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SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
Florida | 26-2792552 | |
(State or other jurisdiction of incorporation) | (I.R.S. Employer Identification Number) | |
1234 Airport Road, Suite 105 | ||
Destin, Florida | 32541 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code
Common Stock, par value $0.001 per share
(Title of class)
Yeso Noo
Large accelerated filero | Accelerated filero | Non-accelerated filero (Do not check if a smaller reporting company) | Smaller reporting companyþ |
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Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32.1 | ||||||||
Exhibit 32.2 |
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• | Initial tests of fibers cross-linked with NDGA appear to demonstrate they are stronger than existing collagenous tissue, including healthy tendons and ligaments. These fibers form the fundamental unit from which a variety of devices could be configured as follows: |
• | Linear arrays of fibers for tendons | ||
• | Fiber braids for ligament bioprostheses | ||
• | Woven meshes for general surgical use; |
• | NDGA-treated biomaterials have been tested and results preliminarily suggest that the materials are biocompatible and biodegradable; | ||
• | Biocompatibilization (making a material biocompatible that may otherwise not be) of in-dwelling medical devices by coating with NDGA polymerized collagen; | ||
• | NDGA treatment of xenograft (animal in origin) and allograft (human in origin) materials could make them more biocompatible and possibly improve functional lifetime; and | ||
• | NDGA-treated collagen-based biorivets have the potential to be used for bone repair. |
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Approach | Description | Goal | ||
Total Disc Replacement | Removal of the majority of the disc and replacement with a mechanical or polymer artificial disc | Maintain disc height and restore motion of spinal segment. | ||
Nucleus Replacement | Replacement of the disc’snucleus pulposus, using a variety of metals and ceramics, injectable fluids, hydrogels, inflatables, and elastic coils. | Restore disc height and shock-absorbing functions (with some designs). | ||
Dynamic Stabilization | Posterior column support unloads the disc and allows a range of motion using a variety of implants or flexible materials. | Reduce loads on the disc and correct the spinal balance and alignment. |
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• | product design and development; |
• | product testing; |
• | product manufacturing; |
• | product labeling; |
• | product storage; |
• | premarket clearance or approval; |
• | advertising and promotion; |
• | product sales and distribution; and |
• | medical device reporting. |
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• | fines, injunctions, and civil penalties; |
• | recall or seizure of our products; |
• | operating restrictions, partial suspension or total shutdown of production; |
• | refusing our requests for 510(k) clearance or PMA approval of new products; |
• | withdrawing 510(k) clearance or PMA approvals already granted; and |
• | criminal prosecution. |
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Developer | Product | Status | ||
DePuy | RESTORE | Clinic | ||
Advanced Tissue Sciences | Tendon/Lig Repair | Pilot (human, ACL) | ||
Organogenesis | Fortaflex | European Clinical (ACL) | ||
ReGen Biologics | Collagen matrices | Preclinical (animal) | ||
Biomet/Organogenesis | CuffPatch | Clinical (Rotator Cuff) |
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Developer | Product | Status | ||
DePuy | BioBlanket™ Soft-Tiss | Received 510(k) Oct. 2006 | ||
CryoLife | ProPatch™ Soft-Tiss | Received 510(k) Dec. 2006 | ||
Wright Medical | Graft Jacket® Regenerative Tissue Matrix | Received 510(k) | ||
Pegasus Biologics | OrthADAPT™ Bioimplant | Received 510(k) | ||
Stryker | Tissue Mend | Received 510(k) |
• | improved outcomes for spine pathology procedures; | ||
• | acceptance by spine surgeons; | ||
• | ease of use and reliability; | ||
• | product price and qualification for reimbursement; | ||
• | technical leadership and superiority; | ||
• | effective marketing and distribution; and | ||
• | speed to market. |
Technology | Representative Product | Company | ||
Total Disc Replacement, cervical | Prestige® ProDisc-C | Medtronic Sofamor Danek Synthes Spine | ||
Posterior Lumbar Interbody | PLIF Spacers Puros® Symmetry® PLIF Allograft System Trabecular Metal PLIF Device HRC Locking Cage™ Interbody Fusion System VG2® PLIF Allograft SpaceVision™ PLIF Cage Coreograft™ PLIF Allograft AlloCraft™ PL | Synthes Zimmer Zimmer Zimmer J&J, DePuy Spine SpineVision Alphatec Spine Stryker | ||
Vessel Guard | Preclude Vessel Guard | W.L.Gore |
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Patent Number | Title | Filing Date | Issue Date | Expiration Date | ||||
6,565,960 | Polymer Composite Compositions | June 1, 2001 | May 20, 2003 | June 1, 2021 | ||||
6,821,530 | Polymer Composite Compositions | May 19, 2003 | November 23, 2004 | June 1, 2021 |
Patent Application | ||||
Serial Number | Title | Filing Date | ||
U.S. 11/685,528 and corresponding PCT application (PCT/US2007/063882) | Self-Assembling, Collagen Based Material for Corneal Replacement | March 13, 2007 | ||
U.S. 11/821,320 and corresponding PCT application (PCT/US2007/014560) | Collagen Scaffolds, Medical Implants With Same and Methods of Use | June 22, 2007 | ||
U.S. 11/964,745 and corresponding PCT application (PCT/US2007/026381) | Woven and/or Braided Fiber Implants and Methods of Making Same | December 27, 2007 | ||
U.S. 11/964,756 and corresponding PCT application (PCT/US2007/026361) | Methods of Making High-Strength NDGA Polymerized Collagen Fibers and Related Collagen-Prep Methods, Medical Devices and Constructs | December 27, 2007 | ||
U.S. 11/964,830 and corresponding PCT application (PCT/US2007/026365) | Bioprosthesis for Replacement or Augmentation of Tendons and Ligaments | December 27, 2007 | ||
U.S. 12/034,004 and corresponding PCT application (PCT/US2008/002230) | In Vivo Hydraulic Fixation Including BioRivets Using Biocompatible Expandable Fibers | February 20, 2008 | ||
U.S. Provisional 61/030,768 | Biostaples Suitable for Wrist Hand and Other Ligament Replacements or Repairs | February 22, 2008 | ||
U.S. Provisional 61/053,901 | Medical Constructs of Twisted Lengths of Biocompatible Fibers and Methods of Making Same | May 19, 2008 |
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Patent Application | ||||
Serial Number | Title | Filing Date | ||
U.S. 10/658,932 and corresponding foreign applications | Flexible Spinal Disc | September 9, 2003 | ||
U.S. 11/688,931 | Flexible Spinal Disc | March 21, 2007 | ||
U.S. 11/626,399 | Prosthetic Wide Range Motion Facets and Methods of Fabricating | January 24, 2007 | ||
U.S. 11/626,401 and corresponding PCT application (PCT/US2007/001933) | Spinal Disc Implants with Flexible Keels and Methods of Fabricating Implants | January 24, 2007 | ||
U.S. 11/625,845 | Implantable Spinous Process Prosthetic Devices, Including Cuffs, and Methods of Fabricating Same | January 23, 2007 | ||
U.S. 11/671,507 | Spinal Implants with Cooperating Suture Anchors | February 6, 2007 | ||
U.S. 11/753,755 and corresponding PCT application (PCT/US2007/012517) | Patient-Specific Spinal Implants and Related Systems and Methods | May 25, 2007 | ||
U.S. 11/768,933 and corresponding PCT application (PCT/US2007/014907) | Spinal Implants with Cooperating Anchoring Sutures | June 27, 2007 | ||
U.S. 12/016,223 and corresponding PCT application (PCT/US2008/000674) | Methods and Systems for Forming Implants with Selectively Exposed Mesh for Fixation and Related Implants | January 18, 2008 | ||
U.S. 12/101,390 | Surgical Instruments for Spinal Disc Implants and Related Methods | April 11, 2008 | ||
*U.S. Provisional 60/968,709 (Co-owned with SaluMedica, LLC) | Orthopaedic Cement Mixtures with Low Weight Percent Polyvinyl Alcohol (PVA) Solution | August 29, 2007 | ||
U.S. Provisional 61/050,105 | Spinal Total Disc Replacement (TDR) Implants | May 2, 2008 |
Patent Number | Title | Filing Date | Issue Date | Date of Expiration | ||||
5,981,826 and corresponding foreign patents | Poly(vinyl alcohol) cryogel | September 17, 1997 | November 9, 1999 | U.S. Patent expires on 09/17/2017 | ||||
6,231,605 | Poly(vinyl alcohol) hydrogel | March 17, 1999 | May 15, 2001 | 09/17/2017 |
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Patent Application | ||||
Serial Number | Title | Filing Date | ||
U.S. 10/199,554 | Poly(vinyl alcohol) hydrogel | July 19, 2002 | ||
U.S. 10/752,246 | Poly(vinyl alcohol) hydrogel | January 5, 2004 | ||
U.S. 10/966,859 | Poly(vinyl alcohol) hydrogel | October 14, 2004 | ||
