MiMedx Group, Inc. (NASDAQ:MDXG) Q2 2020 Earnings Conference Call August 11, 2020 8:30 AM ET Company Participants Hilary Dixon - VP of IR and Corporate Communications Tim Wright - CEO Pete Carlson - CFO Conference Call Participants Eiad Asbahi - Prescience Point Capital Management Brian Finn - FIN Capital Operator Good morning and welcome to the MiMedx Second Quarter 2020 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, th ...

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 June 30, 2020 OR ☐ 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. | | | Name of each exchange on which | | --- | --- | --- | | Title of ea ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2019 OR ☐ 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) (State or ot ...

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 June 30, 2019 OR ☐ 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 26-279255 ...

[Part I - Financial Information](index=5&type=section&id=Part%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) The Q1 2019 financial statements show a $13.3 million net loss due to lower sales and high investigation costs, with subsequent financing activities undertaken to improve liquidity - The company's previously issued financial statements for fiscal years 2012-2016 and interim periods in 2017 were **restated due to accounting irregularities** in revenue recognition[8](index=8&type=chunk) - Due to an inappropriate 'tone at the top', the company recognized revenue upon cash receipt rather than product shipment under ASC 606[37](index=37&type=chunk)[38](index=38&type=chunk) [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to $107.4 million and stockholders' equity fell to $38.4 million, driven by a reduction in cash and the quarterly net loss Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $28,381 | $45,118 | | Total current assets | $57,187 | $74,049 | | Total assets | $107,442 | $122,844 | | **Liabilities & Equity** | | | | Total current liabilities | $64,347 | $71,547 | | Total liabilities | $69,090 | $73,189 | | Total stockholders' equity | $38,352 | $49,655 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net loss of $13.3 million in Q1 2019, a sharp reversal from a $4.6 million net income in Q1 2018 due to lower sales and surging investigation expenses Q1 2019 vs. Q1 2018 Statement of Operations (in thousands) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net sales | $66,555 | $84,149 | | Gross margin | $59,137 | $74,791 | | Selling, general and administrative | $50,862 | $65,910 | | Investigation, restatement and related | $18,107 | $2,113 | | Operating (loss) income | $(13,413) | $2,971 | | Net (loss) income | $(13,273) | $4,619 | | Net (loss) income per share - diluted | $(0.12) | $0.04 | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity decreased by $11.3 million to $38.4 million, primarily driven by the net loss for the quarter - The **net loss of $13.3 million** was the primary driver for the decrease in total stockholders' equity during the first quarter of 2019[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating activities resulted in a net cash use of $15.3 million, a significant reversal from the prior year, leading to a $16.7 million decrease in total cash Q1 2019 vs. Q1 2018 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(15,260) | $10,176 | | Net cash used in investing activities | $(433) | $(3,107) | | Net cash used in financing activities | $(1,044) | $(8,091) | | **Net change in cash** | **$(16,737)** | **$(1,022)** | | **Cash and cash equivalents, end of period** | **$28,381** | **$26,454** | [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's business, a critical change in revenue recognition policy, legal proceedings, and significant subsequent financing events to secure liquidity - The company operates in one business segment, Regenerative Biomaterials, focusing on human placental tissue allografts for various healthcare sectors, primarily in the United States[24](index=24&type=chunk)[25](index=25&type=chunk) - As of March 31, 2019, the company has accrued approximately **$16.4 million** related to various legal proceedings[103](index=103&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 20.9% revenue decline to insurance issues and negative publicity, while expressing confidence in future liquidity due to post-quarter financing - The company's business suffered from **significant legal fees, fines, and penalties** stemming from the Audit Committee Investigation, which also created challenges in sales and employee retention[128](index=128&type=chunk) - The company plans to continue investing in R&D, focusing on advancing its **Biologic License Application (BLA) programs** for its micronized dHACM product[130](index=130&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Net sales fell 20.9% to $66.6 million, and despite a 22.8% drop in SG&A expenses, a $16.0 million increase in investigation costs drove the company to a net loss Q1 2019 vs Q1 2018 Key Operational Changes (in thousands) | Metric | 2019 | 2018 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $66,555 | $84,149 | $(17,594) | (20.9)% | | Selling, general and administrative | $50,862 | $65,910 | $(15,048) | (22.8)% | | Investigation, restatement and related | $18,107 | $2,113 | $15,994 | 756.9% | | Net (loss) income | $(13,273) | $4,619 | $(17,892) | (387.4)% | [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) With