MIMEDX GROUP, INC. 10-K

Item 9A. Controls and Procedures REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of MiMedx Group, Inc. Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of MiMedx Group, Inc. and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021, of the Company and our report dated February 28, 2022, expressed an unqualified opinion on those financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touch LLP Atlanta, Georgia February 28, 2022 79 Evaluation of Disclosure Controls and Procedures Management maintains a set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including our CEO and CFO, to allow for timely decisions regarding required disclosure. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was performed under the supervision and with the participation of our management, including our CEO and CFO. As a result of this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2021. Management's Report on Internal Control Over Financial Reporting Management, including our CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act and based upon the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the "COSO framework"). The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with United States Generally Accepted Accounting Principles (“GAAP”). An effective internal control system, no matter how well designed, has inherent limitations, including the possibility of human error or overriding of controls, and therefore can provide only reasonable assurance with respect to reliable financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may demonstrate. Under the supervision and with the participation of our management, including our CEO and CFO, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the COSO framework. Based on evaluation under these criteria, management determined that we did maintain effective internal control over financial reporting as of December 31, 2021. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The Company previously disclosed material weaknesses in internal control over financial reporting as of December 31, 2020 in Item 9A of our Annual Report in Form 10-K for the year ended December 31, 2020 related to certain control activities for which we did not have proper segregation of duties, were not sufficiently evidenced, or included assumptions which were not evaluated for completeness, accuracy or application of GAAP as part of the control. Our independent registered public accounting firm, Deloitte & Touche LLP, has audited the effectiveness of our internal control over financial reporting as of December 31, 2021, as stated in their report which appears on page 79 of this Form 10-K. Remediated Material Weaknesses Remediation of the previously identified material weaknesses and strengthening our internal control environment were priorities for us throughout 2021. We implemented and tested the design and operating effectiveness of new and existing controls related to the previously identified material weaknesses, as follows: • The Company enhanced its financial close process by introducing additional layers of independent reviews by appropriately qualified individuals and improving the precision and timeliness of reviews applied to various financial result analyses, including revenue recognition, recording of inventory and accrued expenses. Additionally, the Company enhanced the level of evidence of review required to be maintained to evidence the operation of controls. • The Company enhanced its sales order review process to ensure compliance with Company sales policies by requiring retention of appropriate evidence of customer arrangements and establishing a quarterly review of key revenue metrics by finance and accounting personnel. • The Company enhanced the operation of controls to address the accuracy and completeness of information used in the performance of controls, including retention of evidence of review and assessment of significant judgements to ensure 80 proper application of GAAP specific to accounting for revenue, inventory, goodwill impairment and the provision for income taxes. • Management enhanced the controls that validate the completeness and accuracy of data utilized in financial forecasting and periodic goodwill analyses, employing the use of checklists and assessing the appropriateness of significant estimates. Management has deemed the newly implemented or enhanced controls described above to be operating effectively as of December 31, 2021, and has determined them to have appropriately remediated the previously identified material weaknesses. Changes in Internal Control Over Financial Reporting Other than the changes described above in “Remediated Material Weaknesses,” there were no changes during the quarter ended December 31, 2021 in our internal control over financial reporting (as such term is defined in the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information Item 1.01 Entry into a Material