mdxg-20220331

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

March 31, 2022


☐			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

Accelerated Filer ¨

Non-accelerated filer ¨

(Do not check if a smaller reporting company)

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 113,352,746 shares of the registrant’s common stock, par value $0.001 per share, outstanding as of April 27, 2022.

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’ (Deficit) Equity	8
	Condensed Consolidated Statements of Cash Flows	9
	Notes to the Condensed Consolidated Financial Statements	10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4	Controls and Procedures	29
Part II OTHER INFORMATION
Item 1	Legal Proceedings	30
Item 1A	Risk Factors	30
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3	Defaults upon Senior Securities	31
Item 4	Mine Safety Disclosures	31
Item 5	Other Information	31
Item 6	Exhibits	32
Signatures		32

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.

Important Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements. 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, as illustrated by our 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 the sufficiency of our liquidity and existing capital resources to implement our current business priorities;

•our expectations regarding our ability to fund our ongoing and future operating costs;

•our expectations regarding future income tax liability;

•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, including our existing and planned investigative new drug application and pre-market approval requirements; current plans, designs, expected timelines, and expectations for success of our clinical trials; and our expectations regarding timing and receipt of necessary regulatory approvals for certain of our products, including Biological License Applications (“BLAs”);

•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 manufacture certain of our products in compliance with current Good Manufacturing Practices (“CGMP”) in sufficient quantities to meet current and potential demand;

•our expectations regarding costs relating to compliance with regulatory requirements, including those arising from our clinical trials, pursuit of BLAs, and CGMP compliance;

•the likelihood, timing, and scope of possible regulatory approval and commercial launch of our late-stage product candidates and new indications for our products;

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

•our expectations regarding future revenue growth;

•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 the outcome of pending litigation and investigations;

•our expectations regarding the ongoing and future effects arising from the investigation conducted by the Audit Committee (the “Audit Committee”) of our Board of Directors (the “Board”) that concluded in May 2019 relating to allegations regarding certain sales and distribution practices at the Company and certain other matters (the “Investigation” or the “Audit Committee Investigation”), the restatement of our consolidated financial statements previously filed in our Annual Report for the year ended December 31, 2016, as well as selected unaudited condensed consolidated financial data as of and for the years ended December 31, 2015 (Restated) and 2014 (Restated), which reflected adjustments to our previously filed consolidated financial statements as of and for the years ended December 31, 2015 and 2014 (collectively, the “Restatement”), and related litigation;

•the ongoing and future effects arising from the COVID-19 pandemic (“Covid-19”) on our business, employees, suppliers and other third parties with whom we do business, and our responses intended to mitigate such effects;

•demographic and market trends;

•our expectations regarding research and development costs, including those arising from filing additional investigative new drug applications and pursuing new BLAs; 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, 2021 (our “2021 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on February 28, 2022.

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 apply 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. 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)


	March 31, 2022		December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	75,676	$	87,083
Accounts receivable, net	37,674		40,353
Inventory	13,170		11,389
Prepaid expenses	6,136		6,146
Income tax receivable	680		743
Other current assets	2,571		2,809
Total current assets	135,907		148,523

Property and equipment, net	8,759		9,165
Right of use asset	4,364		4,696
Goodwill	19,976		19,976
Intangible assets, net	5,265		5,383

Other assets	172		186
Total assets	$	174,443	$	187,929
LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	8,120	$	7,385
Accrued compensation	17,102		23,595
Accrued expenses	9,812		9,812




Other current liabilities	1,557		1,565
Total current liabilities	36,591		42,357
Long term debt, net	48,239		48,127
Other liabilities	4,553		4,869
Total liabilities	$	89,383	$	95,353
Commitments and contingencies (Note 13)
Convertible preferred stock Series B; $0.001 par value; 100,000 shares authorized, issued and outstanding at March 31, 2022 and December 31, 2021	$	92,494	$	92,494
Stockholders' (deficit) equity
Preferred stock Series A; $0.001 par value; 5,000,000 shares authorized, 0 issued and outstanding at March 31, 2022 and December 31, 2021	$	—	$	—
Common stock; $0.001 par value; 187,500,000 shares authorized; 113,525,178 issued and 113,352,410 outstanding at March 31, 2022 and 112,703,926 issued and 111,925,216 outstanding at December 31, 2021	114		113
Additional paid-in capital	165,490		165,695
Treasury stock at cost; 172,768 shares at March 31, 2022 and 778,710 shares at December 31, 2021	(840)		(4,017)
Accumulated deficit	(172,198)		(161,709)
Total stockholders' (deficit) equity	(7,434)		82
Total liabilities, convertible preferred stock, and stockholders’ (deficit) equity	$	174,443	$	187,929

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 March 31,
	2022		2021

Net sales	$	58,894	$	59,967
Cost of sales	9,936		9,641
Gross profit	48,958		50,326

Operating expenses:
Selling, general and administrative	49,570		45,404
Research and development	5,964		4,339
Investigation, restatement and related	2,552		7,196
Amortization of intangible assets	172		239