U.S. 10/966,866 | Poly(vinyl alcohol) hydrogel | October 24, 2004 | ||
U.S. 11/626,405 | Methods Of Producing PVA Hydrogel Implants and Related Devices | January 24, 2007 | ||
U.S. 11/837,027 | Methods of Making Medical Implants of Poly(Vinyl Alcohol) Hydrogel | August 10, 2007 |
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• | the revenues generated by sales of our products, if any; |
• | the costs associated with expanding our sales and marketing efforts, including efforts to hire independent agents and sales representatives; |
• | the expenses we incur in developing and commercializing our products, including the cost of obtaining and maintaining FDA or other regulatory approvals; and |
• | unanticipated general and administrative expenses. |
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• | products which have been approved by regulatory authorities for use in the United States and/or Europe and which are supported by long-term clinical data; | ||
• | significantly greater name recognition; | ||
• | established relations with surgeons, hospitals, other healthcare providers and third party payors; | ||
• | large and established distribution networks in the United States and/or in international markets; | ||
• | greater experience in obtaining and maintaining regulatory approvals and/or clearances from the United States Food and Drug Administration and other regulatory agencies; | ||
• | more expansive portfolios of intellectual property rights; and | ||
• | greater financial, managerial and other resources for products research and development, sales and marketing efforts and protecting and enforcing intellectual property rights. |
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• | the announcement or introduction of new products by our competitors; |
• | our ability to upgrade and develop our systems and infrastructure to accommodate growth; |
• | our ability to attract and retain key personnel in a timely and cost effective manner; |
• | technical difficulties; |
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• | the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations and infrastructure; |
• | regulation by federal, state or local governments; and |
• | general economic conditions as well as economic conditions specific to the healthcare industry. |
• | we may not be able to obtain regulatory approvals for our products, or the approved indication may be narrower than we seek; |
• | our products may not prove to be safe and effective in clinical trials; |
• | physicians may not receive any reimbursement from third party payors, or the level of reimbursement may be insufficient to support widespread adoption of our products; |
• | we may experience delays in our development program; |
• | any products that are approved may not be accepted in the marketplace by physicians or patients; |
• | we may not be able to manufacture any of our products in commercial quantities or at an acceptable cost; and |
• | rapid technological change may make our products obsolete. |
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• | their lack of experience with prior procedures in the field using our products; |
• | lack of evidence supporting additional patient benefits and our products over conventional methods; |
• | perceived liability risks generally associated with the use of new products and procedures; |
• | limited availability of reimbursement from third party payors; and |
• | the time that must be dedicated to training. |
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• | failure to obtain approval from the FDA or any foreign regulatory authority to commence an investigational study; |
• | conditions imposed on us by the FDA or any foreign regulatory authority regarding the scope or design of our clinical trials; |
• | delays in obtaining or in our maintaining required approvals from institutional review boards or other reviewing entities at clinical sites selected for participation in our clinical trials; |
• | insufficient supply of our products or other materials necessary to conduct our clinical trials; |
• | difficulties in enrolling patients in our clinical trials; |
• | negative or inconclusive results from clinical trials, or results that are inconsistent with earlier results, that necessitate additional clinical studies; |
• | serious or unexpected side effects experienced by patients in whom our products are implanted; or |
• | failure by any of our third-party contractors or investigators to comply with regulatory requirements or meet other contractual obligations in a timely manner. |
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• | untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; |
• | customer notifications for repair, replacement, refunds; |
• | recall, detention or seizure of our products; |
• | operating restrictions or partial suspension or total shutdown of production; |
• | refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified products; |
• | withdrawing 510(k) clearances on PMA approvals that have already been granted; |
• | refusal to grant export approval for our products; or |
• | criminal prosecution. |
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• | make a special written suitability determination for the purchaser; |
• | receive the purchaser’s written agreement to a transaction prior to sale; |
• | provide the purchaser with risk disclosure documents which identify certain risks associated with investing in “penny stocks” and which describe the market for these “penny stocks” as well as a purchaser’s legal remedies; |
• | obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has received the required risk disclosure document before a transaction in a “penny stock” can be completed; and |
• | give bid and offer quotations and broker and salesperson compensation information to the customer orally or in writing before or with the confirmation. |
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• | authorizing the issuance of preferred stock which can be created and issued by the Board of Directors without prior common stock shareholder approval, with rights senior to those of the common stock; |
• | restricting persons who may call shareholder meetings; and |
• | allowing the Board to fill vacancies and to fix the number of directors. |
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Quarter | High* | Low* | ||||||||||
Year Ended | ||||||||||||
March 31, 2008 | First | N/A | N/A | |||||||||
Second | $ | 0.96 | $ | 0.96 | ||||||||
Third | $ | 0.96 | $ | 0.96 | ||||||||
Fourth | $ | 6.52 | $ | 0.96 |
* | Adjusted to reflect the reverse stock split effective on April 2, 2008. |
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Payments due by period | ||||||||||||||||||||
Less than | ||||||||||||||||||||
Contractual Obligations | Total | 1 year | 2 - 3 years | 4 - 5 years | After 5 years | |||||||||||||||
Consulting Agreements | $ | 602,000 | $ | 296,000 | $ | 306,000 | $ | — | $ | — | ||||||||||
Employment Agreements | 2,291,000 | 1,276,000 | 1,015,000 | — | — | |||||||||||||||
Operating Lease Obligations | 1,055,000 | 245,000 | 564,000 | 246,000 | — | |||||||||||||||
Total | $ | 3,948,000 | $ | 1,817,000 | $ | 1,885,000 | $ | 246,000 | $ | — | ||||||||||
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MiMedx Group, Inc.
June 27, 2008
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Report of Independent Registered Public Accounting Firm
Board of Directors
MiMedx Group, Inc.
We have audited the accompanying consolidated balance sheet of MiMedx Group, Inc. and subsidiaries as of March 31, 2007, and the related consolidated statements of operations, stockholders’ equity and cash flows for the period from inception (November 22, 2006) through March 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards of the Public Company Accounting Oversight Board (United States of America). The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in all material respects, the consolidated financial position of MiMedx Group, Inc. and subsidiaries as of March 31, 2007 and the consolidated results of its operations and its cash flows for the period from inception (November 22, 2006) through March 31, 2007, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has incurred net losses and negative operating cash flows since inception and will require additional financing over a period of years to fund the continued development of products subject to its licensed technologies. The availability of such financing cannot be assured. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 3. The financial statements do not include any adjustments with respect to the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of these uncertainties.
/s/ Aidman, Piser & Company, P.A.
