previously filed and incorporated herein by reference
#			Filed or furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


~~October~~April 30, ~~2023~~2024	MIMEDX GROUP, INC.

	By:	/s/ Doug Rice
		Doug Rice
		Chief Financial Officer
		~~Principal Financial Officer and Authorized Signatory~~

3827


	2023		2022
Balance at July 1	$	2,196	$	3,471
Bad debt expense	447		426
Write-offs	(69)		(67)
Balance at September 30	$	2,574	$	3,830


	2023		2022
Balance at January 1	$	3,783	$	1,187
Bad debt expense	737		2,817
Write-offs	(1,946)		(174)
Balance at September 30	$	2,574	$	3,830


	Wound & Surgical		Regenerative Medicine		Goodwill
Balance as of December 31, 2022	$	19,441	$	535	$	19,976
Impairment of goodwill	—		(535)		(535)
Balance as of September 30, 2023	$	19,441	$	—	$	19,441


	RSA			RSU			PSU
	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Shares	Weighted-Average Grant Date Fair Value		Number of Shares	Weighted-Average Grant Date Fair Value
Unvested at January 1, 2023	122,755	$	6.13	4,774,971	$	6.28	241,072	$	4.62
Granted	—	—		3,266,244	4.65		3,851,427	3.83
Vested	(13,624)	6.18		(2,237,260)	6.20		—	—
Forfeited	(90,367)	5.83		(1,715,136)	5.45		(365,227)	4.24
Unvested at September 30, 2023	18,764	$	7.55	4,088,819	$	5.38	3,727,272	$	3.84


	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2023	933,894	$	6.46
Granted	3,694,000	3.77
Exercised	(62,599)	6.50

Vested options expired	(423,213)	5.81
Outstanding at September 30, 2023	4,142,082	4.13		6.31	13,178,214
Exercisable at September 30, 2023	448,082	$	7.06	0.60	$	174,314


	Wound & Surgical		Regenerative Medicine		Corporate & Other		Consolidated
Net sales	$	80,376	$	—	$	1,336	$	81,712
Cost of sales	13,305		—		1,485		14,790
Selling, general and administrative expense	38,687		—		13,884		52,571
Research and development expense	3,175		—		—		3,175
Restructuring	—		208		—		208

Amortization of intangible assets	—		—		190		190
Segment contribution	$	25,209	$	(208)
Investigation, restatement and related expense							(38)

Operating income							$	10,816
Supplemental information
Depreciation expense	$	423	$	—	$	230	$	653
Share-based compensation	$	1,902	$	—	$	2,486	$	4,388