current liabilities exceeding current assets and its stock delisted, the company secured major financing in 2019 and 2020 to ensure operational funding - On July 2, 2020, the company significantly improved its capital structure by issuing **$100 million of Series B Preferred Stock** and entering a new **$75 million loan facility**[118](index=118&type=chunk)[119](index=119&type=chunk) - Proceeds from the July 2020 financing were used to repay a previous **$72.0 million term loan**, including a $1.4 million prepayment penalty[122](index=122&type=chunk) - The company's common stock was **delisted from The Nasdaq Capital Market** in March 2019, significantly limiting its ability to access capital markets[145](index=145&type=chunk) [Non-GAAP Financial Measures](index=35&type=section&id=Non-GAAP%20Financial%20Measures) The company reported a non-GAAP Adjusted EBITDA of $10.9 million after excluding $18.1 million in investigation costs and other non-recurring items from its GAAP net loss Reconciliation of GAAP Net (Loss) Income to Adjusted EBITDA (in thousands) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net (loss) income | $(13,273) | $4,619 | | EBITDA | $(11,514) | $4,444 | | **Adjusted EBITDA** | **$10,865** | **$11,488** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company states it had no material market risk exposure to its financial position, results of operations, or cash flows as of March 31, 2019 - As of March 31, 2019, the company determined there was **no material market risk exposure**[170](index=170&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were not effective as of March 31, 2019, due to unremediated material weaknesses in internal control - The CEO and CFO concluded that the company's disclosure controls and procedures were **not effective** as of March 31, 2019[172](index=172&type=chunk) - The ineffectiveness was attributed to **unremediated material weaknesses** in all five components of the COSO internal control framework, as described in the 2018 Form 10-K[173](index=173&type=chunk)[174](index=174&type=chunk) [Part II - Other Information](index=38&type=section&id=Part%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is party to various claims and lawsuits, with detailed information referenced in Note 13 of the Condensed Consolidated Financial Statements - This section incorporates by reference the detailed discussion of legal matters found in **Note 13** of the financial statements[178](index=178&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) This section incorporates by reference the risk factors detailed in the company's Annual Report on Form 10-K for the year ended December 31, 2019 - Risk factors are not detailed in this report but are incorporated by reference from the **2019 Form 10-K**[179](index=179&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 336,674 shares solely to cover employee tax obligations from vested restricted stock and made no unregistered sales of equity Stock Repurchases for Q1 2019 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2019 | 12,134 | $1.94 | | Feb 2019 | 323,860 | $3.15 | | Mar 2019 | 680 | $3.18 | | **Total** | **336,674** | **$3.10** | - All shares repurchased during the quarter were surrendered by employees to **satisfy tax withholding obligations** upon the vesting of restricted stock[182](index=182&type=chunk) [Item 3. Defaults Upon Senior Securities](index=38&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) The company reported no defaults upon senior securities [Item 4. Mine Safety Disclosures](index=38&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company [Item 5. Other Information](index=38&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL data files

[PART I - FINANCIAL INFORMATION](index=6&type=section&id=Part%20I%20FINANCIAL%20INFORMATION) This part details the unaudited financial statements, management's analysis of operations, market risk, and internal controls for the period [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents MiMedx Group's unaudited condensed consolidated financial statements and comprehensive notes for Q1 2020 and 2019 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (in thousands) | ASSETS | March 31, 2020 (unaudited) | December 31, 2019 | | :-------------------------- | :------------------------- | :------------------ | | Cash and cash equivalents | $53,525 | $69,069 | | Accounts receivable, net | 31,932 | 32,327 | | Inventory, net | 9,247 | 9,104 | | Prepaid expenses | 5,239 | 6,669 | | Income tax receivable | 10,729 | 18 | | Other current assets | 5,216 | 6,058 | | **Total current assets** | **115,888** | **123,245** | | Property and equipment, net | 11,833 | 12,328 | | Right of use asset | 3,158 | 3,397 | | Goodwill | 19,976 | 19,976 | | Intangible assets, net | 7,581 | 7,777 | | Other assets | 473 | 443 | | **Total assets** | **$158,909** | **$167,166** | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | Accounts payable | $9,756 | $8,710 | | Accrued compensation | 17,116 | 21,302 | | Accrued expenses | 30,661 | 32,161 | | Current portion of long term debt | 3,750 | 3,750 | | Other current liabilities | 2,416 | 1,399 | | **Total current liabilities** | **63,699** | **67,322** | | Long term debt, net | 61,637 | 61,906 | | Other liabilities | 3,234 | 3,540 | | **Total liabilities** | **$128,570** | **$132,768** | | Total stockholders' equity | 30,339 | 34,398 | | **Total liabilities and