Tampa, Florida
February 8, 2008
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(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
March 31, | ||||||||
2008 | 2007 | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 6,749,609 | $ | 10,456,707 | ||||
Due from related parties | — | 30,125 | ||||||
Prepaid expenses and other current assets | 189,253 | 931 | ||||||
Investment, related party | — | 172,800 | ||||||
Total current assets | 6,938,862 | 10,660,563 | ||||||
Property and equipment, net of accumulated depreciation | 1,452,436 | 7,265 | ||||||
Goodwill | 857,597 | — | ||||||
Intangible assets, net | 5,783,153 | 981,067 | ||||||
Deposits | 146,433 | 119,200 | ||||||
Total assets | $ | 15,178,481 | $ | 11,768,095 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 948,478 | $ | 970,117 | ||||
Deferred interest income | — | 164,278 | ||||||
Due to related party | — | 500,000 | ||||||
Total current liabilities | 948,478 | 1,634,395 | ||||||
Commitments and contingency (Notes 6 and 10) | ||||||||
Stockholders’ equity: | ||||||||
Convertible preferred stock Series A; $.0001 par value; 0 (2008) and 20,000,000 (2007) shares authorized and 0 (2008) and 11,212,800 (2007) shares issued and outstanding | — | 14,016,000 | ||||||
Preferred stock; $.001 par value; 5,000,000 (2008) and 0 (2007) shares authorized and 0 (2008 and 2007) shares issued and outstanding | — | — | ||||||
Common stock; $.001 par value; 100,000,000 (2008) and 40,000,000 (2007) shares authorized and 36,864,534 (2008) and 14,000,000 (2007) shares issued and outstanding | 36,864 | 14,000 | ||||||
Additional paid-in capital | 32,226,983 | 7,463 | ||||||
Stock subscriptions receivable | — | (1,233,750 | ) | |||||
Note receivable, related party | — | (2,007,644 | ) | |||||
Deficit accumulated during the development stage | (18,033,844 | ) | (662,369 | ) | ||||
Total stockholders’ equity | 14,230,003 | 10,133,700 | ||||||
Total liabilities and stockholders’ equity | $ | 15,178,481 | $ | 11,768,095 | ||||
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(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
Period from | Period from | |||||||||||
Inception | Inception | |||||||||||
Year | (November 22, 2006) | (November 22, 2006) | ||||||||||
Ended | through | through | ||||||||||
March 31, 2008 | March 31, 2007 | March 31, 2008 | ||||||||||
Research and development expenses | $ | 2,013,002 | $ | 113,897 | $ | 2,126,899 | ||||||
Acquired in-process research and development (Note 4) | 7,177,000 | — | 7,177,000 | |||||||||
General and administrative expenses | 8,659,405 | 570,626 | 9,230,031 | |||||||||
Loss from operations | (17,849,407 | ) | (684,523 | ) | (18,533,930 | ) | ||||||
Other income (expense): | ||||||||||||
Interest income | 519,707 | 33,746 | 553,453 | |||||||||
Change in fair value of investment, related party | (41,775 | ) | — | (41,775 | ) | |||||||
Loss before income taxes | (17,371,475 | ) | (650,777 | ) | (18,022,252 | ) | ||||||
Income taxes | — | — | — | |||||||||
Net loss | $ | (17,371,475 | ) | $ | (650,777 | ) | $ | (18,022,252 | ) | |||
Net loss per common share | ||||||||||||
Basic and diluted | $ | (0.97 | ) | $ | (0.08 | ) | ||||||
Shares used in computing net loss per common share | ||||||||||||
Basic and diluted | 17,909,903 | 8,537,000 | ||||||||||
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(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
PERIOD FROM INCEPTION (NOVEMBER 22, 2006) THROUGH MARCH 31, 2008
Deficit | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible | Convertible | Convertible | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||||||
Preferred Stock | Preferred Stock | Preferred Stock | Additional | Stock | Note | During the | ||||||||||||||||||||||||||||||||||||||||||||||
Series A | Series B | Series C | Common Stock | Paid-in | Subscriptions | Receivable, | Development | |||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Receivable | Related party | Stage | Total | ||||||||||||||||||||||||||||||||||||||||
Balances, November 22, 2006 | — | $ | — | — | $ | — | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||||||||||||||
Issuance of common stock at inception | — | — | — | — | — | — | 12,880,000 | 12,880 | — | — | — | (11,592 | ) | 1,288 | ||||||||||||||||||||||||||||||||||||||
Employee share-based compensation expense | — | — | — | — | — | — | — | — | 13,409 | — | — | — | 13,409 | |||||||||||||||||||||||||||||||||||||||
Other share-based compensation expense | — | — | — | — | — | — | — | — | 17,980 | — | — | — | 17,980 | |||||||||||||||||||||||||||||||||||||||
Common stock issued in connection with purchase of license agreement | — | — | — | — | — | — | 1,120,000 | 1,120 | 894,880 | — | — | — | 896,000 | |||||||||||||||||||||||||||||||||||||||
Issuance of note receivable, related party | — | — | — | — | — | — | — | — | — | — | (2,000,000 | ) | — | (2,000,000 | ) | |||||||||||||||||||||||||||||||||||||
Sale of Series A Preferred stock | 11,212,800 | 14,016,000 | — | — | — | — | — | — | (918,806 | ) | (1,233,750 | ) | — | — | 11,863,444 | |||||||||||||||||||||||||||||||||||||
Accrued interest income | — | — | — | — | — | — | (7,644 | ) | — | (7,644 | ) | |||||||||||||||||||||||||||||||||||||||||
Net loss for the period | — | — | — | — | — | — | — | — | — | — | — | (650,777 | ) | (650,777 | ) | |||||||||||||||||||||||||||||||||||||
Balances, March 31, 2007 | 11,212,800 | 14,016,000 | — | — | — | — | 14,000,000 | 14,000 | 7,463 | (1,233,750 | ) | (2,007,644 | ) | (662,369 | ) | 10,133,700 | ||||||||||||||||||||||||||||||||||||
Employee share-based compensation expense | — | — | — | — | — | — | — | — | 649,783 | — | — | — | 649,783 | |||||||||||||||||||||||||||||||||||||||
Other share-based compensation expense | — | — | — | — | — | — | — | — | 158,247 | — | — | — | 158,247 | |||||||||||||||||||||||||||||||||||||||
Collection of stock subscription receivable | — | — | — | — | — | — | — | — | — | 1,233,750 | — | — | 1,233,750 | |||||||||||||||||||||||||||||||||||||||
Accrued interest income | — | — | — | — | — | — | — | — | — | — | (41,250 | ) | — | (41,250 | ) | |||||||||||||||||||||||||||||||||||||
SpineMedica Corp. acquisition | — | — | 5,922,397 | 7,402,996 | 2,911,117 | 2,911 | 2,316,908 | — | 2,048,894 | 11,771,709 | ||||||||||||||||||||||||||||||||||||||||||
Sale of Series C Preferred stock | — | — | — | — | 1,285,001 | 3,855,000 | — | — | — | — | — | — | 3,855,000 | |||||||||||||||||||||||||||||||||||||||
Stock options issued in connection with purchase of intellectual property | — | — | — | — | — | — | — | — | 116,000 | — | — | — | 116,000 | |||||||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | — | — | 1,200 | 1 | 2,159 | — | — | — | 2,160 | |||||||||||||||||||||||||||||||||||||||
Alynx Merger — Recapitalization | 7,207,398 | 11,257,996 | (5,922,397 | ) | (7,402,996 | ) | (1,285,001 | ) | (3,855,000 | ) | 926,168 | 926 | (926 | ) | — | — | — | — | ||||||||||||||||||||||||||||||||||
Alynx Merger — Transaction Costs (expensed) | — | — | — | — | — | — | 205,851 | 206 | 1,126,173 | — | — | — | 1,126,379 | |||||||||||||||||||||||||||||||||||||||
Conversion of Preferred stock | (18,420,198 | ) | (25,273,996 | ) | — | — | 18,420,198 | 18,420 | 25,255,576 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
Common stock issued in connection with purchase of license agreement | — | — | — | — | — | — | 400,000 | 400 | 2,595,600 | — | — | — | 2,596,000 | |||||||||||||||||||||||||||||||||||||||
Net loss for the period | — | — | — | — | — | — | — | — | — | — | — | (17,371,475 | ) | (17,371,475 | ) | |||||||||||||||||||||||||||||||||||||
Balances, March 31, 2008 | — | $ | — | — | $ | — | — | $ | — | 36,864,534 | $ | 36,864 | $ | 32,226,983 | $ | — | $ | — | $ | (18,033,844 | ) | $ | 14,230,003 | |||||||||||||||||||||||||||||
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(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Period from | Period from | |||||||||||
Inception | Inception | |||||||||||
Year | (November 22, 2006) | (November 22, 2006) | ||||||||||
Ended | through | through | ||||||||||
March 31, 2008 | March 31, 2007 | March 31, 2008 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net loss | $ | (17,371,475 | ) | $ | (650,777 | ) | $ | (18,022,252 | ) | |||
Adjustments to reconcile net loss to net cash flows from operating activities, net of effects of acquisition: | ||||||||||||
Acquired in-process research and development | 7,177,000 | — | 7,177,000 | |||||||||
Depreciation | 191,348 | 807 | 192,155 | |||||||||
Amortization of intangible assets | 308,914 | 14,933 | 323,847 | |||||||||
Employee share-based compensation expense | 649,783 | 13,409 | 663,192 | |||||||||
Other share-based compensation expense | 158,247 | 17,980 | 176,227 | |||||||||
Issuance of common stock for transaction fees | 1,126,379 | — | 1,126,379 | |||||||||
Accrued interest on notes receivable, related party | (41,250 | ) | (7,644 | ) | (48,894 | ) | ||||||
Change in fair value of investment, related party | 41,775 | — | 41,775 | |||||||||
Increase (decrease) in cash resulting from changes in: | — | |||||||||||
Prepaid expenses and other current assets | (169,244 | ) | (931 | ) | (170,175 | ) | ||||||
Accounts payable and accrued expenses | (164,601 | ) | 214,965 | 50,364 | ||||||||
Deferred interest income | (43,200 | ) | — | (43,200 | ) | |||||||
Net cash flows from operating activities | (8,136,324 | ) | (397,258 | ) | (8,533,582 | ) | ||||||
Cash flows from investing activities: | ||||||||||||
Purchase of equipment | (1,172,730 | ) | (8,072 | ) | (1,180,802 | ) | ||||||