Definitive Agreement Amendment to Hayfin Loan Agreement On February 28, 2022, the Company entered into the Amendment. Refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources for details. Item 9C. Disclosures Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. PART III Item 10. Directors, Executive Officers and Corporate Governance Information required by this Item will be contained in our definitive proxy statement relating to our 2022 Annual Meeting of Shareholders under the captions “Executive Officers,” “Election of Directors” and “Delinquent Section 16(a) Reports,” or similar captions which are incorporated herein by reference. Item 11. Executive Compensation Information required by this Item will be contained in our definitive proxy statement relating to our 2022 Annual Meeting of Shareholders under the caption “Executive Compensation Discussion and Analysis,” “Summary Compensation Table (2021, 2020 and 2019,” “Grants of Plan Based Awards for 2021,” “Outstanding Equity Awards on December 31, 2021,” “2021 Options Exercised and Stock Vested Table,” “2021 Potential Payments Upon Termination or Change in Control,” “2021 Director Compensation,” “Compensation Committee Report” and “Compensation Committee Interlocks and Insider Participation” or similar captions which are incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information required by this Item will be contained in our definitive proxy statement relating to our 2022 Annual Meeting of Shareholders under the captions “Security Ownership of Certain Beneficial Owners and Management,” and “Equity Compensation Plan Information,” or similar captions which are incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence Information required by this Item will be contained in our definitive proxy statement relating to our 2022 Annual Meeting of Shareholders under the captions “Policies and Procedures for Approval of Related Party Transactions,” “Related Party Transactions,” and "Director Independence" or similar captions which are incorporated herein by reference. 81 Item 14. Principal Accounting Fees and Services Information required by this Item will be contained in our definitive proxy statement relating to our 2022 Annual Meeting of Shareholders under the captions “Audit Matters,” or a similar caption which is incorporated herein by reference. 82 PART IV Item 15. Exhibits, Financial Statement Schedules (a) Documents filed as part of this report: (i) Financial Statements (ii) Financial Statement Schedule: The following Financial Statement Schedule is filed as part of this Report: Schedule II Valuation and Qualifying Accounts for the years ended December 31, 2021, 2020 and 2019 (iii) Exhibits See Item 15(b) below. Each management contract or compensation plan has been identified with an asterisk. (b) Exhibits Notes * Indicates a management contract or compensatory plan or arrangement # Filed herewith ## Certain exhibits and schedules have been omitted pursuant to Item 601(b)(10) of Regulation S-K, but a copy will be furnished supplementally to the Securities and Exchange Commission upon request. Exhibit Number Description 3.1 Restated Articles of Incorporation, adopted March 4, 2021, effective March 5, 2021 ( incorporated by reference to Exhibit 3.1 to the Registrant’s Form 10-K filed March 8, 2021 ). 3.2 Articles of Amendment to Restated Articles of Incorporation, effective June 3, 2021 ( incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed June 10, 2021 ). 3.3 Articles of Amendment to Restated Articles of Incorporation, effective June 3, 2021 ( incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed June 10, 2021 ). 3.4 Bylaws of MiMedx Group, Inc., as amended and restated as of April 19, 2021 ( incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on April 21, 2021 ). 3.5 Amendment No. 1 to the Company’s Bylaws effective May 27, 2021 ( incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K Filed June 3, 2021 ). 4.1 The description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, incorporated by reference to Registration Statement on Form 8-A filed November 2, 2020 . 10.1## Loan Agreement dated as of June 30, 2020 by and among MiMedx Group, Inc., certain subsidiaries of MiMedx Group, Inc. parties thereto, the Lenders from time to time party hereto, Hayfin Services LLP, as administrative agent for the Lenders and as collateral agent for the Secured Parties, incorporated by reference to Exhibit 10.36 to Annual Report on Form 10-K filed July 6, 2020. 10.2## Securities Purchase Agreement, dated as of June 30, 2020, by and between MiMedx Group, Inc., Falcon Fund 2 Holding Company, L.P. and certain other investors, incorporated by reference to Exhibit 10.38 to Annual Report on Form 10-K filed July 6, 2020 . 10.3 Registration Rights Agreement dated as of July 2, 2020, by and between MiMedx Group, Inc. and Falcon Fund 2 Holding Company, L.P., incorporated by reference to Exhibit 10.39 to Annual Report on Form 10-K filed July 6, 2020 . 