stockholders' equity** | **$158,909** | **$167,166** | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (in thousands, except share and per share data) | | Three Months Ended March 31, | | :---------------------------------- | :---------- | :---------- | | | 2020 | 2019 | | Net sales | $61,736 | $66,555 | | Cost of sales | 10,025 | 7,418 | | Gross profit | 51,711 | 59,137 | | Operating expenses: | | | | Selling, general and administrative | 46,942 | 50,862 | | Investigation, restatement and related | 15,592 | 18,107 | | Research and development | 2,650 | 2,902 | | Amortization of intangible assets | 271 | 233 | | Impairment of intangible asset | — | 446 | | Operating loss | $(13,744) | $(13,413) | | Other income (expense), net | | | | Interest (expense) income, net | (2,387) | 211 | | Other income (expense), net | 6 | (29) | | Loss before income tax provision | (16,125) | (13,231) | | Income tax provision benefit (expense) | 11,304 | (42) | | Net loss | $(4,821) | $(13,273) | | Net loss per common share - basic | $(0.04) | $(0.12) | | Net loss per common share - diluted | $(0.04) | $(0.12) | | Weighted average shares outstanding - basic | 107,538,509 | 106,420,317 | | Weighted average shares outstanding - diluted | 107,538,509 | 106,420,317 | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Condensed Consolidated Statements of Stockholders' Equity (in thousands, except share data) | | Common Stock Issued | Paid - in Capital | Treasury Stock Shares | Treasury Stock Amount | Accumulated Deficit | Total | | :---------------------------------- | :-------------------- | :---------------- | :-------------------- | :-------------------- | :------------------ | :---------- | | Balance at December 31, 2019 | 112,703,926 $113 | $147,231 | 1,885,277 | $(10,806) | $(102,140) | $34,398 | | Share-based compensation expense | — | 1,915 | — | — | — | 1,915 | | Exercise of stock options | — | (1,214) | (170,300) | 1,512 | — | 298 | | Restricted stock shares canceled/forfeited | — | 1,746 | 242,998 | (1,746) | — | — | | Shares repurchased for tax withholding | — | 87 | 205,091 | (1,538) | — | (1,451) | | Net loss | — | — | — | — | (4,821) | (4,821) | | Balance at March 31, 2020 | 112,703,926 $113 | $149,765 | 2,163,066 | $(12,578) | $(106,961) | $30,339 | | | | | | | | | | Balance at December 31, 2018 | 112,703,926 $113 | $164,744 | 3,605,263 | $(38,642) | $(76,560) | $49,655 | | Share-based compensation expense | — | 3,014 | — | — | — | 3,014 | | Issuance of restricted stock | — | (3,025) | (251,305) | 3,025 | — | — | | Restricted stock shares canceled/forfeited | — | 1,563 | 141,381 | (1,563) | — | — | | Shares repurchased for tax withholding | — | — | 336,674 | (1,044) | — | (1,044) | | Net loss | — | — | — | — | (13,273) | (13,273) | | Balance at March 31, 2019 | 112,703,926 $113 | $166,296 | 3,832,013 | $(38,224) | $(89,833) | $38,352 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (in thousands) | | Three Months Ended March 31, | | :-------------------------------------------------- | :---------- | :---------- | | | 2020 | 2019 | | Cash flows from operating activities: | | | | Net loss | $(4,821) | $(13,273) | | Cash flows used in operating activities | (12,281) | (15,260) | | Cash flows from investing activities: | | | | Purchases of equipment | (1,011) | (648) | | Principal payments from note receivable | — | 389 | | Patent application costs | (75) | (174) | | Cash flows used in investing activities | (1,086) | (433) | | Cash flows from financing activities: | | | | Proceeds from exercise of stock options | 298 | — | | Stock repurchased for tax withholdings on vesting of restricted stock | (1,538) | (1,044) | | Repayment of term loan | (937) | — | | Cash flows used in financing activities | (2,177) | (1,044) | | Net change in cash | (15,544) | (16,737) | | Cash and cash equivalents, beginning of period | 69,069 | 45,118 | | Cash and cash equivalents, end of period | $53,525 | $28,381 | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [1. Nature of Business](index=11&type=section&id=1.%20Nature%20of%20Business) MiMedx Group, Inc. specializes in advanced wound care and therapeutic biologics, operating in one segment, with COVID-19 impacting operations but offset by a CARES Act tax benefit - MiMedx Group, Inc. is an advanced wound care and emerging therapeutic biologics company, developing and distributing human placental tissue allografts with patent-protected processes for multiple sectors of healthcare, including wound care, burn, surgical, orthopedic, spine, sports medicine, ophthalmic, and dental sectors[24](index=24&type=chunk) - The Company operates in one business segment, Regenerative Biomaterials, and its allograft product families include dHACM (AmnioFix®, EpiFix®), Umbilical (EpiCord®, AmnioCord®), and Placental Collagen (AmnioFill™)[25](index=25&type=chunk) - The COVID-19 pandemic has affected the Company's business, results of operations, and financial condition, with the ultimate impact being highly uncertain, however, the CARES Act resulted in an expected federal tax refund of approximately **$11.3 million** and a recognized income tax benefit of the same amount[27](index=27&type=chunk)[28](index=28&type=chunk) [2. Significant Accounting Policies](index=11&type=section&id=2.