Cash paid for intangible asset | — | (100,000 | ) | (100,000 | ) | |||||||
Cash paid for security deposits | 6,569 | (119,200 | ) | (112,631 | ) | |||||||
Cash received in acquisition of SpineMedica Corp. | 1,957,405 | — | 1,957,405 | |||||||||
Cash paid for acquisition costs of SpineMedica Corp. | (227,901 | ) | — | (227,901 | ) | |||||||
Payments from (advances to) related party | 30,125 | (2,038,647 | ) | (2,008,522 | ) | |||||||
Net cash flows from investing activities | 593,468 | (2,265,919 | ) | (1,672,451 | ) | |||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from (repayments of) related party borrowing | (500,000 | ) | 500,000 | — | ||||||||
Proceeds from Series A preferred stock | 1,233,750 | 12,782,250 | 14,016,000 | |||||||||
Proceeds from Series C preferred stock | 3,855,000 | — | 3,855,000 | |||||||||
Proceeds from common stock sale | — | 1,288 | 1,288 | |||||||||
Proceeds from exercise of stock options | 2,160 | — | 2,160 | |||||||||
Offering costs paid in connection with Series A preferred stock offering | (755,152 | ) | (163,654 | ) | (918,806 | ) | ||||||
Net cash flows from financing activities | 3,835,758 | 13,119,884 | 16,955,642 | |||||||||
Net change in cash | (3,707,098 | ) | 10,456,707 | 6,749,609 | ||||||||
Cash, beginning of period | 10,456,707 | — | — | |||||||||
Cash, end of period | $ | 6,749,609 | $ | 10,456,707 | $ | 6,749,609 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||||||
Cash paid for: | ||||||||||||
Interest | $ | — | $ | — | ||||||||
Income taxes | $ | — | $ | — | ||||||||
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(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS (CONTINUED)
AND FINANCING ACTIVITIES
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(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2008 AND PERIOD FROM INCEPTION (NOVEMBER 22, 2006)
THROUGH MARCH 31, 2008 AND 2007
1. | Formation and nature of business: | |
Nature of business: | ||
MiMedx, Inc. (“MiMedx”) was incorporated in Florida in 2006. MiMedx entered into an Agreement and Plan of Merger (“Merger Agreement”) with a publicly-traded Nevada Corporation, Alynx, Co. (“Alynx”), a public shell company, on February 8, 2008. As a result of this transaction, MiMedx shareholders owned approximately 97% of the outstanding shares, thus giving MiMedx substantial control. | ||
Under U.S. generally accepted accounting principles (“GAAP”), MiMedx was deemed to be the accounting acquirer since the shareholders of MiMedx own a substantial majority of the issued and outstanding shares, and thus this reverse merger was accounted for as a capital transaction. | ||
On March 31, 2008, MiMedx Group, Inc., a Florida Corporation, and Alynx merged. As a result of this transaction, MiMedx Group, Inc. became the surviving corporation. The “Company” refers to MiMedx Group, Inc., a development stage company, as well as its two operating subsidiaries: MiMedx and SpineMedica, LLC. | ||
MiMedx acquired a license for the use, adoption and development of certain core technologies developed at the Shriners Hospital for Children and the University of South Florida Research Foundation. This technology focuses on biomaterials for soft tissue repair, such as tendons, ligaments and cartilage, as well as other biomaterial-based products for numerous other medical applications. The development of the licensed technologies will require continued research and development and, ultimately, the approval of the U.S. Food and Drug Administration (“FDA”) and/or foreign regulatory authorities in order for the Company to be able to generate revenues from the sale of its products. This process is expected to take at least two to four years, and there can be no assurance that the Company will be successful in its efforts to commercialize that licensed technology. | ||
On July 23, 2007, MiMedx acquired SpineMedica Corp. through its wholly-owned subsidiary, SpineMedica, LLC (“SpineMedica”) (Note 4). SpineMedica Corp. was incorporated in the State of Florida on June 9, 2005 and its successor SpineMedica, LLC was incorporated in the State of Florida on June 27, 2007 and holds a license for the use of certain developed technologies related to spine repair. SpineMedica also owns certain assets (equipment) for the production of products based on a poly-vinyl alcohol-based hydrogel, similar to Salubria® biomaterial. Salubria® biomaterial has been used in other medical device applications and is cleared for use in the United States by the Food and Drug Administration (“FDA”) as a nerve cuff. The development of the licensed technologies will require continued research and development and, ultimately, the approval of the FDA and/or foreign regulatory authorities in order for the Company to be able to generate revenues from the sale of its products. This process is expected to take from twelve months up to seven years depending on the type of product and regulatory pathway, and there can be no assurance that SpineMedica will be successful in its efforts to commercialize the licensed technology. SpineMedica is also pursing clearance by foreign regulatory authorities to commercialize its first product outside the United States. This process also depends on the type of product and is expected to take twelve months for less regulated products and approximately two years for more regulated products. | ||
Future products developed by SpineMedica may fall within less regulated classifications, allowing for earlier commercialization in the United States. | ||
The Company currently operates in one business segment, musculoskeletal products, which will include the design, manufacture and marketing of four major market categories: soft-tissue reconstructive products, fixation devices, spinal products and joint reconstruction products including tendons and ligaments of the hand and upper and lower extremity joint markets, and procedure-specific instrumentation required to implant reconstructive systems. Fixation devices may include internal, bone-to-bone fixation devices that do not address the spine. Spinal products include artificial spinal discs to treat cervical pain and degeneration as well as lumbar indications, facet arthroplasty, intervertebral spacers, spinous process spacers, and other spinal systems and implants, as well as orthobiologics. |
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The Company is a development stage enterprise and will remain as such until such time as significant revenues are generated, if ever. | ||
2. | Significant accounting policies: | |
Use of estimates: | ||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | ||
Principles of consolidation: | ||
The financial statements include the accounts of MiMedx Group, Inc. and its wholly-owned subsidiary MiMedx and, subsequent to July 23, 2007, its wholly-owned subsidiary, SpineMedica. All significant inter-company balances and transactions have been eliminated. | ||
Concentration of credit risk: | ||
Cash and cash equivalents are maintained with major financial institutions in the United States. Deposits with these banks exceed the amount of insurance provided by the FDIC on such deposits. Generally, these deposits may be redeemed upon demand. | ||
Cash and cash equivalents: | ||
Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less. | ||
Investment, related party: | ||
Investment, related party at March 31, 2007 consisted of a common stock warrant in SpineMedica Corp. and was classified as an available for sale security and recorded at its fair value. The warrant was cancelled in connection with the acquisition of SpineMedica Corp. on July 23, 2007 (see Note 4). The carrying value of the warrant on that date was recognized as part of the purchase consideration. | ||
Goodwill and intangible assets: | ||
Goodwill is not amortized but is tested at least annually for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Intangible assets with finite useful lives are amortized using the straight-line method over a period of 10 years, the remaining term of the patents underlying the licensing rights and intellectual property (considered to be the remaining useful life of the assets). | ||
Property and equipment: | ||
Property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives, principally five to seven years. Leasehold improvements are depreciated on a straight-line basis over the lesser of the estimated useful lives or the life of the lease. | ||
Impairment of long-lived assets: | ||
The Company evaluates the recoverability of its long-lived assets (finite lived intangible assets and property and equipment) whenever adverse events or changes in business climate indicate that the expected undiscounted future cash flows from the related assets may be less than previously anticipated. If the net book value of the related assets exceeds the expected undiscounted future cash flows of the assets, the carrying amount would be reduced to the present value of their expected future cash flows and an impairment loss would be recognized. There have been no impairment losses in the periods presented. |
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Research and development costs: | ||
Research and development costs consist of direct and indirect costs associated with the development of the Company’s technologies. These costs are expensed as incurred. | ||
Acquired in-process research and development: | ||
In connection with the acquisition of SpineMedica, the Company determined that approximately $7.2 million of the fair value of the acquisition price qualified as in-process research and development, and as such, this amount was expensed as research and development expense on the acquisition date (see Note 4). | ||
Income taxes: | ||
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that included the enactment date. Valuation allowances are recorded for deferred tax assets when the recoverability of such assets is not deemed more likely than not. | ||
Share-based compensation: | ||
The Company follows the provisions of Statement of Financial Accounting Standards No. 123R —Share-based Payments(“SFAS123R”) which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (options and warrants). | ||
Fair value of financial instruments: | ||
The fair value of due from related parties and note receivable, related party approximates its carrying amount due to its short-term maturity. The carrying value of due to related party and accounts payable and accrued expenses approximate their fair value due to the short-term nature of these liabilities. | ||
Fair value determination of privately-held securities: | ||
Prior to February 8, 2008, the fair values of the common stock as well as the common stock underlying options and warrants granted as part of asset purchase prices or as compensation were estimated by management with input from an unrelated valuation specialist. Determining the fair value of stock requires making complex and subjective judgments. The Company used the market approach to estimate the value of the enterprise at each date on which securities were issued or granted. The enterprise value was then allocated to preferred and common shares taking into account the enterprise value available to all stockholders and allocating that value among the various classes of stock based on the rights, privileges and preferences of the respective classes. There is inherent uncertainty in these estimates. | ||
Net loss per share / Reverse stock split | ||
Basic net loss per common share is computed using the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is typically computed using the weighted-average number of common and dilutive common equivalent shares from stock options, warrants and convertible preferred stock using the treasury stock method. | ||
For all periods presented, diluted net loss per share is the same as basic net loss per share, as the inclusion of equivalent shares from outstanding common stock options, warrants and convertible preferred stock would be anti-dilutive. All share and per share amounts for all periods presented have been adjusted to give effect to the reverse stock split discussed in Note 7. |
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The following table sets forth the computation of basic and diluted net loss per share for the year ended March 31, 2008 and the period from inception (November 22, 2006) to March 31, 2007: |
2008 | 2007 | |||||||
Net loss | $ | (17,371,475 | ) | $ | (650,777 | ) | ||
Denominator for basic earnings per share-weighted average shares | 17,909,903 | 8,537,000 | ||||||
Effect of dilutive securities: Stock options and warrants outstanding(a) | — | — | ||||||
Denominator for diluted earnings per share—weighted average shares adjusted for dilutive securities | 17,909,903 | 8,537,000 | ||||||
Loss per common share—basic and diluted | $ | (0.97 | ) | $ | (.08 | ) | ||
(a) | Securities outstanding that were excluded from the computation, prior to the use of the treasury stock method, because they would have been anti-dilutive are as follows: |
2008 | 2007 | |||||||
Stock options, warrants, and convertible preferred stock | 4,955,581 | 12,146,880 |
Recently issued accounting pronouncements: | ||
In June 2006, the Financial Accounting Standards Board (“FASB”) announced FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48), which is effective for fiscal year 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, “Accounting for Income Taxes”. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The adoption of FIN 48 did not result in any changes to either the beginning stockholders equity (April 1, 2007) or the Company’s financial position. | ||
In September 2006, the FASB issued Statement No. 157,Fair Value Measurements(“SFAS 157”). SFAS 157 clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The adoption of SFAS 157 on April 1, 2008 is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows. In February 2008, the FASB issued a staff position that delays the effective date of SFAS 157 for all nonfinancial assets and liabilities except for those recognized or disclosed at least annually. | ||
In February 2007, the FASB issued Statement No. 159,The Fair Value Option for Financial Assets and Financial Liabilities(“SFAS 159”), which establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The standard requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the company’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which the company has chosen to use fair value on the face of the balance sheet. The new Statement does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in SFAS 157. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The adoption of SFAS 159 on April 1, 2008 is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows. |
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In December 2007, the FASB issued Statements No. 141R,Business Combinations(“SFAS 141R”) and No. 160Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51(“SFAS 160”). SFAS 141R expands the scope of acquisition accounting to all transactions under which control of a business is obtained. Among other things, SFAS 141R requires that contingent consideration as well as contingent assets and liabilities be recorded at fair value on the acquisition date, and also requires transaction costs and costs to restructure the acquired company be expensed. SFAS 160 requires, among other things, that noncontrolling interests be recorded as equity in the consolidated financial statements. SFAS 141R and SFAS 160 are both effective January 1, 2009. The adoption of these standards will not have an impact on the Company’s 2008 and 2007 consolidated financial statements. | ||
In March 2008, the FASB issued Statement No. 161,Disclosures about Derivative Instruments and Hedging Activities(“SFAS 161”), which requires enhanced disclosures about how these instruments and activities affect the entity’s financial position, financial performance and cash flows. The standard requires disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity’s liquidity by requiring disclosure of derivative features that are credit risk-related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Because SFAS 161 requires enhanced disclosures but does not modify the accounting treatment of derivative instruments and hedging activities, the Company believes the adoption of this standard will have no impact on its financial position, results of operations or cash flows. | ||
3. | Liquidity and management’s plans: | |
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. For the period from inception (November 22, 2006) through March 31, 2008 the Company experienced net losses of $18,022,252 and cash used in operations of $8,533,582. As of March 31, 2008, the Company has not emerged from the development stage. In view of these matters, the ability of the Company to continue as a going concern is dependent upon the Company’s ability to generate additional financing sufficient to support its research and development activities, approval of developed products for sale by regulatory authorities, including the FDA, and ultimately to generate revenues sufficient to cover all costs. Since inception, the Company has financed its activities principally from the sale of equity securities and related party advances. The Company may seek to raise additional funds and such funds may not be available on favorable terms, or at all. Furthermore, if the Company issues equity or debt securities to raise additional funds, existing shareholders may experience dilution and the new equity or debt securities it issues may have rights, preferences and privileges senior to those of existing shareholders. In addition, if the Company raises additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to products or proprietary technologies, or grant licenses on terms that are not favorable. If the Company cannot raise funds on acceptable terms, the Company may not be able to develop or enhance products, obtain the required regulatory clearances or approvals, execute the Company’s business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements. Any of these events could adversely affect the Company’s ability to achieve the Company’s development and commercialization goals, which could have a material and adverse effect on the Company’s business, results of operations and financial condition. | ||
4. | SpineMedica Corp. acquisition: | |
On July 23, 2007, MiMedx purchased 100% of the capital stock of SpineMedica Corp. through a newly formed subsidiary, SpineMedica, LLC. SpineMedica’s results of operations and cash flows are included in the accompanying financial statements from July 23, 2007 through March 31, 2008. | ||
The acquisition was accounted for as a purchase and was accomplished through the issuance of 2,911,117 Common Shares of MiMedx (for the acquisition of the SpineMedica Corp.’s Common Shares) and the issuance of 5,922,397 Series B Convertible Preferred Shares of MiMedx and 5,922,398 Common Stock Warrants (for the acquisition of SpineMedica Corp. Preferred Stock). | ||