10.4 Lease effective May 1, 2013 between Hub Properties of GA, LLC and MiMedx Group, Inc. ( incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed on May 10, 2013 ). 10.5 First Amendment to Lease dated March 7, 2017 between CPVF II West Oak LLC (as successor in interest to HUB Properties of GA, LLC) and MiMedx Group, Inc. ( incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on March 13, 2017 ). 83 Exhibit Number Description 10.6# Third Amendment to Lease made as of November 30, 2021 for real property and improvements located at 1775 West Oak Commons Court, Marietta, Georgia between RE Fields, LLC, successor in interest to HUB Properties GA, LLC, and CPVF II West Oak LLC, and MiMedx Group, Inc., dated January 25, 2013, as amended March 7, 2017. 10.7* MiMedx Group, Inc. Assumed 2006 Stock Incentive Plan, as amended and restated effective February 25, 2014 ( incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on March 3, 2014 ). 10.8* Form of Incentive Stock Option Agreement under the MiMedx Group, Inc. Assumed 2006 Stock Incentive Plan ( incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-K filed on March 4, 2014) . 10.9* Form of Nonqualified Stock Option Agreement under the MiMedx Group, Inc. Assumed 2006 Stock Incentive Plan ( incorporated by reference to Exhibit 10.5 to the Registrant’s Form 10-K filed on March 4, 2014 ). 10.10* Form of Restricted Stock Agreement for Non-Employee Directors under the MiMedx Group, Inc. 2006 Assumed Stock Incentive Plan ( incorporated by reference to Exhibit 10.66 to the Registrant’s Form 10-Q filed on August 8, 2013 ). 10.11* Form of Restricted Stock Agreement under the MiMedx Group, Inc. 2006 Assumed Stock Incentive Plan ( incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-K filed on March 4, 2014 ). 10.12* 2016 Equity and Cash Incentive Plan, as amended and restated through October 2, 2020, incorporated by reference to Exhibit 4.6 to Registration Statement on Form S-8 filed December 17, 2020 . 10.13* Form of Incentive Stock Option Agreement under the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan ( incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q filed on August 2, 2016 ). 10.14* Form of Restricted Stock Agreement under the MiMedx Group, Inc 2016 Equity and Cash Incentive Plan (for shares not registered under the Securities Act of 1933) ( incorporated by reference to Exhibit 10.9 to the Registrant’s Form 8-K filed on May 30, 2019 ). 10.15* Form of Restricted Stock Agreement under the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan ( incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q filed on August 2, 2016 ). 10.16* Form of Restricted Stock Agreement for Non-Employee Directors under the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan ( incorporated by reference to Exhibit 10.11 to the Registrant’s Form 8-K filed on May 30, 2019 ). 10.17* Form of Nonqualified Stock Option Agreement under the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan ( incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q filed on August 2, 2016 ). 10.18* Form of Director Restricted Stock Unit Award Agreement ( incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K filed March 17, 2020 ). 10.19* Form of Employee (Time-Vested) Restricted Stock Unit Award Agreement, incorporated by reference to Exhibit 10.33 to Annual Report on Form 10-K filed July 6, 2020. 10.20* Form of Employee (Performance-Vested, uncertain number of shares) Restricted Stock Unit Award Agreement, incorporated by reference to Exhibit 10.34 to Annual Report on Form 10-K filed July 6, 2020 . 10.21* Form of Employee (Performance-Vested, certain number of shares) Restricted Stock Unit Award Agreement, incorporated by reference to Exhibit 10.35 to Annual Report on Form 10-K filed July 6, 2020 . 10.22* Form of Non-Employee Restricted Stock Award Agreement (vest into retirement), incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q filed August 4, 2020 . 10.23* Form of Employee (Time-Vested) Restricted Stock Unit Award Agreement, incor porated by reference to Exhi bit 10.25 to the Annual Report on form 10- K file on March 8, 2021 . 10.24* Letter Agreement dated April 10, 2019 between MiMedx Group, Inc. and Timothy R. Wright ( incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on May 9, 2019 ). 10.25* Employment Offer Letter between the Company and Peter M. Carlson, as amended and restated on June 30, 2021, incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed August 3, 2021 . 10.26* Employment Offer Letter between the Company and William F. Hulse IV as of November 4, 2019, i ncorporated by reference to Exhibit 10.30 to Annual Report on Form 10-K filed July 6, 2020 . 10.27* Employment Offer Letter between the Company and Rohit Kashyap dated as of July 23, 2020, incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q filed August 4, 2020 . 