%20Significant%20Accounting%20Policies) This section details significant accounting policies, including the evolution of revenue recognition under ASC 606 and the adoption of new accounting standards - The Company's revenue recognition methodology changed significantly, particularly for the three months ended March 31, 2019, due to uncertainties surrounding contractual adjustments and extra-contractual arrangements, leading to revenue deferral until payment was received[39](index=39&type=chunk)[45](index=45&type=chunk) - Effective October 1, 2019, for all new customer arrangements, the Company began recognizing revenue upon shipment of product to the customer or at the time of implantation for consignment products, having addressed prior control environment weaknesses[51](index=51&type=chunk)[55](index=55&type=chunk) - The Company adopted new accounting standards including ASU No. 2016-02 (Leases), ASU No. 2018-02 (Income Statement - Reporting Comprehensive Income), ASU 2018-07 (Compensation-Stock Compensation), and ASU 2016-13 (Financial Instruments - Credit Losses), with minimal material impact on financial statements[66](index=66&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk) [3. Liquidity and Capital Resources](index=20&type=section&id=3.%20Liquidity%20and%20Capital%20Resources) The Company enhanced liquidity post-quarter with **$100 million** in preferred stock and a **$75 million** Hayfin loan, repaying the existing BT Loan Agreement Liquidity Snapshot (in thousands) | Metric | March 31, 2020 | | :------------------------ | :------------- | | Cash and cash equivalents | $53,525 | | Total current assets | $115,888 | | Total current liabilities | $63,699 | - On July 2, 2020, the Company issued **$100 million** of Series B Convertible Preferred Stock and entered into a **$75 million** loan facility with Hayfin, comprising a **$50 million** senior secured term loan and a **$25 million** committed but undrawn delayed draw term loan[75](index=75&type=chunk)[76](index=76&type=chunk) - The proceeds from the new financing were used to repay the remaining **$72.0 million** principal and accrued interest of the BT Loan Agreement, incurring a **$1.4 million** prepayment premium, and terminating the BT Loan Agreement[79](index=79&type=chunk) [4. Inventory](index=22&type=section&id=4.%20Inventory) The Company's net inventory increased slightly from **$9.104 million** at December 31, 2019, to **$9.247 million** at March 31, 2020, primarily due to an increase in finished goods, partially offset by a decrease in work in process and a reduction in the reserve for obsolescence Inventory (in thousands) | Category | March 31, 2020 | December 31, 2019 | | :--------------- | :------------- | :---------------- | | Raw materials | $330 | $318 | | Work in process | 3,913 | 4,299 | | Finished goods | 5,587 | 5,206 | | Inventory, gross | 9,830 | 9,823 | | Reserve for obsolescence | (583) | (719) | | Inventory, net | $9,247 | $9,104 | [5. Property and Equipment](index=23&type=section&id=5.%20Property%20and%20Equipment) Net property and equipment decreased to **$11.833 million** at March 31, 2020, from **$12.328 million** at December 31, 2019, with depreciation expense for Q1 2020 at **$1.5 million** Property and Equipment (in thousands) | Category | March 31, 2020 | December 31, 2019 | | :-------------------------- | :------------- | :---------------- | | Leasehold improvements | $5,321 | $5,321 | | Lab and clean room equipment | 15,128 | 14,894 | | Furniture and office equipment | 15,405 | 15,118 | | Construction in progress | 1,463 | 972 | | Property and equipment, gross | 37,317 | 36,305 | | Less accumulated depreciation | (25,484) | (23,977) | | Property and equipment, net | $11,833 | $12,328 | - Depreciation expense for the three months ended March 31, 2020, was approximately **$1.5 million**, compared to **$1.7 million** for the same period in 2019[82](index=82&type=chunk) [6. Leases](index=23&type=section&id=6.%20Leases) The Company adopted ASC 842 for leases effective January 1, 2019, recognizing right-of-use assets and liabilities for operating leases, with a Q1 2020 operating lease cost of **$0.4 million** - The Company adopted ASC 842, 'Leases,' effective January 1, 2019, recognizing right-of-use assets and liabilities for operating leases, primarily for corporate offices, vehicles, and equipment[61](index=61&type=chunk)[83](index=83&type=chunk) Operating Lease Information (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :-------------------------------- | :------------- | :---------------- | | Right of use asset | $3,158 | $3,397 | | Short term lease liability | $1,195 | $1,168 | | Long term lease liability | $2,611 | $2,919 | | Weighted-average remaining lease term (years) | 2.8 | 3.1 | | Weighted-average discount rate | 11.5% | 11.5% | - Operating lease cost was **$0.4 million** for the three months ended March 31, 2020, recorded in Selling, general, and administrative expenses[87](index=87&type=chunk) [7. Intangible Assets](index=24&type=section&id=7.