The Series B preferred stockholders had voting rights identical to those of common stockholders, were entitled to dividends only when, or if, declared by the Board of Directors and had preference over the common stockholders in the event of the Company’s liquidation. | ||
The Series B Preferred Stock was convertible into Common Stock of MiMedx at the option of the holder at any time on a one share for one share basis, subject to adjustment for stock splits, stock dividends, recapitalizations and the like. All preferred stock automatically was to convert to common stock upon the Company becoming a publicly traded company, an upstream merger or consolidation, a sale of substantially all the Company’s assets or the consent of holders of the majority of the then outstanding shares of Series B Preferred Stock. As a result of the Alynx merger transaction, discussed in Note 7, all Series B Preferred Stock was exchanged for New Series A Preferred Stock. |
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• | Preferred Stock sales for at least $3.00 per share | ||
• | Sale of a controlling interest in the Company of at least $3.00 per share | ||
• | Issuance of securities by the Company with $2,000,000 minimum proceeds at a minimum price of $3.00 per share | ||
• | Trading of the Series B Preferred Stock on a national or regional exchange, quotation system, or the OTCBB at a closing price of at least $3.00 per share for 15 out of 20 days on a rolling basis. |
Stock options: | ||
Exercise price | $1.80 | |
Range of expiration dates | April 2011 - April 2017 | |
Warrants: | ||
Exercise price | $1.80 | |
Expiration date | October 2010 |
Finally, the Company’s note receivable, related party, deferred interest income related thereto and common stock warrant in SpineMedica (recorded as investment, related party) were cancelled pursuant to this transaction. | ||
The SpineMedica acquisition was accounted for as a purchase and is summarized as follows (in thousands $): |
Purchase price components: | ||||
Common stock issued | $ | 2,300 | ||
Preferred stock issued | 7,403 | |||
Common stock warrants issued | 20 | |||
Expenses incurred on acquisition | 238 | |||
Cancellation of note receivable from and warrants in SpineMedica | 2,049 | |||
Total consideration | $ | 12,010 | ||
Allocation of purchase price: | ||||
Cash (acquired at closing) | $ | 1,957 | ||
Prepaid expenses and other current assets | 19 | |||
Property and equipment | 464 | |||
Intangible assets (licenses - 10 year amortization period) | 2,399 | |||
Deposits | 34 | |||
Current liabilities | (898 | ) | ||
Net assets received | 3,975 | |||
Goodwill | 858 | |||
In-process research and development (1) | 7,177 | |||
$ | 12,010 | |||
(1) | The in-process research and development (“IPR&D”) acquired was related to two products, a cervical total disc replacement device and a posterior lumbar interbody fusion device. |
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• | Material cash inflows from the products were anticipated to commence in 2008. |
• | Material anticipated changes from historical pricing and margins were not considered as there was no history for the products. There were projected increases in expenditures associated with the products development over the historical levels in order to advance the products through any regulatory agencies. |
• | The risk adjusted discount rate applied to the estimated future cash flows was 43%. |
Period from | Period from | |||||||||||
Inception | Inception | |||||||||||
Year | (November 22, 2006) | (November 22, 2006) | ||||||||||
Ended | through | through | ||||||||||
March 31, 2008 | March 31, 2007 | March 31, 2008 | ||||||||||
Loss from operations | $ | (12,482,000 | ) | $ | (9,233,000 | ) | $ | (21,715,000 | ) | |||
Net loss | (12,073,000 | ) | (9,202,000 | ) | $ | (21,275,000 | ) |
5. | Property and equipment: | |
Property and equipment consist of the following at March 31,: |
2008 | 2007 | |||||||
Leasehold improvements | $ | 746,382 | $ | — | ||||
Furniture and equipment | 897,642 | 8,072 | ||||||
1,644,024 | 8,072 | |||||||
Less accumulated depreciation | (191,588 | ) | (807 | ) | ||||
$ | 1,452,436 | $ | 7,265 | |||||
6. | Intangible assets and royalty agreement: | |
Intangible assets activity is summarized as follows: |
License | License | License | Intellectual | |||||||||||||||||
(a) | (b) | (c) | Property (d) | Total | ||||||||||||||||
Inception | — | — | — | — | — | |||||||||||||||
Additions | 996,000 | — | — | — | 996,000 | |||||||||||||||
Amortization | (14,933 | ) | — | — | — | (14,933 | ) | |||||||||||||
March 31, 2007 | 981,067 | — | — | — | 981,067 | |||||||||||||||
Additions | — | 2,399,001 | 2,596,000 | 116,000 | 5,111,001 | |||||||||||||||
Amortization | (99,601 | ) | (203,514 | ) | — | (5,800 | ) | (308,915 | ) | |||||||||||
March 31, 2008 | 881,466 | 2,195,487 | 2,596,000 | 110,200 | 5,783,153 | |||||||||||||||
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(a) | On January 29, 2007, the Company acquired a license from Shriners Hospitals for Children and University of South Florida Research Foundation, Inc. which is further discussed in Note 1. The acquisition price of this license was a one-time fee of $100,000 and 1,120,000 shares of common stock valued at $896,000 (based upon the estimated fair value of the common stock on the transaction date). Within thirty days after the receipt by the Company of approval by the FDA allowing the sale of the first licensed product, the Company is required to pay an additional $200,000 to the licensor. This amount is not recorded as a liability as of March 31, 2008 based on its contingent nature. The Company will also be required to pay a royalty of 3% on all commercial sales revenues of the licensed products. | |
(b) | License from SaluMedica, LLC (SaluMedica) for the use of certain developed technologies related to spine repair. This license was acquired through the acquisition of SpineMedica Corp. (see Notes 1 and 4). | |
(c) | On March 31, 2008, the Company entered into a license agreement for the use of certain developed technologies related to surgical sheets made of polyvinyl alcohol cryogel. The acquisition price of the asset was 400,000 shares of common stock valued at $2,596,000 (based upon the closing price of the common stock on the transaction date). The agreement also provides for the issuance of an additional 600,000 shares upon the Company meeting certain milestones related to future sales. At March 31, 2008, there are no amounts accrued for this obligation due to its contingent nature. | |
(d) | During the year ended March 31, 2008, the Company issued 200,000 stock options valued at $116,000 for certain technologies relating to medical device designs for products used in hand surgery. The agreement also provides for royalty payments upon approval and sale of certain products (Note 10). At March 31, 2008, there are no amounts accrued for this obligation due to its contingent nature. |
Year ending March 31, | ||||
2009 | $ | 666,821 | ||
2010 | 666,821 | |||
2011 | 666,821 | |||
2012 | 666,821 | |||
2013 | 666,821 | |||
Thereafter | 2,449,048 | |||
$ | 5,783,153 | |||
7. | Stockholders’ equity: | |
Alynx merger transaction: | ||
On January 29, 2008 MiMedx entered into an Agreement and Plan of Merger (“Merger Agreement”) with Alynx. The merger transaction became effective on February 8, 2008. | ||
In accordance with the Merger Agreement, Alynx issued 52,283,090 shares of common stock to MiMedx shareholders based on a conversion rate of 3.091421 for each share of MiMedx common stock. All Preferred Stock of MiMedx (Series A, B and C) was exchanged for a Series A Preferred Stock of Alynx based on a conversion rate of one share of Alynx Series A Preferred Stock for every five shares of MiMedx Preferred Stock . The Alynx Series A preferred stock was convertible into common stock and contained no cash redemption features. As of March 31, 2008, all of the Alynx Series A Preferred Stock shares were converted into common shares of the Company at a rate of five shares of Common Stock of the Company for every one share of Series A Preferred Stock of Alynx. | ||
The Company incurred approximately $1,870,000 of merger costs related to the merger acquisition. These costs, (including 205,851 shares of common stock which had a value of approximately $1,126,000) are included in general and administrative expenses in the statement of operations for the year ended March 31, 2008. |
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Because Alynx hadde minimisoperations, the merger transaction was accounted for as a reverse acquisition (recapitalization) whereby MiMedx was deemed to be the acquirer for accounting purposes. | ||
Reverse Stock Split: | ||
On March 31, 2008, with shareholder approval, the Company affected a reverse stock split. Each share of common stock was converted into .3234758 shares of post reverse split shares of common stock. All share amounts have been retro-actively adjusted for all periods presented. | ||
Conversion of Alynx Series A Preferred Stock: | ||
The following series of preferred stock were issued prior to the Alynx merger transaction and, as previously discussed, were all redeemed through the issuance of Alynx Series A Preferred Stock: |
identical to those of common stockholders, were entitled to dividends only when, or if, declared by the Board of Directors and had preference over the common stockholders in the event of the Company’s liquidation. The preferred stock was convertible into common stock at the option of the holder at any time on a one share for one share basis, subject to adjustment for stock splits, stock dividends, recapitalizations and the like.