10.28* Employment Offer Letter between the Company and Robert B. Stein effective August 1, 2020, incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q filed August 4, 2020 . 10.29* Form of Key Employee Retention and Restrictive Covenant Agreement, incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed December 21, 2020. 10.30* 2020 Management Incentive Plan, incorporated by reference to Exhibit 10.35 to the Annual Report on form 10-K file on March 8, 2021 . 10.31* Management Incentive Plan, incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K filed December 21, 2020 . 84 Exhibit Number Description 10.32* Form of Indemnification Agreement ( incorporated by reference to Exhibit 10.65 to the Registrant’s Form 8-K filed July 15, 2008 ). 10.33* Form of Director Restricted Stock Unit Award Agreement (Type I - Initial Grant, Full Amount), incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q filed August 3, 2021 . 10.34* Form of Director Restricted Stock Unit Award Agreement (Type II - Initial Grant, Pro Rata Amount), incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q filed August 3, 2021 . 10.35* Form of Director Restricted Stock Unit Award Agreement (Type III - Annual Grant), incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q filed August 3, 2021 . 10.36 Technology License Agreement dated January 29, 2007 between MiMedx, Inc., Shriner's Hospitals for Children and University of South Florida Research Foundation ( incorporated by reference to Exhibit 10.32 to the Registrant’s Form 8-K filed on February 8, 2008 ). 10.37 Cooperation Agreement dated as of May 29, 2019 among MiMedx Group, Inc., M. Kathleen Behrens Wilsey, K. Todd Newton, Richard J. Barry, Prescience Partners, LP, Prescience Point Special Opportunity LP, Prescience Capital LLC, Prescience Investment Group, LLC d/b/a Prescience Point Capital Management LLC and Eiad Asbahi ( incorporated by reference to Exhibit 10.32 to the Registrant’s Form 8-K filed on May 30, 2019 ). 10.38# ## Amendment No. 1 to Loan Agreement dated as of February 28, 2022 , which amends that certain Loan Agreement dated as of June 30, 2020 by and among MiMedx Group, Inc., certain subsidiaries of MiMedx Group, Inc. parties thereto, the Lenders from time to time party hereto, Hayfin Services LLP, as administrative agent for the Lenders and as collateral agent for the Secured Parties. 16.1 Letter from BDO USA, LLP dated March 30, 2021, incorporated by reference to Exhibit 16.1 to the Registrant’s Current Report on Form 8-K filed March 30, 202 1 . 21.1# Subsidiaries of MiMedx Group, Inc. 23.1# Consent of Deloitte & Touche LLP , Independent Registered Public Accounting Firm. 23.2# Consent of BDO USA, LLP, Independent Registered Public Accounting Firm. 24.1# Power of Attorney (included on the signature page to this Report). 31.1# Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2# Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1# Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2# Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS# XBRL Instance Document 101.SCH# XBRL Taxonomy Extension Schema Document 101.CAL# XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF# XBRL Taxonomy Extension Definition Linkbase Document 101.LAB# XBRL Taxonomy Extension Label Linkbase Document 101.PRE# XBRL Taxonomy Extension Presentation Linkbase Document Item 16. Form 10-K Summary Not applicable. 85 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MIMEDX GROUP, INC. February 28, 2022 By: /s/ Peter M. Carlson Peter M. Carlson Chief Financial Officer and Principal Financial Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints William F. Hulse IV and Sajid N. Ajmeri and each of them acting individually, as his or her true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him or her in any and all capacities, to sign any and all amendments to this Annual Report for the year ended December 31, 2021, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorney to any and all amendments to said Annual Report. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. 86 Signature / Name Title Date /s/ Timothy R. Wright Chief Executive Officer and Director February 28, 2022 Timothy R. Wright (Principal Executive Officer) /s/ Peter M. Carlson Chief Financial Officer February 28, 2022 Peter M. Carlson (Principal Financial Officer) /s/ William L. Phelan Senior Vice President and Chief Accounting Officer February 28, 2022 William L. Phelan (Principal Accounting Officer) /s/ M. Kathleen Behrens Chair of the Board (Director) February 28, 2022 M. Kathleen Behrens /s/ James L. Bierman Director February 28, 2022 James L. Bierman /s/ Michael J. Giuliani Director February 28, 2022 Michael J. Giuliani /s/ William A. Hawkins III Director February 28, 2022 William A. Hawkins III /s/ Cato T. Laurencin Director February 28, 2022 Cato T. Laurencin /s/ K. Todd Newton Director February 28, 2022 K. Todd Newton /s/ Martin P. Sutter Director February 28, 2022 Martin P. Sutter /s/ Phyllis I. Gardner Director February 28, 2022 Phyllis I. Gardner 87