%20Intangible%20Assets) Total intangible assets, net, decreased slightly to **$7.581 million** at March 31, 2020, from **$7.777 million** at December 31, 2019, with Q1 2020 amortization expense of **$0.3 million** Intangible Assets (in thousands) | Category | March 31, 2020 Net Carrying Amount | December 31, 2019 Net Carrying Amount | | :-------------------------- | :------------------------- | :------------------------ | | Licenses | $180 | $214 | | Patents and know how | 3,876 | 4,029 | | Customer and supplier relationships | 1,276 | 1,344 | | Non-compete agreements | 45 | 52 | | Total amortized intangible assets | $5,377 | $5,639 | | Trade names and trademarks | $1,008 | $1,008 | | Patents in process | 1,196 | 1,130 | | Total intangible assets | $7,581 | $7,777 | - Amortization expense for the three months ended March 31, 2020, was approximately **$0.3 million**, compared to **$0.2 million** for the same period in 2019[90](index=90&type=chunk) Expected Future Amortization Expense (in thousands) | Year ending December 31, | Estimated Amortization Expense | | :----------------------- | :----------------------------- | | 2020 (excluding Q1) | $739 | | 2021 | $978 | | 2022 | $955 | | 2023 | $955 | | 2024 | $955 | | Thereafter | $795 | | Total | $5,377 | [8. Accrued Expenses](index=26&type=section&id=8.%20Accrued%20Expenses) Accrued expenses decreased to **$30.661 million** at March 31, 2020, from **$32.161 million** at December 31, 2019, primarily due to legal costs, settlement costs, and a Veterans Affairs pricing adjustment Accrued Expenses (in thousands) | Category | March 31, 2020 | December 31, 2019 | | :------------------------------------ | :------------- | :---------------- | | Legal costs | $13,302 | $12,202 | | Settlement costs | 5,931 | 5,931 | | Pricing adjustment settlement with Veterans Affairs | 6,894 | 6,894 | | Estimated returns | 1,567 | 2,581 | | External commissions | 1,328 | 1,722 | | Accrued clinical trials | 566 | 1,076 | | Other | 1,073 | 1,755 | | Total | $30,661 | $32,161 | [9. Long-Term Debt](index=26&type=section&id=9.%20Long-Term%20Debt) The Company's long-term debt, primarily the BT Term Loan with a **$61.637 million** net carrying value at March 31, 2020, was subsequently repaid and terminated using proceeds from new financing - The BT Term Loan, entered into on June 10, 2019, had a principal balance of **$72.188 million** as of March 31, 2020, with an interest rate of LIBOR plus **8.00%** (**9.95%** at March 31, 2020)[94](index=94&type=chunk)[95](index=95&type=chunk)[97](index=97&type=chunk) BT Term Loan Balances (in thousands) | Category | March 31, 2020 Current | March 31, 2020 Long-term | December 31, 2019 Current | December 31, 2019 Long-term | | :-------------------------------- | :--------------------- | :----------------------- | :------------------------ | :------------------------ | | Liability component - principal | $3,750 | $68,438 | $3,750 | $69,375 | | Original issue discount | — | (1,723) | — | (1,890) | | Deferred financing cost | — | (5,078) | — | (5,579) | | Liability component - net carrying value | $3,750 | $61,637 | $3,750 | $61,906 | - On July 2, 2020, the BT Loan Agreement was fully repaid and terminated using proceeds from the Preferred Stock Transaction and the Hayfin Loan Transaction, incurring a **$1.4 million** prepayment premium[98](index=98&type=chunk)[100](index=100&type=chunk) [10. Net Loss Per Share](index=30&type=section&id=10.%20Net%20Loss%20Per%20Share) The Company reported a basic and diluted net loss per common share of **$(0.04)** for Q1 2020, an improvement from **$(0.12)** in Q1 2019, based on approximately **107.5 million** weighted-average shares outstanding Net Loss Per Share (in thousands except share data) | | Three Months Ended March 31, | | :-------------------------------------------------- | :---------- | :---------- | | | 2020 | 2019 | | Net loss | $(4,821) | $(13,273) | | Denominator for basic earnings per share - weighted average shares | 107,538,509 | 106,420,317 | | Loss per common share - basic | $(0.04) | $(0.12) | | Loss per common share - diluted | $(0.04) | $(0.12) | [11. Income Taxes](index=30&type=section&id=11.%20Income%20Taxes) The effective tax rate for Q1 2020 significantly increased to **70.1%** from **0.3%** in Q1 2019, primarily due to an **$11.3 million** income tax benefit from CARES Act net operating loss carrybacks - The effective tax rate for the three months ended March 31, 2020, was **70.1%**, compared to **0.3%** for the same period in 2019[102](index=102&type=chunk) - The significant increase in the effective tax rate was primarily due to an **$11.3 million** income tax benefit recognized from federal net operating loss carrybacks permitted under the CARES Act[102](index=102&type=chunk) [12. Supplemental Disclosure of Cash Flow and Non-Cash Investing and Financing Activities](index=30&type=section&id=12.%20Supplemental%20Disclosure%20of%20Cash%20Flow%20and%20Non-Cash%20Investing%20and%20Financing%20Activities) Supplemental cash flow disclosures show cash paid for interest increased significantly to **$1.840 million** in Q1 2020 from **$1 thousand** in Q1 2019, while income taxes paid decreased to **$6 thousand** from **$46 thousand** Selected Cash Payments (in thousands) | | Three Months Ended March 31, | | :------------------ | :---------- | :---------- | | | 2020 | 2019 | | Cash paid for interest | $1,840 | $1 | | Income taxes paid | 6 | 46 | [13. Contractual Commitments and Contingencies](index=32&type=section&id=13.