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Range of | Weighted- | |||||||||||||||
Exercise | average Option | Intrinsic | ||||||||||||||
Shares | Prices | Price Per Share | Value | |||||||||||||
Balance at November 22, 2006 | — | $ | — | $ | — | |||||||||||
Options granted | 410,000 | .0001 - 1.00 | .66 | |||||||||||||
Outstanding at March 31, 2007 | 410,000 | .0001 - 1.00 | .66 | |||||||||||||
Options exercisable at March 31, 2007 | 177,500 | .0001 - 1.00 | .80 | $ | 110,586 | |||||||||||
Options granted April 1, 2007 - March 31, 2008 | 3,102,500 | 1.00 - 5.44 | 2.51 | |||||||||||||
SpineMedica outstanding options assumed at July 23, 2007 by MiMedx, Inc. | 1,333,750 | 1.80 | 1.80 | |||||||||||||
Options expired April 1, 2007 - March 31, 2008 | (600,000 | ) | 1.80 - 2.40 | 1.93 | ||||||||||||
Options outstanding at March 31, 2008 | 4,246,250 | .0001 - 5.44 | 2.19 | |||||||||||||
Options exercisable at March 31, 2008 | 2,036,667 | $ | .0001 - 5.44 | $ | 4.56 | $ | 964,598 | |||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted- | ||||||||||||||||||||
Average | Weighted- | Weighted- | ||||||||||||||||||
Number | Remaining | Average | Number | Average | ||||||||||||||||
Exercise Price | Outstanding | Contractual Life | Exercise Price | Exercisable | Exercise Price | |||||||||||||||
$.0001 — 1.00 | 1,270,000 | 3.94 | $ | .89 | 529,167 | $ | .87 | |||||||||||||
1.80 — 2.40 | 2,376,250 | 6.39 | 2.06 | 1,357,500 | 1.93 | |||||||||||||||
5.44 | 600,000 | 4.90 | 5.44 | 150,000 | 5.44 | |||||||||||||||
4,246,250 | 5.45 | 2.19 | 2,036,667 | 4.56 | ||||||||||||||||
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Weighted | ||||||||
Average | ||||||||
Grant Date | ||||||||
Unvested Stock Options | Shares | Fair Value | ||||||
Balance at November 22, 2006 | — | $ | — | |||||
Granted | 410,000 | .20 | ||||||
Vested | (177,500 | ) | .24 | |||||
Unvested at March 31, 2007 | 232,500 | .17 | ||||||
SpineMedica unvested options assumed at July 23, 2007 by MiMedx, Inc. | 376,875 | 1.80 | ||||||
Granted | 3,102,500 | .80 | ||||||
Vested | (902,292 | ) | .46 | |||||
Expired | (600,000 | ) | .30 | |||||
Unvested at March 31, 2008 | 2,209,583 | .49 | ||||||
Year Ended | Period Ended | |||
March 31, 2008 | March 31, 2007 | |||
Dividend yield | 0% | 0% | ||
Expected volatility | 45.53% to 64.97% | 59.29% to 59.89% | ||
Risk free interest rates | 2.24% to 5.10% | 4.54% to 4.74% | ||
Expected lives | 2.75 to 5 years | 1.5 to 3.5 years |
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Weighted Average | ||||||||
Exercise | ||||||||
Number | Price per Share | |||||||
Warrants outstanding at November 22, 2006 | — | $ | — | |||||
Warrants issued during the period ended March 31, 2007 | 524,080 | 1.25 | ||||||
Warrants outstanding at March 31, 2007 | 524,080 | $ | 1.25 | |||||
Warrants assumed by MiMedx on July 23, 2007 (Note 4) | 175,251 | 1.80 | ||||||
Warrants issued on July 23, 2007 (Note 4) | 5,922,398 | .01 | ||||||
Warrants cancelled during the year ended March 31, 2008 (Note 4) | (5,922,398 | ) | .01 | |||||
Warrants issued during the year ended March 31, 2008 | 10,000 | 3.00 | ||||||
Warrants outstanding at March 31, 2008 | 709,331 | $ | 1.41 | |||||
8. | Income taxes: | |
Significant items comprising the Company’s deferred tax assets and liabilities are as follows at March 31,: |
2008 | 2007 | |||||||
Deferred tax assets: | ||||||||
Share-based compensation expense | $ | 398,000 | $ | 12,000 | ||||
Furniture, software and equipment | 283,000 | — | ||||||
Accrued expenses | 51,000 | — | ||||||
Net operating loss carryforward | 5,251,000 | 231,000 | ||||||
5,983,000 | 243,000 | |||||||
Deferred tax liabilities: | ||||||||
Intangible assets | (78,000 | ) | — | |||||
Valuation allowance | (5,905,000 | ) | (243,000 | ) | ||||
$ | — | $ | — | |||||
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2008 | 2007 | |||||||
Federal statutory rate | 34.00 | % | 34.00 | % | ||||
State taxes, net of federal benefit | 3.96 | % | 3.96 | % | ||||
Acquisition adjustment | 17.08 | % | — | % | ||||
Permanent difference | (22.45 | %) | (0.80 | %) | ||||
Valuation allowance | (32.59 | %) | (37.16 | %) | ||||
— | % | — | % | |||||
9. | Related party transactions: |
Due from Dimensional Research, Inc. (a) | $ | 28,734 | ||
Due from Surgi-Vision, Inc. (a) | 1,391 | |||
$ | 30,125 | |||
(a) | Non-interest bearing, unsecured advances due from companies related through partial common ownership. Amounts were repaid as of March 31, 2008. |
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10. | Commitments: |
Years ending March 31, | ||||
2009 | $ | 296,000 | ||
2010 | 275,000 | |||
2011 | 31,000 | |||
Total minimum payments | $ | 602,000 | ||
Years ending March 31, | ||||
2009 | $ | 1,276,000 | ||
2010 | 1,015,000 | |||
Total minimum payments | $ | 2,291,000 | ||
Years ending March 31, | ||||
2009 | $ | 245,000 | ||
2010 | 279,000 | |||
2011 | 285,000 | |||
2012 | 190,000 | |||
2013 | 56,000 | |||
Total minimum payments | $ | 1,055,000 | ||
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(a) | Financial Statements. |
• | Report of Independent Registered Public Accounting Firm | ||
• | Consolidated Balance Sheets as of March 31, 2008 and March 31, 2007 | ||
• | Consolidated Statements of Operations for the year ended March 31, 2008 and the periods from inception (November 22, 2006) through March 31, 2007 and 2008. | ||
• | Consolidated Statements of Shareholders’ Equity and for the year ended March 31, 2008 and the period from inception (November 22, 2006) through March 31, 2007. | ||
• | Consolidated Statements of Cash Flows for the year ended March 31, 2008 and the periods from inception (November 22, 2006) through March 31, 2007 and 2008. | ||
• | Notes to Consolidated Financial Statements |
(b) | Exhibits. |
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MIMEDX GROUP, INC. | ||||
Date: June 27, 2008 | By: | /s/ John C. Thomas, Jr. | ||
John C. Thomas, Jr. | ||||
Chief Financial Officer | ||||
Signature / Name | Title | Date | ||
/s/ Thomas W. D’Alonzo | Chief Executive Officer (principal executive officer) | June 27, 2008 | ||
/s/ John C. Thomas, Jr. | Chief Financial Officer and Secretary (principal financial and accounting officer) | June 27, 2008 | ||
/s/ Steve Gorlin | Chairman of the Board | June 27, 2008 | ||
Steve Gorlin | ||||
/s/ Kurt M. Eichler | Director | June 27, 2008 | ||
Kurt M. Eichler | ||||
/s/ Charles E. Koob | Director | June 26, 2008 | ||
Charles E. Koob | ||||
/s/ Larry W. Papasan | Director | June 27, 2008 | ||
Larry W. Papasan | ||||
/s/ Ronald G. Wallace | Director | June 27, 2008 | ||
Ronald G. Wallace |
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Exhibit Number | Description | |
2.1(1) | Agreement and Plan of Merger, dated as of January 29, 2008, between Alynx, Co., MMX Acquisition Corp., and MiMedx, Inc. | |
2.2(1) | Articles of Merger, dated February 8, 2008, between MMX Acquisition Corp. and MiMedx, Inc. | |
2.2(2) | Agreement and Plan of Merger, dated as of March 10, 2008, between Alynx, Co. and MiMedx Group, Inc. | |
3.1(3) | Articles of Incorporation of MiMedx Group, Inc. | |
3.2(3) | Bylaws of MiMedx Group, Inc. | |
4.1(1) | Amended and Restated Registration Rights Agreement dated July 23, 2007 between MiMedx, Inc. and the holders of Preferred Stock | |
4.2(1) | Registration Rights Agreement dated February 8, 2008 between Alynx, Co. and certain Alynx shareholders | |
4.3(1) | Form of Warrant to purchase MiMedx common stock | |
10.1(1)* | MiMedx, Inc. 2006 Stock Incentive Plan | |
10.1(1) * | Declaration of Amendment to MiMedx, Inc. 2006 Stock Incentive Plan | |
10.2(1) * | Form of Incentive Award Agreement under the MiMedx, Inc. 2006 Stock Incentive Plan, including a list of officers and directors receiving options thereunder | |
10.3(1) * | Form of Nonqualified Incentive Award Agreement under the MiMedx, Inc. 2006 Stock Incentive Plan, including a list of officers and directors receiving options thereunder | |
10.4(1) * | MiMedx, Inc. 2005 Assumed Stock Plan (formerly the SpineMedica Corp. 2005 Employee, Director and Consultant Stock Plan) | |
10.5(1) * | Declaration of Amendment to MiMedx, Inc. 2005 Assumed Stock Plan (formerly the SpineMedica Corp. 2005 Employee, Director and Consultant Stock Plan) | |
10.6(1) * | Form of Incentive Award Agreement under the MiMedx, Inc. Assumed 2005 Stock Plan (formerly the SpineMedica Corp. 2005 Employee, Director and Consultant Stock Plan), including a list of officers and directors receiving options thereunder | |
10.7(1) * | Form of Nonqualified Incentive Award Agreement under the MiMedx, Inc. Assumed 2005 Stock Plan (formerly the SpineMedica Corp. 2005 Employee, Director and Consultant Stock Plan) | |
10.8(1) * | MiMedx, Inc. Assumed 2007 Stock Plan (formerly the SpineMedica Corp. 2007 Stock Incentive Plan) | |
10.9(1) * | Declaration of Amendment to MiMedx, Inc. Assumed 2007 Stock Plan (formerly the SpineMedica Corp. 2007 Stock Incentive Plan) | |
10.10(1) * | Form of Incentive Award Agreement under the MiMedx, Inc. Assumed 2007 Stock Plan (formerly the SpineMedica Corp. 2007 Stock Incentive Plan) | |
10.11(1) * | Form of Nonqualified Incentive Award Agreement under the MiMedx, Inc. Assumed 2007 Stock Plan (formerly the SpineMedica Corp. 2007 Stock Incentive Plan) | |
10.12(1) | Form of MiMedx, Inc. Employee Proprietary Information and Inventions Assignment Agreement | |
10.13*(1) | Employment Agreement between MiMedx, Inc. and Steve Gorlin | |
10.14*(1) | Employment Agreement between MiMedx, Inc. and John C. Thomas, Jr. | |
10.15*(1) | Employment Agreement between MiMedx, Inc. and Matthew J. Miller | |
10.16*(1) | Employment Agreement between MiMedx, Inc. and Thomas W. D’Alonzo | |
10.17*(1) | Employment Agreement between MiMedx, Inc. and Maria Steele | |
10.18*(1) | Employment Agreement between MiMedx, Inc. and Thomas Koob, Ph.D. | |
10.19*(1) | Employment Agreement between MiMedx, Inc. and Louise Focht | |
10.20*(4) | Employment Agreement between Alynx, Co. and Brian Splan | |
10.21(1) | Sublease Agreement between MiMedx, Inc. and The Gorlin Companies, LLC dated April 1, 2007 | |
10.22(1) | Lease Agreement between MiMedx, Inc. and the Andrews Institute Medical Park, LLC dated June 12, 2007 |
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Exhibit Number | Description | |
10.23(1) | Lease between MiMedx, Inc. and University of South Florida Research Foundation, Incorporated dated March 6, 2007 | |
10.24(1) | Amendment to Lease Agreement between MiMedx, Inc. and the Andrews Institute Medical Park, LLC dated June 12, 2007 | |
10.25(1) | Agreement and Plan of Merger among MiMedx, Inc., SpineMedica Corp., and SpineMedica, LLC dated as of July 23, 2007 | |
10.26(1) | Consulting Agreement between MiMedx, Inc. and James Andrews, M.D. | |
10.27# | Consulting Agreement between MiMedx, Inc. and Thomas Graham, M.D. | |
10.28(1) | Consulting Agreement between MiMedx, Inc. and Joseph Story, M.D. | |
10.29(1) | Form of MiMedx, Inc. Physician Advisory Board Consulting Agreement | |
10.30(1) | Joint Development Agreement between MiMedx, Inc. and Offray Specialty Narrow Fabrics, Inc. dated October 18, 2007 | |
10.31(1) | Collaborative Research and Evaluation Agreement between MiMedx, Inc. and Regeneration Technologies, Inc. dated November 1, 2007 | |
10.32(1) | Technology License Agreement between MiMedx, Inc., Shriners Hospitals for Children, and University of South Florida Research Foundation dated January 29, 2007 | |
10.33(1) | Technology License Agreement between SpineMedica Corp. and SaluMedica, LLC dated August 12, 2005 | |
10.34(1) | Trademark License Agreement between SaluMedica, LLC and SpineMedica Corp. dated August 12, 2005 | |
10.35(1) | Technology License Agreement between SpineMedica Corp. and SaluMedica, LLC dated August 3, 2007 | |
10.36(1) | First Amendment Technology License Agreement between SpineMedica Corp. and SaluMedica, LLC dated August 3, 2007 | |
10.37(1) | Trademark License Agreement between SaluMedica, LLC and SpineMedica Corp dated August 13, 2007 | |
10.38(1) | Acknowledgement of Georgia Tech Research Corporation dated August 12, 2005 | |
10.39(1) | License Agreement between Georgia Tech Research Corporation and Restore Therapeutics, Inc. dated March 5, 1998 | |
10.40(1) | First Amendment to License Agreement between Georgia Tech Research Corporation and Restore Therapeutics, Inc. dated November 18, 1998 | |
10.41(1) | Second Amendment to License Agreement between Georgia Tech Research Corporation and SaluMedica, LLC (f/k/a Restore Therapeutics, Inc.) dated February 28, 2005 | |
10.42(1) | Third Amendment to License Agreement between Georgia Tech Research Corporation and SaluMedica, LLC dated August 12, 2005 | |
10.43(1) | Assignment of Invention and Non-Provisional Patent Application from David N. Ku to SpineMedica Corp. dated August 11, 2005 | |
10.44(1) | Assignment of Invention and Non-Provisional Patent Application from SaluMedica, LLC to SaluMedica, LLC dated August 12, 2005 | |
10.45(1) | Form of SpineMedica, Corp. Employee Proprietary Information and Inventions Assignment Agreement | |
10.46(1) | Purchase Agreement between SpineMedica Corp. and SaluMedica, LLC dated March 12, 2007 | |
10.47(1) | Letter Agreement between MiMedx, Inc. and SaluMedica, LLC dated June 26, 2007 | |
10.48(1) | Materials Transfer Agreement dated March 28, 2007 between Kensey Nash Corporation and MiMedx, Inc. | |
10.49(1) | Materials Transfer Agreement dated June 7, 2007 between Kensey Nash Corporation and MiMedx, Inc. | |
10.50(1) | Industrial Lease Agreement between SpineMedica Corp. and Franklin Forest Investors, LLC dated April 25, 2007 | |
10.51(1) | Sublease and Agreement dated April 9, 2007 between CCA Global Partners, Inc. (f/k/a Carpet Co-op of America Association) and SpineMedica, Corp. & Landlord consent | |
10.52(5) | Investment Agreement dated March 31, 2008 between MiMedx Group, Inc. and SaluMedica, LLC | |
10.53(5) | Technology License Agreement dated March 31, 2008 between MiMedx Group, Inc. and SaluMedica, LLC |
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Exhibit Number | Description | |
10.54(5) | Trademark License Agreement dated March 31, 2008 between MiMedx Group, Inc. and SaluMedica, LLC | |
10.55(6) | Cost Recovery and Revenue Sharing Letter Agreement dated May 22, 2008 between MiMedx, Inc. and Thomas J. Graham, M.D. | |
10.56(6) | Finder’s Fee Letter Agreement dated May 22, 2008 between MiMedx, Inc. and Thomas J. Graham, M.D. | |
10.57*# | Assignment and Assumption of Employment Agreement of Steve Gorlin between MiMedx Group, Inc. and MiMedx, Inc. dated June 20, 2008 | |
10.58*# | Assignment and Assumption of Employment Agreement of Thomas W. D’Alonzo between MiMedx Group, Inc. and MiMedx, Inc. dated June 21, 2008 | |
10.59*# | Assignment and Assumption of Employment Agreement of John C. Thomas, Jr. between MiMedx Group, Inc. and MiMedx, Inc. dated June 24, 2008 | |
10.60*# | Assignment and Assumption of Employment Agreement of Matthew J. Miller between MiMedx Group, Inc. and MiMedx, Inc. dated June 23, 2008 | |
10.61*# | Assignment and Assumption of Employment Agreement of Brian J. Splan between MiMedx, Inc. and MiMedx Group, Inc. dated June 20, 2008 | |
10.62*# | Consulting Agreement between SpineMedica Corp. and Randal Betz, M.D. | |
10.63*# | Consulting Agreement between SpineMedica Corp. and Ronald DeWald, M.D. | |
10.64*# | Form of SpineMedica Corp. Physician Advisory Board Consulting Agreement | |
14.1(7) | Code of Business Conduct and Ethics | |
16.1(8) | Letter From Aidman Piser Dated June 12, 2008 | |
21.1(1) | Subsidiaries of MiMedx Group, Inc. | |
31.1# | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Acts of 2002 | |
31.2# | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Acts 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 |
* | Indicates a management contract or compensatory plan or arrangement | |
# | Filed herewith |
(1) | Form 8-K filed February 8, 2008 | |
(2) | Schedule 14A filed March 10, 2008 | |
(3) | Form 8-K filed April 2, 2008 | |
(4) | Form 8-K filed February 25, 2008 | |
(5) | Form 8-K filed April 4, 2008 | |
(6) | Form 8-K filed May 29, 2008 | |
(7) | Form 8-K filed May 1, 2008 | |
(8) | Form 8-K filed June 13, 2008 |
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