Operating loss	(9,300)		(6,852)

Other expense, net

Interest expense, net	(1,126)		(1,472)

Loss before income tax provision	(10,426)		(8,324)
Income tax provision expense	(63)		(58)
Net loss	$	(10,489)	$	(8,382)

Net loss available to common shareholders (Note 9)	$	(12,075)	$	(9,850)


Net loss per common share - basic	$	(0.11)	$	(0.09)
Net loss per common share - diluted	$	(0.11)	$	(0.09)

Weighted average common shares outstanding - basic	111,615,839		109,401,383
Weighted average common shares outstanding - diluted	111,615,839		109,401,383

See notes to unaudited condensed consolidated financial statements

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


	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	—	—		3,998		—	—		—		3,998

Exercise of stock options	—	—		(972)		(124,334)	1,138		—		166

Issuance of restricted stock	821,252	1		(3,237)		(732,053)	3,236		—		—
Restricted stock canceled/forfeited	—	—		6		667	(6)		—		—


Shares repurchased for tax withholding	—	—		—		249,778	(1,191)		—		(1,191)
Net loss	—	—		—		—	—		(10,489)		(10,489)
Balance at March 31, 2022	113,525,178	$	114	$	165,490	172,768	$	(840)	$	(172,198)	$	(7,434)


	Common Stock Issued			Additional Paid - in		Treasury Stock			Accumulated
	Shares	Amount		Capital		Shares	Amount		Deficit		Total
Balance at December 31, 2020	112,703,926	$	113	$	158,610	1,773,683	$	(7,449)	$	(151,424)	$	(150)

Deemed dividends	—	—		(462)		—	—		—		(462)
Share-based compensation expense	—	—		3,244		—	—		—		3,244
Exercise of stock options	—	—		(1,364)		(310,813)	2,279		—		915
Issuance of restricted stock	—	—		(3,596)		(742,001)	3,596		—		—
Restricted stock shares canceled/forfeited	—	—		301		35,589	(301)		—		—
Shares repurchased for tax withholding	—	—		—		326,839	(3,216)		—		(3,216)
Net loss	—	—		—		—	—		(8,382)		(8,382)
Balance at March 31, 2021	112,703,926	$	113	$	156,733	1,083,297	$	(5,091)	$	(159,806)	$	(8,051)

See notes to unaudited condensed consolidated financial statements

MIMEDX GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net loss	$	(10,489)	$	(8,382)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Share-based compensation	3,998		3,244
Depreciation	860		1,161
Amortization of intangible assets	172		239
Amortization of deferred financing costs	112		415
Non-cash lease expenses	295		237
Accretion of asset retirement obligation	22		17
(Gain) loss on fixed asset disposal	(15)		236


Increase (decrease) in cash resulting from changes in:
Accounts receivable	2,679		3
Inventory	(1,781)		(1,221)
Prepaid expenses	11		910
Income taxes	63		54
Other assets	(298)		319
Accounts payable	456		(936)
Accrued compensation	(6,494)		(2,314)
Accrued expenses	550		(484)
Other liabilities	(364)		(177)
Net cash flows used in operating activities	(10,223)		(6,679)

Cash flows from investing activities:
Purchases of equipment	(118)		(1,941)
Patent application costs	(54)		(153)
Principal payments from note receivable	—		15
Proceeds from sale of equipment	24		—
Net cash flows used in investing activities	(148)		(2,079)

Cash flows from financing activities:
Stock repurchased for tax withholdings on vesting of restricted stock	(1,191)		(3,216)
Proceeds from exercise of stock options	166		915
Principal payments on finance lease	(11)		(7)
Net cash flows used in financing activities	(1,036)		(2,308)

Net change in cash	(11,407)		(11,066)

Cash and cash equivalents, beginning of period	87,083		95,812
Cash and cash equivalents, end of period	$	75,676	$	84,746

See notes to unaudited condensed consolidated financial statements

MIMEDX GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

1.Nature of Business

MiMedx Group, Inc. (together with its subsidiaries, except where the context otherwise requires, “MIMEDX,” or the “Company”) is a transformational placental biologics company, developing and distributing placental tissue allografts with patent-protected, proprietary processes for multiple sectors of healthcare. As a pioneer in placental biologics, the Company is focused on addressing unmet clinical needs in the areas of advanced wound care, surgical recovery applications, and musculoskeletal conditions. The Company derives its products from human placental tissues and process these tissues using its proprietary methods, including the PURION® process. The Company applies Current Good Tissue Practices, Current Good Manufacturing Practices, and terminal sterilization to produce its allografts. MIMEDX provides products primarily in the wound care, burn, and surgical recovery sectors of healthcare. All of its products are regulated by the U.S. Food & Drug Administration (“FDA”).

The Company’s business model is focused primarily on the United States of America but the Company is pursuing opportunities for international expansion.

Enforcement Discretion

In November 2017, the FDA published a series of guidances that established an updated framework for the regulation of cellular and tissue-based products. These guidances clarified the FDA’s views about the criteria that differentiate those products subject to regulation under Section 361 of the Public Health Service Act (“Section 361”) from those considered to be drugs, devices, and/or biological products subject to licensure under Section 351 of the Public Health Service Act and related regulations. The Company identified its micronized and particulate products (collectively, the “Section 351 Products”) as being subject to regulation under Section 351, requiring pre-market approval from the FDA for a specified indication with demonstrated clinical efficacy.

The FDA exercised enforcement discretion with respect to Investigational New Drug (“IND”) applications and pre-market approval requirements through May 31, 2021. As of May 31, 2021, the Company stopped marketing its Section 351 Products in the United States and is precluded from marketing such products until a Biologics License Application (“BLA”) is granted. If and when the FDA approves a BLA, the Company expects to be allowed to market its Section 351 Products in the United States, but only for specific indications as permitted by the FDA. Sales of the Company’s Section 351 Products were $0.4 million and $8.1 million for the three months ended March 31, 2022 and 2021, respectively. Sales of Section 351 Products during the three months ended March 31, 2022 were derived from sales outside the United States of America.

The Company currently markets EPICORD® and AMNIOCORD® tissue products derived from human umbilical cord as providing a protective environment or as a barrier. If the FDA were to determine that EPICORD and AMNIOCORD do not meet the requirements for regulation solely under Section 361, then pre-market clearance or approval would be required. The loss of the Company’s ability to market and sell its umbilical cord-derived products would have an adverse effect on the Company’s revenue, business, financial condition, and results of operations. Net sales of the Company’s umbilical cord-derived products were $5.6 million and $5.0 million for the three months ended March 31, 2022 and 2021, respectively. The Company’s cord inventory, which would be at risk for write-down in the case of such a determination, was $2.3 million and $1.9 million as of March 31, 2022 and December 31, 2021, respectively.

2.Significant Accounting Policies

Please see Note 2 to the Company’s Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”), filed with the Securities and Exchange Commission (“SEC”) on February 28, 2022 for a description of all significant accounting policies.

Basis of Presentation

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 months ended March 31, 2022 and 2021 are not necessarily indicative of the results that may be expected for the fiscal year. The

balance sheet as of December 31, 2021 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 2021 Form 10-K.

Use of Estimates

The unaudited condensed consolidated financial statements have been prepared in accordance with GAAP. Conformity with 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 unaudited condensed consolidated financial statements and the reported unaudited condensed 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 and intangible assets, estimates regarding asset retirement obligations, estimates for contingent liabilities, the measurement of right of use assets and lease liabilities, management’s assessment of the Company’s ability to continue as a going concern, estimates of fair value of share-based payments, estimates of sales returns and allowances, and valuation of deferred tax assets.

Principles of Consolidation

The unaudited condensed 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.

Recently Adopted Accounting Standards

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10, “Government Assistance (Topic 832)”, which provides disclosure requirements regarding government grants and contributions. The ASU requires disclosure of the nature of transactions and related accounting policies used to account for transactions, the effect, including amounts, of government assistance on individual line items on the financial statements, and significant terms and conditions of the transactions, including commitments and contingencies. This ASU is effective for fiscal years beginning after December 15, 2021. The Company adopted the provisions of this ASU effective January 1, 2022. There was no impact upon adoption.

Recently Issued Accounting Standards Not Yet Adopted

All ASUs issued and not yet effective for the three months ended March 31, 2022, 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 financial position or results of operations.

3. Accounts Receivable, Net

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


	March 31, 2022		December 31, 2021
Accounts receivable, gross	$	39,061	$	41,540
Less: allowance for doubtful accounts	(1,387)		(1,187)
Accounts receivable, net	$	37,674	$	40,353

Bad debt expense (reversal), included in selling, general and administrative expense on the condensed consolidated statements of operations, for the three months ended March 31, 2022 and 2021 was as follows (in thousands):


	Three Months Ended March 31,
	2022		2021
Bad debt expense (reversal)	$	223	$	(21)

4. Inventory

Inventory consisted of the following (in thousands):


	March 31, 2022		December 31, 2021
Raw materials	$	536	$	364
Work in process	7,229		6,112
Finished goods	5,405		4,913


Inventory	$	13,170	$	11,389

5. Property and Equipment, Net

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


	March 31, 2022		December 31, 2021
Leasehold improvements	$	9,170	$	9,052
Laboratory and clean room equipment	16,255		16,567
Furniture and equipment	14,975		14,975
Construction in progress	683		397
Asset retirement cost	929		863
Finance lease right-of-use asset	189		189
Property and equipment, gross	42,201		42,043
Less: accumulated depreciation	(33,442)		(32,878)
Property and equipment, net	$	8,759	$	9,165

Depreciation expense for the three months ended March 31, 2022 and 2021, respectively, is summarized in the table below (amounts in thousands):


	Three Months Ended March 31,
	2022		2021
Depreciation expense	$	860	$	1,161

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.

6. Intangible Assets, Net

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

March 31, 2022

December 31, 2021

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Amortized intangible assets

SEC Form 10-Q filed by MiMedx Group Inc