%20Contractual%20Commitments%20and%20Contingencies) The Company faces various legal and regulatory matters, including shareholder suits and government investigations, accruing **$12.8 million** for legal proceedings and expecting substantial indemnification costs - The Company is a party to numerous civil claims and lawsuits, including shareholder derivative suits and a securities class action, primarily alleging breaches of fiduciary duty and misrepresentation of financial statements due to improper revenue recognition[107](index=107&type=chunk)[108](index=108&type=chunk)[112](index=112&type=chunk) - Investigations by the USAO-SDNY, VA-OIG, and USAO-MDNC are ongoing, focusing on revenue recognition, distributor practices, and financial relationships with VA clinicians, with the Company cooperating with these investigations[113](index=113&type=chunk)[114](index=114&type=chunk)[116](index=116&type=chunk) - As of March 31, 2020, the Company has accrued approximately **$12.8 million** related to legal proceedings and expects to continue bearing substantial costs for indemnification and expense advancement for current and former officers and directors[126](index=126&type=chunk)[127](index=127&type=chunk) [14. Product Revenue Detail](index=35&type=section&id=14.%20Product%20Revenue%20Detail) Net sales for Q1 2020 decreased to **$61.736 million** from **$66.555 million** in Q1 2019, with Direct Customers accounting for the majority of sales Net Sales by Customer Type (in thousands) | Customer Type | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :-------------- | :-------------------------------- | :-------------------------------- | | Direct Customers | $59,896 | $64,542 | | Distributors | 1,840 | 2,013 | | Total | $61,736 | $66,555 | [15. Subsequent Events](index=36&type=section&id=15.%20Subsequent%20Events) Key subsequent events include the repayment of a PPP loan, amendment of the BT Loan Agreement, and new financing with **$100 million** preferred stock and a **$75 million** Hayfin loan - On April 24, 2020, the Company received a **$10.0 million** loan under the Paycheck Protection Program (PPP) but repaid it in full on May 11, 2020, following a request from the U.S. House of Representatives' Committee on Oversight and Reform's Select Subcommittee on the Coronavirus Crisis[131](index=131&type=chunk)[154](index=154&type=chunk) - On April 22, 2020, the BT Loan Agreement was amended to increase the maximum Total Leverage Ratio from **3.0 to 1** to **5.0 to 1** and reduce the minimum Liquidity requirement, along with a **1 percentage point** interest rate increase[132](index=132&type=chunk)[152](index=152&type=chunk) - On July 2, 2020, the Company issued **$100 million** of Series B Convertible Preferred Stock and borrowed **$50 million** from a new **$75 million** Hayfin Loan Facility, using these funds to repay and terminate the BT Loan Agreement[134](index=134&type=chunk)[135](index=135&type=chunk)[161](index=161&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes MiMedx's financial condition and operations for Q1 2020, covering business trends, COVID-19 impact, recent financing, and internal control efforts [Overview](index=38&type=section&id=Overview) - MiMedx is a leader in advanced wound care and an emerging therapeutic biologics company, developing and distributing human placental tissue allografts using proprietary processing methodologies like PURION®[137](index=137&type=chunk) - The Company's product lines, including EpiFix, EpiCord, AmnioFix, AmnioCord, and AmnioFill, are used in wound care, burn, surgical, orthopedic, spine, sports medicine, ophthalmic, and dental sectors, distributed through direct sales and distributors[138](index=138&type=chunk)[139](index=139&type=chunk) [Trends in Our Business](index=38&type=section&id=Trends%20in%20Our%20Business) - The Audit Committee Investigation and related restatement have resulted in significant legal fees, fines, penalties, and negative publicity, impacting financial performance and employee retention[140](index=140&type=chunk) - Demographic shifts, such as an aging population and increasing incidence of obesity and diabetes, are driving growth in the advanced wound care market, creating opportunities for the Company[141](index=141&type=chunk) - The Company plans to continue investing in research and development, focusing on advancing its Biologic License Application (BLA) programs for micronized dHACM to treat musculoskeletal degeneration[142](index=142&type=chunk) [Expected Impact of COVID-19 Pandemic](index=39&type=section&id=Expected%20Impact%20of%20COVID-19%20Pandemic) - COVID-19 began affecting operations in Q1 2020, causing interruptions in access to donor hospitals, but the Company mitigated supply disruptions by adding new hospitals and increasing efforts at unrestricted sites[146](index=146&type=chunk)[147](index=147&type=chunk) - Sales and marketing efforts were hampered by restricted access to healthcare providers and reduced patient visits, leading to lower revenues in late Q1 2020 and April, though access began to restore by mid-May[149](index=149&type=chunk) - Management implemented cost-containment measures, including cancelling discretionary expenses, negotiating vendor discounts, deferring salary increases, and reducing employee salaries, saving an estimated **$9.0 million** through June 30, 2020[151](index=151&type=chunk) [Recent Developments](index=41&type=section&id=Recent%20Developments) - Peter M. Carlson was appointed Chief Financial Officer on March 18, 2020, and William L. Phelan was appointed Senior Vice President and Chief Accounting Officer on May 1, 2020[158](index=158&type=chunk)[159](index=159&type=chunk) - The BT Loan Agreement was amended on April 22, 2020, to adjust financial covenants and increase the interest rate to LIBOR plus **9%**, incurring a one-time fee of approximately **$0.7 million**[160](index=160&type=chunk) - On July 2, 2020, the Company completed significant financing transactions, including issuing **$100 million** in Series B Preferred Stock and securing a **$75 million** Hayfin Loan Facility, which enabled the repayment and termination of the BT Loan Agreement[161](index=161&type=chunk) [Results of Operations Comparison of the Three Months Ended March 31, 2020, to the Three Months Ended March 31, 2019](index=41&type=section&id=Results%20of%20Operations%20Comparison%20of%20the%20Three%20Months%20Ended%20March%2031%2C%202020%2C%20to%20the%20Three%20Months%20Ended%20March%2031%2C%202019) Key Financial Performance Indicators (in thousands, except percentages) | Metric | 2020 | 2019 | $ Change | % Change | | :---------------------------------- | :---------- | :---------- | :---------- | :---------- | | Net Sales | $61,736 | $66,555 | $(4,819) | (7.2)% | | Gross profit | 51,711 | 59,137 | $(7,426) | (12.6)% | | Selling, general and administrative | 46,942 | 50,862 | $(3,920) | (7.7)% | | Investigation, restatement and related | 15,592 | 18,107 | $(2,515) | (13.9)% | | Research and development | 2,650 | 2,902 | $(252) | (8.7)% | | Interest (expense) income, net | (2,387) | 211 | $(2,598) | (1,231.3)% | | Income tax provision expense | 11,304 | (42) | $11,346 | (27,014.3)% | | Net loss | $(4,821) | $(13,273) | $8,452 | 63.7 % | - Net sales decreased by **7.2%** to **$61.7 million**, primarily due to lower shipment levels in late March 2020 caused by the COVID-19 pandemic[163](index=163&type=chunk) - Gross profit margin decreased from **89%** in Q1 2019 to **84%** in Q1 2020, reflecting higher costs associated with cGMP quality standards and investments in BLA programs[164](index=164&type=chunk) - Net loss improved significantly to **$(4.8) million** in Q1 2020 from **$(13.3) million** in Q1 2019, largely driven by a substantial income tax benefit from the CARES Act and reduced investigation/litigation costs[162](index=162&type=chunk)[166](index=166&type=chunk)[172](index=172&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2020, the Company had **$53.5 million** in cash and cash equivalents, with a current ratio of **1.8**[174](index=174&type=chunk) - The Company expects to meet its operational liquidity needs and fund planned investing activities for the next year, supported by anticipated cash from operating activities, existing cash, and the recent **$100 million** Series B Preferred Stock issuance and **$75 million** Hayfin Loan Agreement[175](index=175&type=chunk)[176](index=176&type=chunk) - Future cash requirements include investments in cGMP compliance, advancement of IND applications, pursuit of BLAs for micronized products, and potential settlements for lawsuits[177](index=177&type=chunk)[178](index=178&type=chunk) [Discussion of Cash Flows](index=44&type=section&id=Discussion%20of%20Cash%20Flows) - Net cash used in operating activities decreased by **$3.0 million** to **$12.3 million** in Q1 2020, primarily due to reduced selling, general, and administrative expenses[186](index=186&type=chunk) - Net cash used in investing activities increased to **$1.1 million** in Q1 2020, mainly due to higher equipment purchases (**$1.0 million**)[187](index=187&type=chunk) - Net cash used in financing activities increased by **$1.2 million** to **$2.2 million** in Q1 2020, driven by BT Term Loan payments and increased stock repurchases for tax withholdings, partially offset by stock option exercises[188](index=188&type=chunk) [Non-GAAP Financial Measures](index=44&type=section&id=Non-GAAP%20Financial%20Measures) - The Company uses Non-GAAP measures like EBITDA and Adjusted EBITDA to provide supplemental information on performance, eliminating effects of financing, capital expenditures, and irregular items such as Audit Committee Investigation and Restatement costs[189](index=189&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) Reconciliation of GAAP Net Loss to EBITDA and Adjusted EBITDA (in thousands) | | Three Months Ended March 31, | | :-------------------------------------------------- | :---------- | :---------- | | | 2020 | 2019 | | Net loss | $(4,821) | $(13,273) | | EBITDA | $(11,961) | $(11,514) | | Adjusted EBITDA | $3,114 | $10,865 | [Critical Accounting Policies](index=45&type=section&id=Critical%20Accounting%20Policies) - No material changes to critical accounting policies and assumptions were made during the quarter, except as disclosed in Note 2 to the condensed consolidated financial statements[193](index=193&type=chunk) [Recent Accounting Pronouncements](index=45&type=section&id=Recent%20Accounting%20Pronouncements) - For the effect of recent accounting pronouncements, refer to Note 2 to the condensed consolidated financial statements[194](index=194&type=chunk) [Off-Balance Sheet Arrangements](index=45&type=section&id=Off-Balance%20Sheet%20Arrangements) - The Company has no off-balance sheet arrangements[195](index=195&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=46&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As of March 31, 2020, the Company determined there was no material market risk exposure to its consolidated financial position, results of operations, or cash flows, given its lack of market risk sensitive instruments - The Company determined there was no material market risk exposure to its consolidated financial position, results of operations, or cash flows as of March 31, 2020, due to a lack of market risk sensitive instruments[197](index=197&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were ineffective as of March 31, 2020, due to unremediated material weaknesses, with ongoing remediation efforts targeting full resolution in 2020 [Evaluation of Disclosure Controls and Procedures](index=46&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) - The CEO and CFO concluded that the Company's disclosure controls and procedures were not effective as of March 31, 2020, due to identified material weaknesses in internal control over financial reporting[199](index=199&type=chunk) [Changes in Internal Control over Financial Reporting](index=46&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2020, and the COVID-19 pandemic has not had a material impact on these controls[200](index=200&type=chunk) [Remediation Efforts to Address Material Weaknesses in Internal Control Over Financial Reporting](index=46&type=section&id=Remediation%20Efforts%20to%20Address%20Material%20Weaknesses%20in%20Internal%20Control%20Over%20Financial%20Reporting) - The Company identified unremediated material weaknesses related to Control Environment and Control Activities as of December 31, 2019, and has implemented new controls specific to its information and technology system in Q4 2019 and executed them in Q1 2020[201](index=201&type=chunk) - Remediation efforts, including comprehensive reviews of IT permissions and profiles, are ongoing with the goal of fully remediating the material weaknesses during 2020[201](index=201&type=chunk) [Inherent Limitation on the Effectiveness of Internal Controls](index=46&type=section&id=Inherent%20Limitation%20on%20the%20Effectiveness%20of%20Internal%20Controls) - The effectiveness of any internal control system is subject to inherent limitations, providing only reasonable, not absolute, assurance that objectives will be met[202](index=202&type=chunk) [PART II - OTHER INFORMATION](index=48&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This part provides additional information on legal proceedings, risk factors, equity sales, and other required disclosures [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding the Company's material pending legal proceedings is incorporated by reference from Note 13, 'Contractual Commitments and Contingencies - Litigation and Regulatory Matters,' within this Form 10-Q - Material pending legal proceedings are detailed in Note 13, 'Contractual Commitments and Contingencies - Litigation and Regulatory Matters,' of this Form 10-Q[205](index=205&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously discussed in the Company's 2019 Form 10-K, which could significantly and adversely affect the Company's business, financial condition, and results of operations - No material changes to the risk factors discussed in Part I, Item 1A., 'Risk Factors' of the Company's 2019 Form 10-K have occurred[206](index=206&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2020, the Company repurchased **205,091** common shares at an average price of **$7.50** per share, solely for tax withholding obligations Stock Repurchases (Three Months Ended March 31, 2020) | Period | Total number of shares purchased | Average price paid per share | | :----------------------- | :----------------------------- | :--------------------------- | | January 1 - January 31, 2020 | 5,340 | $7.56 | | February 1 - February 28, 2020 | 199,193 | $7.50 | | March 1 - March 31, 2020 | 558 | $6.55 | | Total for the quarter | 205,091 | $7.50 | - Shares repurchased during the quarter were exclusively those surrendered by employees to satisfy tax withholding obligations upon the vesting of restricted stock[208](index=208&type=chunk) [Item 3. Defaults upon Senior Securities](index=48&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) The Company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[209](index=209&type=chunk) [Item 4. Mine Safety Disclosures](index=48&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - This item is not applicable[210](index=210&type=chunk) [Item 5. Other Information](index=50&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item - No other information to report[211](index=211&type=chunk) [Item 6. Exhibits](index=51&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including articles of incorporation, bylaws, loan agreement amendments, and certifications - The exhibits include Articles of Incorporation, Bylaws, First Amendment to Loan Agreement, and Certifications of Chief Executive Officer and Chief Financial Officer[212](index=212&type=chunk) [Signatures](index=52&type=section&id=Signatures) The report was duly signed on behalf of MiMedx Group, Inc. by Peter M. Carlson, Chief Financial Officer and Principal Financial Officer, on July 6, 2020 - The report was signed by Peter M. Carlson, Chief Financial Officer and Principal Financial Officer, on July 6, 2020[216](index=216&type=chunk)[217](index=217&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K For the transition period from __________to __________ Commission file number 001-35887 MIMEDX GROUP, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) Florida 26-2792552 1775 West Oak Commons Court, NE, Marietta, GA (Address of principal executive offices) 30062 (Zip Code) (770) 651-9100 (Registrant's telephone number ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 For the transition period from __________to __________ Commission file number 001-35887 MIMEDX GROUP, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation ...