What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-02-28 compared with 2023-02-28 · 410 added, 801 removed, 678 unchanged (64% of the section changed)

1 unchanged sentence

Index to Financial Statements

Report of Deloitte & Touch e LLP, Independent Registered Public Accounting Firm (PCAOB ID:

Report of BDO USA, LLP, Independent Registered Public Accounting Firm (PCAOB ID:

Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets – As of December 31, 2023 and 2022

Consolidated Statements of Operations – For the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Stockholde rs’ (Deficit) Equity – For the years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Stockholders’ Equity ( Deficit) – For the years ended December 31, 2023, 2022 and 2021

Consolidated Statements of Cash Flows – For the years ended December 31, 2023, 2022 and 2021

Notes to Consolidated Financial Statements

Schedule II - Valuation and Qualifying Accounts F- 44

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

2 unchanged sentences

We have audited the accompanying consolidated balance sheets of MiMedx Group, Inc.

and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders' (deficit) equity, and cash flows, for the years then ended, and the related notes and the schedule listed in the Index at Item 8 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, stockholders' equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

17 unchanged sentences

Customers obtain and use products either through ship and bill sales or consignment arrangements.

Under ship and bill arrangements, the Company retains possession of the product until the customer submits an order and the product orders is shipped to the customer.

Under ship and bill arrangements, the Company retains possession of the product until the customer submits an order and the order is shipped to the customer.

Under consignment arrangements, the customer takes possession of the product, but the Company retains title until the implantation, or application of the Company’s product to the end user.

1 unchanged sentence

We identified the timing of revenue recognition for ship and bill and consignment sales at or near year end as a critical audit matter because of the judgments involved in evaluating that the performance obligations are fulfilled.

This required extensive audit effort due to the volume of transactions and a degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

This required a higher degree of audit effort and auditor judgment when performing audit procedures and evaluating the results of these procedures.

How the Critical Audit Matter Was Addressed in the Audit

5 unchanged sentences

• We tested a sample of consignment revenue transactions manually accrued as of year-end and evaluated whether the transactions were recorded in the correct period.

• We selected a sample of ship and bill revenue transactions close to year end by agreeing the amounts recognized to source documents and evaluating whether the transaction was recorded in the correct period.

• We selected a sample of ship and bill revenue transactions close to period end by agreeing the amounts recognized to source documents and evaluating whether the transaction was recorded in the correct period.

• We tested a sample of credits issued after year end by agreeing to documents supporting the authorization for the issuance of the credit and to evaluate if the credit was issued in the correct period.

3 unchanged sentences

We have served as the Company's auditor since 2021.

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

MIMEDX GROUP, INC.

Marietta, Georgia

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statement of stockholders’ equity (deficit), operations and cash flows for the year ended December 30, 2020 of MiMedx Group, Inc.

(the “Company”) and the related notes and schedule (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“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 the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ BDO USA, LLP

We served as the Company's auditor from 2019 to 2020.

Atlanta, Georgia

March 8, 2021, except for the change in reportable segments discussed in Notes 2 and 13, as to which the date is February 28, 2023

MIMEDX GROUP, INC.

AND SUBSIDIARIES

6 unchanged sentences

Prepaid expenses 5,624 7,315

Income tax receivable 704 743

Current assets of discontinued operations — 1,331

Other current assets 1,745 3,335

1 unchanged sentence

Property and equipment, net 6,974 7,856

Right of use asset 3,400 4,696

Right of use assets 2,132 3,400

Deferred tax assets 40,777 —

Goodwill 19,441 19,441

1 unchanged sentence

Other assets 205 148

Noncurrent assets of discontinued operations — 535

Total assets $ 239,047 $ 171,430

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ (DEFICIT) EQUITY

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

2 unchanged sentences

Accrued expenses 9,361 10,934

Current liabilities of discontinued operations 1,352 1,479

Other current liabilities 3,894 1,834

6 unchanged sentences

$ .001 par value;

100,000 shares authorized, issued and outstanding at December 31, 2022 and December 31, 2021

$ 92,494 $ 92,494

Stockholders’ (deficit) equity:

Preferred stock Series A;

$ .001 par value;

5,000,000 shares authorized;

0 issued and outstanding at December 31, 2022 and 0 issued and outstanding at December 31, 2021

100,000 shares authorized, 0 shares issued and outstanding at December 31, 2023 and 100,000 shares issued and outstanding at December 31, 2022

Stockholders’ equity (deficit)

Common stock;

$ .001 par value;

187,500,000 shares authorized, 113,705,447 issued and outstanding at December 31, 2022 and 112,703,926 issued and 111,925,216 outstanding at December 31, 2021

250,000,000 shares authorized, 146,227,639 issued and outstanding at December 31, 2023 and 187,500,000 authorized, 113,705,447 issued and outstanding at December 31, 2022

Additional paid-in capital 276,249 173,804

Treasury stock at cost;

0 shares at December 31, 2022 and 778,710 shares at December 31, 2021

Accumulated deficit ( 133,678 ) ( 191,906 )

Total stockholders’ (deficit) equity ( 17,988 ) 82

Total liabilities, convertible preferred stock, and stockholders’ (deficit) equity $ 171,430 $ 187,929

Total stockholders’ equity (deficit) 142,717 ( 17,988 )

Total liabilities, convertible preferred stock, and stockholders’ equity (deficit)

$ 239,047 $ 171,430

See notes to the consolidated financial statements.

14 unchanged sentences

Impairment of intangible assets — — 53

Operating loss ( 24,971 ) ( 5,035 ) ( 45,398 )

Operating income (loss) 37,116 ( 14,727 ) ( 7,051 )

Other expense, net

1 unchanged sentence

Other expense, net ( 26 ) ( 4 ) ( 23 )

Loss on extinguishment of debt — — ( 8,201 )

Loss before income tax provision ( 29,991 ) ( 10,038 ) ( 61,543 )

Income tax provision (expense) benefit ( 206 ) ( 247 ) 12,259

Net loss $ ( 30,197 ) $ ( 10,285 ) $ ( 49,284 )

Net loss available to common stockholders (Note 10) $ ( 36,777 ) $ ( 16,421 ) $ ( 83,328 )

Net loss per common share - basic $ ( 0.33 ) $ ( 0.15 ) $ ( 0.77 )

Net loss per common share - diluted $ ( 0.33 ) $ ( 0.15 ) $ ( 0.77 )

Income (loss) from continuing operations before income tax provision 30,633 ( 19,747 ) ( 12,054 )

Income tax provision benefit (expense) from continuing operations 36,806 ( 206 ) ( 247 )

Net income (loss) from continuing operations 67,439 ( 19,953 ) ( 12,301 )

(Loss) income from discontinued operations, net of tax

( 9,211 ) ( 10,244 ) 2,016

Net income (loss) $ 58,228 $ ( 30,197 ) $ ( 10,285 )

Net income (loss) from continuing operations available to common stockholders (Note 10) $ 55,796 $ ( 26,533 ) $ ( 18,437 )

Basic net income (loss) per common share:

Continuing operations $ 0.48 $ ( 0.24 ) $ ( 0.17 )

Discontinued operations ( 0.08 ) ( 0.09 ) 0.02

Basic net income (loss) per common share:

$ 0.40 $ ( 0.33 ) $ ( 0.15 )

Diluted net income (loss) per common share:

Continuing operations

$ 0.43 $ ( 0.24 ) $ ( 0.17 )

Discontinued operations

( 0.06 ) ( 0.09 ) 0.02

Diluted net income (loss) per common share:

$ 0.37 $ ( 0.33 ) $ ( 0.15 )

Weighted average common shares outstanding - basic 116,495,810 112,909,266 110,353,406

9 unchanged sentences

Balance at December 31, 2020 112,703,926 $ 113 $ 158,610 1,773,683 $ ( 7,449 ) $ ( 151,424 ) $ ( 150 )

Issuance of Series B Convertible Preferred Stock — — 32,954 — — — 32,954

Deemed dividends — — ( 926 ) — — — ( 926 )

4 unchanged sentences

Shares repurchased for tax withholding — — — 469,239 ( 4,751 ) — ( 4,751 )

Other — — ( 2,009 ) ( 239,502 ) 2,009 — —

Net loss — — — — — ( 10,285 ) ( 10,285 )

Balance at December 31, 2021 112,703,926 $ 113 $ 165,695 778,710 $ ( 4,017 ) $ ( 161,709 ) $ 82

Deemed dividends — — ( 926 ) — — — ( 926 )

Shares repurchased for tax withholding — — — 469,239 ( 4,751 ) — ( 4,751 )

Share-based compensation expense — — 12,666 — — — 12,666

Exercise of stock options — — ( 1,199 ) ( 487,361 ) 2,636 — 1,437

Restricted stock shares canceled/forfeited — — 515 73,056 ( 515 ) — —

Issuance of restricted stock 840,759 1 ( 3,969 ) ( 882,251 ) 3,968 — —

Other — — ( 2,009 ) ( 239,502 ) 2,009 — —

Restricted stock shares canceled/forfeited — — 30 5,338 ( 30 ) — —

Exercise of stock options 160,762 — ( 618 ) ( 151,239 ) 1,269 — 651

Shares repurchased for tax withholding — — — 249,442 ( 1,190 ) — ( 1,190 )

Net loss — — — — — ( 30,197 ) ( 30,197 )

Balance at December 31, 2022 113,705,447 $ 114 $ 173,804 — $ — $ ( 191,906 ) $ ( 17,988 )

Shares repurchased for tax withholding — — — 249,442 ( 1,190 ) — ( 1,190 )

Conversion of Series B Preferred Stock 29,761,650 30 87,840 — — — 87,870

Repurchase of Series B Preferred Stock — — ( 4,935 ) — — — ( 4,935 )

Employee stock purchase plan 444,809 — 1,367 — — — 1,367

Share-based compensation expense — — 17,178 — — — 17,178

2 unchanged sentences

Restricted stock shares canceled/forfeited — — 378 90,367 ( 378 ) — —

Net loss — — — — — ( 30,197 ) ( 30,197 )

Net income — — — — — 58,228 58,228

Balance at December 31, 2023 146,227,639 $ 146 $ 276,249 — $ — $ ( 133,678 ) $ 142,717

2 unchanged sentences

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Years Ended December 31,

CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

Year Ended December 31,

2023 2022 2021

Cash flows from operating activities:

Net loss $ ( 30,197 ) $ ( 10,285 ) $ ( 49,284 )

Adjustments to reconcile net loss to net cash used in operating activities:

Net income (loss) from continuing operations $ 67,439 $ ( 19,953 ) $ ( 12,301 )

Adjustments to reconcile net income (loss) from continuing operations to net cash flows provided by (used in) operating activities of continuing operations:

Deferred income tax provision

( 37,802 ) — —

Share-based compensation 16,959 11,328 14,156

3 unchanged sentences

Amortization of intangible assets 762 701 820

Amortization of deferred financing costs and debt discount 467 1,055 2,276

Amortization of deferred financing costs 505 467 1,055

Accretion of asset retirement obligation 93 92 81

(Gain) loss on fixed asset disposal ( 17 ) 262 1

Loss (gain) on fixed asset disposal 15 ( 17 ) 262

Impairment of intangible assets — — 53

Loss on extinguishment of debt — — 8,201

Increase (decrease) in cash resulting from changes in:

6 unchanged sentences

Accrued expenses ( 1,708 ) 2,366 ( 20,497 )

Income taxes 39 9,302 ( 10,027 )

Other liabilities ( 497 ) 75 ( 1,159 )

Net cash flows used in operating activities ( 17,893 ) ( 1,982 ) ( 30,263 )

Net cash flows provided by (used in) operating activities of continuing operations 34,937 ( 7,972 ) ( 9,874 )

Net cash flows (used in) provided by operating activities of discontinued operations

( 8,162 ) ( 9,921 ) 7,892

Net cash flows provided by (used in) operating activities

26,775 ( 17,893 ) ( 1,982 )

Cash flows from investing activities:

Purchases of property and equipment ( 1,514 ) ( 3,218 ) ( 4,228 )

Cash paid for licensing agreement ( 1,000 ) — —

Purchases of equipment ( 1,987 ) ( 1,514 ) ( 3,218 )

Patent application costs ( 168 ) ( 170 ) ( 252 )

Sales of equipment — 24 —

Cash paid for licensing agreement — ( 1,000 ) —

Principal payments from note receivable — — 75

Proceeds from property and equipment sale 24 — —

Net cash flows used in investing activities ( 2,155 ) ( 2,660 ) ( 3,395 )

Cash flows from financing activities:

Stock repurchased for tax withholdings on vesting of restricted stock ( 1,190 ) ( 4,751 ) ( 2,334 )

Proceeds from exercise of stock options 997 651 1,437

Payments under finance lease obligations ( 52 ) ( 41 ) ( 38 )

Proceeds from sale of Series B convertible preferred stock — — 100,000

Stock issuance costs — — ( 7,470 )

Proceeds from term loans — — 59,500

Deferred financing costs — — ( 3,235 )

Repayment of term loans — — ( 83,872 )

Prepayment premium on early repayment of term loan — — ( 1,439 )

Net cash flows (used in) provided by financing activities ( 580 ) ( 3,352 ) 61,561

Net change in cash ( 21,133 ) ( 8,729 ) 26,743

Cash and cash equivalents, beginning of year 87,083 95,812 69,069

Cash and cash equivalents, end of year $ 65,950 $ 87,083 $ 95,812

Repurchase of Series B Preferred Shares ( 9,515 ) — —

Stock repurchased for tax withholdings on vesting of restricted stock — ( 1,190 ) ( 4,751 )

Net cash flows used in financing activities

( 8,570 ) ( 580 ) ( 3,352 )

Net change in cash and cash equivalents 16,050 ( 21,133 ) ( 8,729 )

Cash and cash equivalents, beginning of period 65,950 87,083 95,812

Cash and cash equivalents, end of period $ 82,000 $ 65,950 $ 87,083

See notes to the consolidated financial statements.

4 unchanged sentences

MiMedx Group, Inc.

(together with its subsidiaries, except where the context otherwise requires, “ MIMEDX ,” or the “ Company ”) is a is a pioneer and leader in placental biologics focused on addressing the needs of patients with acute and chronic non-healing wounds.

The Company is also advancing a promising late-stage biologics pipeline targeted at decreasing pain and improving function for patients with knee osteoarthritis (“ KOA ”).

To accomplish these goals, the Company operates as two defined, internal business units:

Wound & Surgical and Regenerative Medicine.

(together with its subsidiaries, except where the context otherwise requires, “ MIMEDX ,” or the “ Company ”) is a pioneer and leader in placental biologics focused on helping humans heal.

With more than a decade of helping clinicians manage chronic and other hard-to-heal wounds, MIMEDX is dedicated to providing a leading portfolio of products for applications in the wound care, burn, and surgical sectors of healthcare.

The Company’s vision is to be the leading global provider of healing solutions through relentless innovation to restore quality of life.

All of our products sold in the United States are regulated by the United States Food and Drug Administration (“ FDA ”).

The Wound & Surgical business focuses on the Advanced Wound Care and Surgical Recovery markets through sales of the Company’s existing product portfolio and product development to serve these end markets.

This business unit is responsible for substantially all sales of the Company’s Advanced Wound Care products, as well as the sale of the Company’s micronized and certain particulate products (collectively, the “ Section 351 products ”) internationally.

The Regenerative Medicine business focuses on progressing the Company’s placental biologics platform towards registration as a FDA-approved biological drug.

Micronized dehydrated human amnion chorion membrane ( “mDHACM” ) is an injectable placental biologic product candidate in its late-stage pipeline targeted at achieving FDA approval for an indication to help decrease pain and improve function in patients suffering from KOA.

Prior to May 31, 2021, this business unit was responsible for domestic sales of the Company’s Section 351 products.

Regenerative Medicine does not currently generate revenue.

Additional information regarding the principal operations and results of these business units can be found in Note 13, Segment Information .

The Company’s business is focused primarily on the United States of America but the Company is pursuing opportunities for international expansion, with specific focus on the sale of its placental tissue products in Japan.

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

The Company’s business is focused primarily on the United States of America but the Company also has a small commercial presence in several international locations, including Japan.

Disbanding of Regenerative Medicine Business Unit

On June 20, 2023, the Company announced the disbanding of its Regenerative Medicine business unit and the suspension of its Knee Osteoarthritis clinical trial program.

During the fourth quarter of 2023, the Company completed the regulatory obligations associated with the clinical trial and concluded that the business unit met the criteria for presentation as a discontinued operation at that time.

Refer to Note 13, Discontinued Operations , for further discussion.

Significant Accounting Policies

3 unchanged sentences

All intercompany balances and transactions have been eliminated upon consolidation.

Reclassifications

Increases in cash resulting from changes in income taxes of $ 0 and $ 9.3 million for the years ended December 31, 2022 and 2021, respectively, were separately presented in previously issued consolidated statements of cash flows.

These amounts are reflected as part of changes in other assets in the consolidated statements of cash flows included in these consolidated financial statements.

Use of Estimates

2 unchanged sentences

Actual results could differ from those estimates.

Significant estimates include estimated useful lives and potential impairment of property and equipment, goodwill and intangible assets, estimates of loss for contingent liabilities, estimate of allowance for doubtful accounts, management’s assessment of the Company’s ability to continue as a going concern, estimate of fair value of share-based payments, estimates of returns and allowances, and valuation of deferred tax assets.

Significant estimates include estimated useful lives and potential impairment of property and equipment, goodwill and intangible assets, estimates of loss for contingent liabilities, estimate of allowance for doubtful accounts, estimate of fair value of share-based payments, the extent of probable achievement of performance conditions in share-based payment awards, estimates of returns and allowances, and valuation of deferred tax assets.

Segment Reporting

2 unchanged sentences

The Company has concluded that its Chief Executive Officer (“ CEO ”) is its CODM.

Prior to June 30, 2022, the Company assessed that it operated as one operating and reportable segment.

The Company reassesses the existence of operating segments when facts and circumstances suggest that there may have been a change in the way that the Company is managed.

On September 30, 2022, the Company reassessed its operating segments, concluding that the CODM assesses performance and allocates resources between two , distinct reportable segments:

Prior to the fourth quarter of 2023, the Company assessed that it operated as two operating and reportable segments:

Wound & Surgical and Regenerative Medicine.

Information regarding the principal operations and results of these segments can be found in Note 13, Segment Information .

During the fourth quarter of 2023, upon the conclusion that the Regenerative Medicine segment met all the requirements to be classified as a discontinued operation, the Company reassessed its operating segments, concluding that the CODM assesses performance and resources as one reportable segment.

Cash and Cash Equivalents

4 unchanged sentences

Federal Deposit Insurance Corporation (“ FDIC ”) provides insurance coverage for deposits up to $250,000 for substantially all depository accounts.

As of December 31, 2022 and 2021, the Company had cash and cash equivalents of approximately $ 65.2 million and $ 86.4 million, respectively, in excess of the insured amounts in four depository institutions.

As of December 31, 2023 and 2022, the Company had cash and cash equivalents of approximately $ 81.3 million and $ 65.2 million, respectively, in excess of the insured amounts in five depository institutions.

Accounts Receivable

1 unchanged sentence

Generally, the Company does not require collateral or any other security to support its receivables.

Bad debt expense and the allowance for doubtful accounts are based on historical trends and current expectations for credit losses.

The Company’s policy to reserve for potential bad debts is based on the aging of the individual receivables as well as customer-specific qualitative factors, such as bankruptcy proceedings.

The allowance for doubtful accounts is calculated based on the Company’s current expectations for credit losses, which is generally informed by historical trends.

The Company’s policy to reserve for potential bad debts based on the age of the individual receivable as well as customer-specific qualitative factors, such as bankruptcy proceedings.

The Company manages credit risk by routinely performing credit checks on customers prior to sales.

7 unchanged sentences

Write-downs are utilized to account for slow-moving inventory as well as inventory no longer needed due to diminished demand or regulatory action.

Property and Equipment, Net

Property and Equipment

Property and equipment are recorded at cost and depreciated on a straight-line method over their estimated useful lives, principally three to seven years .

1 unchanged sentence

Asset Retirement Obligations

The Company records obligations associated with the legal requirement to retire long-lived assets at the sooner of the imposition of the legal requirement and when an estimate for the cost of retirement can reasonably be made.

The Company records obligations associated with the legal requirement to retire long-lived assets when an estimate for the cost of retirement can reasonably be made.

The Company reviews legal obligations associated with the retirement of long-lived assets that result from contractual obligations or the acquisition, construction, development and/or normal use of the assets.

If it is determined that a legal obligation exists, regardless of whether the obligation is conditional on a future event, the fair value of the liability for an asset retirement obligation is recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made.

The fair value is calculated as the estimate of the expected cash outflow to satisfy the legal obligation discounted to present value using the Company’s incremental borrowing rate.

The fair value is calculated as the estimate of the expected cash outflow to satisfy the legal obligation discounted to present value using the Company’s then-prevailing incremental borrowing rate.

At such point in time, an asset and liability are recorded for the amount of the expected liability.

9 unchanged sentences

Actual results may differ from these estimates.

The Company recorded impairment losses on amortizable intangible assets of $ 0 , $ 0.1 million, and $ 1.0 million in in 2022, 2021, and 2020, respectively.

The Company recorded no impairment losses on intangible assets for the years ended December 31, 2023 and 2022 and $ 0.1 million for the year ended December 31, 2021.

The Company recorded no impairment losses with respect to any other classes of long-lived assets in those periods.

11 unchanged sentences

Under the market approach, the Company uses market multiples derived from various comparable companies based on measures salient to investors in those companies.

As indicated above, on September 30, 2022, the Company changed its operating segments, determining that it operates as two reportable segments.

In concert with this re-evaluation, the Company concluded that it has two reporting units for goodwill impairment testing purposes.

Management performed a goodwill impairment test as of September 30, 2022 on its previous reporting unit, concluding that goodwill was not impaired as of that date.

Management subsequently allocated the goodwill assigned to its previous reporting unit to its new reporting units.

Refer to Note 7, Goodwill and Intangible Assets, Net, for information regarding the reallocation of goodwill to the reporting units.

As part of the goodwill impairment test performed on October 1, 2022, the Company performed a quantitative assessment, concluding that goodwill was not impaired for any of its reporting units.

There were no recorded impairment losses related to goodwill in 2022, 2021, or 2020.

The Company recorded no impairment losses related to any of our other indefinite-lived intangible assets during 2022, 2021, or 2020.

On June 20, 2023, the Company announced the disbanding of its Regenerative Medicine business unit and the suspension of its Knee Osteoarthritis clinical trial program.

As a result of this event, the Company evaluated goodwill associated with the Regenerative Medicine reporting unit for potential impairment.

The Company estimated fair value for the reporting unit using the income approach;

specifically, a discounted cash flow method.

As a result of this assessment, management concluded that the fair value of the reporting unit exceeded its carrying value by an amount that exceeded its goodwill balance.

Accordingly, the Company recognized an impairment loss for the full amount of the goodwill ascribed to the Regenerative Medicine reporting unit.

The Company incurs certain legal and related costs in connection with patent applications.

The Company capitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent

or an alternative future use is available to the Company.

The Company capitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent or an alternative future use is available to the Company.

The Company capitalized $ 0.2 million, $ 0.2 million, and $ 0.3 million of patent costs for the years ended December 31, 2023, 2022, and 2021, respectively.

6 unchanged sentences

The lease term and applicable payments include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

Options to renew or terminate a lease are included in the lease term to the extent that such provisions are reasonably certain to be exercised.

Options to renew or terminate a lease are included in the lease term to the extent that such provisions

are reasonably certain to be exercised.

This determination is reassessed as new information arises and is accounted for prospectively.

3 unchanged sentences

Lease expense associated with operating leases is recognized, straight-line, over the lease term.

The Company does not recognize interest expense as part of operating lease liabilities.

The Company does not recognize interest expense from operating lease liabilities.

Finance lease right of use assets and the related liabilities are included in property and equipment, net, other current liabilities, and other liabilities, respectively, in the consolidated balance sheets.

5 unchanged sentences

Contingencies

The Company is or has been subject to various patent challenges, product liability claims, government investigations, former employee matters, and other legal proceedings, see Note 16, Commitments and Contingencies .

Legal fees and other expenses related to litigation are expensed as incurred and included in selling, general and administrative expenses in the consolidated statements of operations.

The Company is or has been subject to various patent challenges, product liability claims, government investigations, former employee matters, and other legal proceedings.

See Note 16, Commitments and Contingencies , for discussion of material matters.

Legal fees and other expenses related to litigation are expensed as incurred and included in selling, general and administrative expenses or investigation, restatement and related expenses in the consolidated statements of operations, depending on the nature of the matter.

The Company records an accrual for resolution costs and other contingencies in the consolidated financial statements when the Company determines that a loss is both probable and reasonably estimable.

6 unchanged sentences

Revenue Recognition

Current Policy

The Company sells its products primarily to individual customers and independent distributors (collectively referred to as “ customers ”).

2 unchanged sentences

Upon approval of the sales order, the Company ships product to the customer and invoices them for the product sold.

Under consignment

arrangements, the customer takes possession of the product, but the Company retains title until the implantation or application of the Company’s product to the end user.

Under consignment arrangements, the customer takes possession of the product, but the Company retains title until the implantation or application of the Company’s product to the end user.

The Company recognizes revenue as performance obligations are fulfilled, which generally occurs upon the shipment of product to the customers for ship and bill orders or upon implantation for consignment sales.

11 unchanged sentences

The Company’s payment terms for customers are typically 30 to 60 days from receipt of title of the goods.

Remaining Contracts

Prior to 2020, the Company’s control environment was such that it created uncertainty surrounding all of its customer arrangements, which required consideration related to the proper revenue recognition under the applicable literature.

The control environment allowed for the existence of extra-contractual or undocumented terms or arrangement initiated by or agreed to by the company and former members of Company management at the outset of the transactions (side agreements).

Concessions were also agreed to subsequent to the initial sale (e.g.

sales above established customer credit limits extended and unusually long payment terms, return or exchange rights, and contingent payment obligations) that precluded the Company from recognizing revenue at the time that product was shipped to a customer.

Because of the prevalence of these arrangements, the Company’s sales arrangements did not qualify as contracts under Accounting Standards Codification (“ ASC ”) Topic 606, Revenue from Contracts with Customers , until consideration was collected from customers.

This determination precluded the recognition of revenue at the time of shipment.

Instead, recognition of revenue was deferred until:

(1) the customer returned the product prior to payment;

or (2) the Company received payment from the customer.

Cost of sales associated with product shipped was deferred until collection was received.

The Company implemented changes and remediated weaknesses, which gave rise to the above conclusion beginning in mid-2018.

Management concluded that these efforts had been sufficiently implemented such that customers were aware of the Company’s sales policies and procedures and that a contract existed prior to the transfer of title or the implantation of product for ship-and-bill and consignment sales, respectively, by the third quarter of 2019.

Accordingly, the Company changed its pattern of revenue recognition effective October 1, 2019 to the policy described under the section titled “ Current Policy ” above.

The Company also reassessed whether the revenue recognition criteria had been met for all shipments of products where payment had not been received as of September 30, 2019.

While the measures summarized above provided significant evidence necessary to understand the terms of the Company’s contractual arrangements with its customers, certain of these customers continued to exhibit behaviors that resulted in extended periods until cash collection.

Such delays in collection suggested that uncertainty regarding extra-contractual arrangements may continue, particularly as it relates to payment terms.

As a result, the Company concluded the following for any existing arrangements, which remained unpaid at September 30, 2019:

• For customer arrangements where collection was considered probable within 90 days from the date of original shipment or implantation of the products, the Company concluded the revenue recognition criteria were met.

The revenue associated with this event was recognized prior to 2020.

• For the remaining customer arrangements (the “ Remaining Contracts ”), the Company concluded that, due to the uncertainty that extra-contractual arrangements may continue, the revenue recognition criteria would not be satisfied until the Company received payment from the customer.

At that point, the Company determined that an accounting

contract would exist and the performance obligations for the Company to deliver product and the customer to pay for the product would be satisfied.

The Company continued to reassess the Remaining Contracts for settlement of the revenue recognition criteria prior to payment, concluding that the revenue recognition criteria continued to not be met due to the same circumstances described above.

The effect of the cash collections on the Remaining Contracts on net sales and cost of sales for each of the years ended December 31, 2022, 2021, and 2020 were as follows (amounts in thousands):

Year Ended December 31,

2022 2021 2020

Net sales $ 259 $ 1,038 $ 7,767

Cost of Sales

Gross profit $ 259 $ 864 $ 6,680

Group Purchasing Organization Fees

The Company sells to GPO members who transact directly with the Company at GPO-agreed pricing.

Group Purchasing Organizations are funded by administrative fees that are paid by the Company.

These fees are set as a percentage of the purchase volume, which is typically 3 % of sales made to the GPO members.

Fees paid to GPOs are presented as a reduction to net sales.

Cost of Sales

Cost of sales includes all costs directly related to bringing the Company’s products to their final selling destination.

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Research and development costs consist of direct and indirect costs associated with the development of the Company’s technologies.

Historically, these expenses largely represented costs associated with our clinical trials, but now largely represent costs associated with new product development and pilot production.

These costs are expensed as incurred.

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Advertising expense for the year ended December 31, 2023, 2022, and 2021 was $ 0.6 million, $ 0.2 million, and $ 0.1 million respectively.

Income tax provision (expense) benefit, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid.

Income tax provision, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid.

The Company is subject to income taxes in the United States and numerous states.

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In evaluating the Company’s ability to recover its deferred tax assets within the jurisdiction from which they arise, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, results of recent operations, and changes in tax laws.

In projecting future taxable income, the Company begins with historical results and incorporates assumptions about the amount of future state and federal

pretax operating income adjusted for items that do not have tax consequences.

In projecting future taxable income, the Company begins with historical results and incorporates assumptions about the amount of future state and federal pretax operating income adjusted for items that do not have tax consequences.

The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates the Company uses to manage the underlying businesses.

In evaluating the objective evidence that historical results provide, management considers three years of cumulative income (loss).

In evaluating the objective evidence that historical results provide, management considers three years of cumulative income (loss) exclusive of items that will not recur, such as discontinued operations.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements.

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federal income tax purposes and across numerous state jurisdictions.

ASC Topic 740, Income Taxes , states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

The Company (1) records unrecognized tax benefits as liabilities in accordance with ASC Topic 740 included within other liabilities on the consolidated balance sheets, and (2) adjusts these liabilities when management’s judgment changes as a result of the evaluation of new information not previously available.

The Company records unrecognized tax benefits within other current liabilities on the consolidated balance sheets and adjusts these liabilities when management’s judgment changes as a result of the evaluation of new information not previously available.

Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from management’s current estimate of the unrecognized tax benefit liabilities.

These differences will be reflected as increases or decreases to the deferred tax asset or income tax expense in the period in which new information is available.

The Company records uncertain tax positions in accordance with ASC Topic 740 on the basis of a two-step process whereby (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position, and (2) for those tax positions that meet the more-likely-than-not recognition threshold, it recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The Company records uncertain tax positions on the basis of a two-step process whereby (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position, and (2) for those tax positions that meet the more-likely-than-not recognition threshold, it recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the consolidated statements of operations.

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For awards with service-based vesting conditions only, the Company recognizes share-based compensation expense on a straight-line basis through the vesting date of the last tranche of the award.

For awards with service- and performance-based vesting conditions, the Company recognizes stock-based compensation expense using the graded-vesting method, treating each tranche as if it were a separately-granted award and recognizing expense through the vesting date of each individual tranche.

For awards which are subject to a condition other than a service condition, the Company recognizes stock-based compensation expense using the graded-vesting method, treating each tranche as if it were a separately-granted award and recognizing expense through the vesting date of each individual tranche.

In each scenario, the Company recognizes share-based compensation expense based upon the probability that the award will ultimately vest.

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Consequently, the Company could recognize expense for awards that do not ultimately vest.

Basic and Diluted Net Loss per Common Share

Basic net loss per common share is calculated as net loss available to common stockholders divided by weighted average common shares outstanding for the applicable period.

Net loss available to common stockholders is calculated by adjusting net loss for periodic preferred accrued or deemed dividends.

These amounts include (i) dividends accumulated on the Company’s Series B Convertible Preferred Stock (“ Series B Preferred Stock ”) during the period, (ii) periodic amortization of the beneficial conversion feature, and (iii) periodic accretion of the increasing-rate dividend feature.

Basic and Diluted Net Income (Loss) per Common Share

Basic net income (loss) per common share is calculated as net income (loss) from continuing operations available to common stockholders divided by weighted average common shares outstanding for the applicable period.

Net income (loss) from continuing operations available to common stockholders is calculated by adjusting net income (loss) for dividends on the Company’s previously outstanding Series B Convertible Preferred Stock (“ Series B Preferred Stock ”).

This amount is divided by the weighted average common shares outstanding during the period.

Weighted average common shares outstanding is calculated as shares of the Company outstanding adjusted for the portion of the period for which they are outstanding.

Unvested restricted stock awards are excluded from the calculation of weighted average common shares outstanding until they have vested.

Diluted net loss per common share adjusts basic net loss per common share for convertible securities, options, equity incentive awards, and other share-based payment awards which have yet to vest, to the extent such adjustments reduce basic net loss per common share.

Unvested non-option share awards are excluded from the calculation of weighted average common shares outstanding until they have vested.

Unexercised stock options are excluded from the calculation of weighted average common shares outstanding until they are exercised.

Shares issuable pursuant to the Company’s Employee Stock Purchase Plan (“ ESPP ”) are included for the minimum number of shares issuable beginning at the point in time that all contingencies for share issuance are resolved.

Diluted net income (loss) per common share adjusts basic net income (loss) per common share for convertible securities, options, equity incentive awards, and other share-based payment awards which have yet to vest and vest only upon the satisfaction of a service condition.

Equity incentive awards and options that are subject to a performance or market condition are included only if the performance or market condition would be satisfied if the end of the applicable period were the end of the performance period.

In any case, these adjustments are reflected in the calculation of diluted net income (loss) per common share to the extent that they reduce basic net income (loss) from continuing operations per common share.

Basic and diluted net income (loss) per common share from discontinued operations are evaluated using the same denominator as basic and diluted net income (loss) per common share from continued operations.

The Company uses the if-converted method to calculate the dilutive effect of the Series B Preferred Stock and other convertible securities to the extent they are outstanding.

The if-converted method assumes that convertible securities are converted at the later of the issuance date or the beginning of the period.

If the hypothetical conversion of convertible securities, and the consequential avoidance of any deemed or accumulated preferred dividends, would decrease basic net loss per common share, these effects are incorporated in the calculation of diluted net loss per common share, adjusted for the proportion of the period the securities were outstanding.

The Company uses the treasury stock method to calculate the dilutive effect of outstanding options, restricted stock awards, and other share-based payments.

The if-converted method assumes that convertible securities are converted at the later of the issuance date and the beginning of the period.

If the hypothetical conversion of convertible securities, and the consequential avoidance of any accumulated preferred dividends, would decrease basic net income (loss) from continuing operations per common share, these effects are incorporated in the calculation of diluted net income (loss) from continuing operations per common share, adjusted for the portion of the period the securities were outstanding.

The Company uses the treasury stock method to calculate the dilutive effect of options, non-option share awards, and certain other share-based payments.

The treasury stock method assumes that the proceeds from exercise are used to repurchase common shares at the weighted average market price during the period, increasing the denominator for the net effect of shares issued upon exercise less hypothetical shares repurchased.

If the dilutive effects noted above would cause diluted net loss per common share to exceed basic net loss per common share, such effects are not incorporated into the calculation, as they are deemed antidilutive.

For all periods with a net loss available to common stockholders, any adjustment for potential common shares would be naturally anti-dilutive.

Therefore, the weighted average shares outstanding used to calculate both basic and diluted net loss per common share are the same for periods with a net loss.

Shares issuable pursuant to the ESPP are included in the calculation of diluted net loss per common share to the extent that such shares would be issued based on the share price at the conclusion of the period, excluding the shares already reflected in the calculation of weighted average common shares outstanding.

Fair Value of Financial Instruments and Fair Value Measurements

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Recently Adopted Accounting Pronouncements

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.

Refer to Note 20, Government Assistance , for the disclosures required by this ASU.

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ ASU ”) 2020-04, “ Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.

” ASU 2020-04 provides temporary expedients to accounting guidance for certain contract modifications and hedging arrangements to ease financial reporting burdens as a result of market transitions from certain reference rates, including the London Interbank Offered Rate (“ LIBOR ”).

In June 2023, the Company entered into Amendment No.

2 (the “ Amendment No.

2 ”) to the loan agreement, dated as of June 30, 2020, by and among the Company, Hayfin Services, LLP (“ Hayfin ”), an affiliate of Hayfin Capital Management LLP, and certain other parties, (as amended, the “ Hayfin Loan Agreement ”), pursuant to which the reference rate used to determine the interest rate was changed from the LIBOR to the Secured Overnight Financing Rate (“ SOFR ”).

Because the only terms of Amendment No.

2 that affected the Company’s contractual cash flows were related to the changes in the reference rate, the Company adopted the optional guidance prescribed by Topic 848 to this transaction.

The adoption of ASU 2020-04 and its application to the Second Amendment did not materially impact the Company’s audited consolidated financial statements for the year ended December 31, 2023.

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, “ Reference Rate Reform (Topic 848) ”, which provides temporary, optional expedients and exceptions to accounting guidance for certain contract modifications and hedging arrangements to ease financial reporting burdens as a result of market transitions from the London Interbank Offered Rate (“ LIBOR ”) to alternative reference rates.

The guidance is available for prospective application and can generally be applied to contract modifications and hedging relationships entered into beginning March 12, 2020 through December 31, 2022.

In December 2022, following the issuance of ASU 2022-06, “ Reference Rate Reform (Topic 848) — Deferral of the Sunset Date of Topic 848 ”, the end date was extended to December 31, 2024.

As of December 31, 2022, the Company has long-term debt outstanding which carries an interest rate tied to LIBOR, the agreement for which contemplates an interest rate alternative in the event that LIBOR is unavailable.

The LIBOR tenor which underlies the Company’s term loan is expected to sunset effective June 30, 2023.

The Company is evaluating the possibility of adoption and the related impact on its financial statements.

If adopted, the Company does not expect the provisions of this ASU to have a material impact on its consolidated financial statements.

All other ASUs issued and not yet effective as of December 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 current or future financial position or results of operations.

In November 2023, the FASB issued ASU 2023-07, “ Segment Reporting:

Improvements to Reportable Segment Disclosures (Topic 280) ”.

The standard seeks to improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses.

ASU 2023-07 is effective for annual reporting periods beginning after December 15, 2023, and interim periods in fiscal years beginning after December 15, 2024.

As of December 31, 2023, the Company is evaluating the impact of this standard on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “ Improvement to Income Tax Disclosures (Topic 740) ”, which requires additional disclosures for income tax rate reconciliations, income taxes paid, and certain other tax disclosures.

ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax disclosures.

The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information.

Adoption is required for annual periods beginning after December 15, 2024.

The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

All other ASUs issued and not yet effective as of December 31, 2023, and through the date of this report, were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s current and future financial position or results of operations.

Accounts Receivable, Net

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Balance at December 31, 2022

Bad debt expense and write-offs were not material for the year ended December 31, 2021.

Bad debt expense 1,449

Write-offs ( 2,088 )

Balance at December 31, 2023

Inventory consists of the following (in thousands):

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Inventory $ 21,021 $ 13,183

As a result of the conclusion of the FDA’s period of enforcement discretion on May 31, 2021, the Company wrote down $ 1.0 million of its Section 351 product inventory and $ 0.7 million related to discontinued product during the year ended December 31, 2021.

There were no significant, unusual write-downs of inventory during the year ended December 31, 2022.

Consignment inventory, included as a component of finished goods in the table above, was $ 4.0 million and $ 3.4 million as of December 31, 2023 and 2022, respectively.

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2026 419 — 419

Thereafter — — —

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In subsequent periods, the asset retirement obligation is accreted for the change in its present value and the capitalized asset is depreciated, both over the term of the associated lease

Asset retirement obligations of $ 1.2 million and $ 1.0 million are included in other liabilities in the consolidated balance sheets as of December 31, 2022 and 2021, respectively.

The Company subleases one of its leased industrial warehouse spaces.

The sublease income from the facility offsets the lease expense associated with the facility.

Sublease income for the facility was $ 0.1 million for each of the years ended December 31, 2022, 2021, and 2020, respectively, and is presented as a reduction to selling, general, and administrative expense on the consolidated statements of operations in those periods.

Asset retirement obligations of $ 1.2 million are included in other liabilities in the consolidated balance sheets as of both December 31, 2023 and 2022.

Goodwill and Intangible Assets, Net

Historically, the Company had concluded that it operated as a single operating segment and single reporting unit.

For the year ended December 31, 2022, as a result of changes in the management of the Company’s business, management concluded that the Company operates as three operating segments, including two distinct reportable segments:

Wound & Surgical and Regenerative Medicine.

See Note 13, Segment Information , for a description of the Company’s operating segments.

Management further concluded that these two reportable segments reflected its reporting units for goodwill impairment testing purposes.

The Company allocated $ 20.0 million of consolidated goodwill, which was entirely allocated to its previous reporting unit, to each of its Wound & Surgical and Regenerative Medicine segments based on their relative fair values from a market participant standpoint.

The result was $ 19.4 million and $ 0.5 million allocated to Wound & Surgical and Regenerative Medicine, respectively.

A third reporting unit associated with the Company’s third operating segment was deemed immaterial and no goodwill was assigned to it.

The Company performed goodwill impairment tests using the Company’s single reporting unit and the new reporting units on September 30, 2022.

In all cases, the Company concluded that the estimated fair values of each reporting unit exceeded its respective carrying values.

Therefore, the Company did not record impairment for goodwill on September 30, 2022.

For the annual impairment test performed October 1, 2022, the Company performed a quantitative assessment to determine the existence of impairment.

The quantitative assessment concluded that it was more likely than not that goodwill was not impaired.

No impairment was recorded for the year ended December 31, 2022.

In concert with the disbanding of its Regenerative Medicine business unit, management concluded that the Company operated as a single operating segment.

This operating segment reflected its sole reporting unit for goodwill impairment testing purposes.

For the annual impairment test performed on October 1, 2023, the Company performed a qualitative assessment to determine the existence of impairment.

The qualitative assessment concluded that it was more likely than not that goodwill was not impaired.

The Company did not proceed to the quantitative assessment, and no impairment was recorded for the year ended December 31, 2021.

The qualitative assessment concluded that it was more likely than not that goodwill was not impaired, and the Company did not proceed to the quantitative assessment.

There was no impairment of goodwill in 2022 or 2021.

The following table indicates the changes in the carrying amount of goodwill for 2023 and 2022 (in thousands):

Previous Reporting Unit Wound & Surgical Regenerative Medicine Total Company

Balance as of January 1, 2022 $ 19,441

Activity — — — —

Balance as of December 31, 2022 $ 19,441

Reallocation ( 19,976 ) 19,441 535 —

Balance as of December 31, 2023 $ 19,441

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Impairment of intangible assets in 2021 related to supplier relationship assets that were determined to be unrecoverable due to attrition.

Impairment of intangible assets in 2020 related to customer relationship assets that were determined to be unrecoverable due to lower than expected margins.

There was no impairment of intangible assets in 2023 or 2022.

Expected future amortization of intangible assets as of December 31, 2023, is as follows (in thousands):

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Accrued expenses consist of the following (in thousands):

Legal costs $ 4,447 $ 2,806

External commissions $ 4,136 $ 2,941

Accrued rebates 707 1,343

Estimated returns 659 788

Accrued GPO Fees 1,338 638

Estimated returns 1,096 659

Legal costs 834 4,447

Accrued rebates 745 707

Accrued travel 433 566

Accrued clinical trials 90 694

Other 779 976

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Hayfin Loan Agreement

On June 30, 2020, the Company entered into a Loan Agreement with, among others, Hayfin Services, LLP, (“ Hayfin ”) an affiliate of Hayfin Capital Management LLP (the “ Hayfin Loan Agreement ”), which was funded on July 2, 2020 and provided the Company with a senior secured term loan in an aggregate amount of $ 50.0 million (the “ Term Loan ”).

The Term Loan matures on June 30, 2025 (the “ Maturity Date ”).

Interest is payable quarterly on the Term Loan for the principal balance outstanding through the Maturity Date.

No principal payments are due and payable until the Maturity Date.

The Hayfin Loan Agreement also provided the Company with an option to draw on an additional delayed draw term loan (the “ DD TL ”, collectively with the Term Loan, the “ Credit Facilities ”) in the form of a committed but undrawn $ 25.0 million facility until June 30, 2021.

The Company did not exercise the option.

On February 28, 2022, the Company executed an Amendment to the Hayfin Loan Agreement (as amended, the “ Amended Hayfin Loan Agreement ”).

The amendment was accounted for as a modification.

No gain or loss was recognized nor was there a change to the carrying amount of the debt as a result of the amendment.

Interest on any borrowings under the Amended Hayfin Loan Agreement is equal to the London Interbank Offered Rate ( “LIBOR” ) (subject to a floor of 1.5 %) plus a margin of 6.75 % per annum.

If LIBOR is unavailable, the Term Loan will carry interest at the 6.75 % margin plus the greatest of the Prime Rate, the Federal Funds Rate plus 0.5 % per annum, and 2.5 %.

An additional 3.0 % margin is applied to the interest rate in the event of default as defined by the Amended Hayfin Loan Agreement.

The Term Loan carried an interest rate of 8.3 % at issuance and 11.5 % as of December 31, 2022.

The Amended Hayfin Loan Agreement contains financial covenants requiring the Company, on a consolidated basis, to maintain the following:

• Minimum Consolidated Total Net Sales (as defined in the Amended Hayfin Loan Agreement) of varying amounts, required to be calculated on a quarterly basis, and

• Minimum Liquidity (as defined in the Amended Hayfin Loan Agreement) of $ 20 million, an at-all-times financial covenant tested monthly.

As of December 31, 2022, the Company is in compliance with all applicable financial covenants under the Amended Hayfin Loan Agreement.

The Amended Hayfin Loan Agreement also includes certain negative covenants and events of default customary for facilities of this type, and upon the occurrence of such events of default, subject to customary cure rights, the Term Loan may be accelerated or the lenders’ commitments terminated.

Mandatory prepayments are also required in the event of a change in control, incurring other indebtedness, certain proceeds from disposal of assets and insured casualty event (as defined in the Amended Hayfin Loan Agreement).

Annually, beginning with the fiscal year ended December 31, 2021, the Company is required to prepay the outstanding loans based on a percentage of Excess Cash Flow (as defined in the Amended Hayfin Loan Agreement), if such is generated.

No such prepayments have been required as of December 31, 2022.

The Amended Hayfin Loan Agreement, as amended, also specifies that any prepayment of the loan, voluntary or mandatory, will subject the Company to a prepayment premium applicable as of the date of the prepayment:

• On or before July 2, 2023:

2 % of the principal balance repaid.

• After July 2, 2023, but on or before July 2, 2024:

1 % of the principal balance repaid.

• After July 2, 2024:

Hayfin maintains a first-priority security interest in substantially all of the Company’s assets.

A breach of a financial covenant in the Amended Hayfin Loan Agreement, if uncured or unable to be cured, would likely result in an event of default that could trigger the lender’s remedies, including acceleration of the entire principal balance of the loan as well as any applicable prepayment premiums.

Future compliance with the financial covenants, as amended, requires continuing growth in net sales consistent with the Company’s business strategy and plans.

The Company is subject to inherent uncertainties that could impact the Company’s net sales growth, including, but not limited to, the regulatory pathway of the Company’s EPICORD® and AMNIOCORD®.

If the FDA were to determine that these products do not meet the requirements for regulation solely under Section 361, the Company would be required to obtain the appropriate FDA clearance or approval to continue marketing these products.

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, including its ability to comply with the financial covenants set forth pursuant to the Amended Hayfin Loan Agreement .

Refer to Note 12, Revenue , for net sales derived from the Company’s cord products.

Original issue discount and deferred financing costs were allocated between the sale of the Series B Preferred Stock (which occurred simultaneously with the funding of the Hayfin Loan Agreement, collectively the “ Financing Transactions ”) and the Term Loan on the basis of the relative fair values of the transactions.

The costs allocated to the Hayfin Loan Agreement were further allocated between the Term Loan and the DD TL on the basis of the maximum potential principal outstanding between the Credit Facilities.

The allocation of the deferred financing costs and original issue discount between Term Loan and the DD TL on July 2, 2020 was as follows (amounts in thousands):

Term Loan DD TL Total

Original issue discount $ 333 $ 167 $ 500

Deferred financing costs 2,169 1,084 3,253

Deferred financing costs and original issue discount allocated to the Term Loan are amortized using the effective interest method through the Maturity Date.

In June 2020, the Company entered into the Hayfin Loan Agreement, under which Hayfin provided the Company with a senior secured term loan of $ 50 million (the “ Hayfin Term Loan ”).

The Hayfin Term Loan was to mature on June 30, 2025 (the “ Hayfin Maturity Date ”).

Interest on the Hayfin Term Loan was based on SOFR, plus a fallback provision of 0.15 %, subject to the Floor, plus the Margin.

As of December 31, 2023, the Hayfin Term Loan carried an interest rate of 12.3 %.

As noted below in Note 19.

Subsequent Events , in January 2024, the Company repaid in full the Hayfin Term Loan and terminated the Hayfin Loan Agreement as part of the Debt Refinancing Transactions.

As of December 31, 2023, the Company was in compliance with all applicable financial covenants under the Hayfin Loan Agreement.

Annually, the Company was required to prepay the outstanding loans based on a percentage of Excess Cash Flow (as defined in the Hayfin Loan Agreement), if such were generated.

Had the Company not executed the Debt Refinancing Transactions (as defined in Note 19), the Company would have been required to prepay a portion of the outstanding principal pursuant to the Excess Cash Flow provision under the Hayfin Loan Agreement for the year ended December 31, 2023.

The Company refinanced this short-term obligation prior to issuance of these consolidated financial statements.

The $ 1.0 million of principal repayments for the year ending December 31, 2024 reflects the scheduled principal payments pursuant to the Citizens Credit Agreement (as defined in Note 19) during that period, therefore representing the current obligation that was not refinanced on a long-term basis.

This amount is classified in other current liabilities in the Company’s consolidated balance sheets.

The Hayfin Loan Agreement also specified that a prepayment of the loan, voluntary or mandatory, would subject the Company to a prepayment premium after July 2, 2023, but on or before July 2, 2024, of 1 % of the principal balance repaid.

Deferred financing costs and original issue discount allocated to the Hayfin Term Loan were amortized using the effective interest method through the Hayfin Maturity Date.

The amortization of such amounts is presented as part of interest expense, net on the consolidated statement of operations for the years ended December 31, 2023, 2022, and 2021.

Deferred financing costs and original issue discount associated with the DD TL were amortized using the straight-line method through the expiration of the DD TL commitment term on June 30, 2021.

Amortization of these amounts are presented as part of interest expense, net on the consolidated statements of operations for the years ended December 31, 2021 and 2020.

The balances of the Term Loan as of December 31, 2022 and 2021 were as follows (amounts in thousands):

The balances of the Hayfin Term Loan as of December 31, 2023 and 2022 were as follows (amounts in thousands):

December 31, 2023 December 31, 2022

Other current liabilities

Long term debt, net

Outstanding principal $ 1,000 $ 49,000 $ 50,000

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Original issue discount — ( 120 ) ( 187 )

Long term debt, net $ 48,594 $ 48,127

Interest expense related to the Term Loan, included in interest expense, net in the consolidated statements of operations, was as follows (amounts in thousands):

Year Ended December 31,

Net principal

$ 1,000 $ 48,099 $ 48,594

Stated interest $ 4,559 $ 4,182 $ 2,085

Amortization of deferred financing costs 405 372 173

Accretion of original issue discount 62 58 26

Interest expense $ 5,026 $ 4,612 $ 2,284

Interest expense related to the DD TL, included in interest expense, net in the consolidated statements of operations, was as follows (amounts in thousands):

Interest expense related to the Hayfin Term Loan, included in interest expense, net in the consolidated statements of operations, was as follows (amounts in thousands):

Year Ended December 31,

2023 2022 2021

Commitment fee $ — $ 126 $ 128

Stated interest $ 6,078 $ 4,559 $ 4,182

Amortization of deferred financing costs 438 405 372

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Interest expense $ 6,583 $ 5,026 $ 4,612

Scheduled principal payments on the Term Loan as of December 31, 2022 are as follows:

Scheduled principal payments on the Hayfin Term Loan as of December 31, 2023 were as follows:

Year ending December 31, Principal

Outstanding principal $ 50,000

As of December 31, 2022, the fair value of the Term Loan was $ 46.7 million.

As of December 31, 2023, the fair value of the Hayfin Term Loan was $ 46.7 million.

This valuation was calculated based on a series of Level 2 and Level 3 inputs, including a discount rate based on the credit risk spread of debt instruments of similar risk character in reference to U.S.

Treasury instruments with similar maturities, with an incremental risk premium for risk factors specific to the Company.

The remaining cash flows associated with the Term Loan were discounted to December 31, 2022 using this discount rate to derive the fair value.

On June 10, 2019, the Company entered into a loan agreement (the “ BT Loan Agreement ”) with Blue Torch Finance LLC (“ Blue Torch ”), as administrative agent and collateral agent, to borrow funds with a face value of $ 75.0 million (the “ BT Term Loan ”), of which the full amount was borrowed and funded.

The proceeds from the BT Term Loan were used (i) for working capital and general corporate purposes and (ii) to pay transaction fees, costs and expenses incurred in connection with the BT Term Loan and the related transactions.

The BT Term Loan would have matured on June 20, 2022 and was repayable in quarterly installments of $ 0.9 million, with the balance due on June 20, 2022.

Blue Torch maintained a first-priority security interest in substantially all the Company’s assets.

The BT Term Loan was issued net of the original issue discount of $ 2.3 million.

The Company incurred $ 6.7 million of deferred financing costs.

On April 22, 2020, the Company amended the BT Loan Agreement with Blue Torch.

The amendment provided for an increase in the maximum Total Leverage Ratio, which was a quarterly test, for the remainder of 2020, and also provided for a reduction in the minimum Liquidity requirement from April 2020 through November 2020.

In connection with the amendment, the Company agreed to pay a one-time fee of approximately $ 0.7 million, added to the principal balance, and a 1 percentage point increase in the interest rate to LIBOR plus 9 %.

On July 2, 2020, a portion of the proceeds from the Financing Transactions was used to repay the outstanding balance of principal, accrued but unpaid interest, and prepayment premium under the BT Loan Agreement.

In connection with the repayment of the BT Term Loan, the Company terminated the BT Loan Agreement.

The Company has no continuing obligations related to the BT Term Loan as of December 31, 2021.

The Company recorded a loss on extinguishment of debt of $ 8.2 million during the year ended December 31, 2020.

The composition of the loss on extinguishment of debt was as follows (amounts in thousands):

Unamortized deferred financing costs $ 4,528

Unamortized original issue discount 1,538

Unamortized amendment fee 671

Prepayment premium 1,439

Other fees 25

Loss on extinguishment of debt $ 8,201

Interest expense related to the BT Term Loan, included in interest expense, net in the consolidated statements of operations was as follows (amounts in thousands):

Year ended December 31, 2020

Interest on principal balance $ 3,773

Accretion of original issue discount 354

Accretion of amendment fee 53

Amortization of deferred financing costs 1,051

Total BT Term Loan interest expense $ 5,231

Paycheck Protection Program Loan

The Company applied for and, on April 24, 2020, received proceeds of $ 10.0 million in the form of a loan under the Paycheck Protection Program (the “PPP Loan” ).

On May 11, 2020, the Company repaid the PPP Loan in full.

There are no continuing obligations under the PPP Loan as of December 31, 2022.

The remaining cash flows associated with the Hayfin Term Loan were discounted to December 31, 2023 using this discount rate to derive the fair value.

Basic and Diluted Net Loss Per Common Share

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2023 2022 2021

Net loss $ ( 30,197 ) $ ( 10,285 ) $ ( 49,284 )

Net income (loss) from continuing operations

$ 67,439 $ ( 19,953 ) $ ( 12,301 )

(Loss) income from discontinued operations, net of tax

( 9,211 ) ( 10,244 ) 2,016

Net income (loss) 58,228 ( 30,197 ) ( 10,285 )

Adjustments to reconcile to net loss available to common stockholders:

Accumulated dividend on Series B Preferred Stock 6,580 5,210 2,016

Amortization of beneficial conversion feature — — 31,110

Accumulated dividend on previously converted Series B Preferred Stock

6,753 6,580 5,210

Preferred share repurchase in excess of book value 4,890 — —

Accretion of increasing-rate dividend feature — — 926

Total adjustments 11,643 6,580 6,136

Net loss available to common stockholders $ ( 36,777 ) $ ( 16,421 ) $ ( 83,328 )

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

$ 55,796 $ ( 26,533 ) $ ( 18,437 )

Weighted average common shares outstanding 116,495,810 112,909,266 110,353,406

Basic net loss per common share $ ( 0.33 ) $ ( 0.15 ) $ ( 0.77 )

Basic net income (loss) per common share:

Continuing operations $ 0.48 $ ( 0.24 ) $ ( 0.17 )

Discontinued operations ( 0.08 ) ( 0.09 ) 0.02

Basic net income (loss) per common share

$ 0.40 $ ( 0.33 ) $ ( 0.15 )

Diluted Net Loss Per Common Share

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2023 2022 2021

Net loss available to common stockholders $ ( 36,777 ) $ ( 16,421 ) $ ( 83,328 )

Dividends on Series B Preferred Stock 6,580 6,136 34,044

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

$ 55,796 $ ( 26,533 ) $ ( 18,437 )

Dividends on previously converted Series B Preferred Stock

6,466 6,580 6,136

Preferred share repurchase in excess of book value 5,177 — —

antidilutive adjustments ( 5,177 ) ( 6,580 ) ( 6,136 )

Total adjustments 6,466 — —

Numerator $ ( 36,777 ) $ ( 16,421 ) $ ( 83,328 )

Net income (loss) available to common stockholders from continuing operations 62,262 ( 26,533 ) ( 18,437 )

(Loss) income from discontinued operations, net of tax

( 9,211 ) ( 10,244 ) 2,016

Weighted average common shares outstanding 116,495,810 112,909,266 110,353,406

Potential common shares 28,705,593 29,801,836 15,687,044

antidilutive potential common shares (a) ( 28,705,593 ) ( 29,801,836 ) ( 15,687,044 )

Potential common shares (a)

Previously converted Series B Preferred Stock 27,457,905 — —

Restricted stock unit awards 1,452,153 — —

Outstanding stock options 396,779 — —

Performance stock unit awards 137,425 — —

Restricted stock awards 22,136 — —

Employee stock purchase plan 254 — —

Total adjustments 29,466,652 — —

Weighted average common shares outstanding adjusted for potential common shares 145,962,462 112,909,266 110,353,406

Diluted net loss per common share $ ( 0.33 ) $ ( 0.15 ) $ ( 0.77 )

Diluted net income (loss) per common share:

Continuing operations $ 0.43 $ ( 0.24 ) $ ( 0.17 )

Discontinued operations $ ( 0.06 ) $ ( 0.09 ) $ 0.02

Diluted net income (loss) per common share

$ 0.37 $ ( 0.33 ) $ ( 0.15 )

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

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Potential common shares 1,219,348 28,705,593 29,801,836

Series B Convertible Preferred Stock

The Series B Preferred Stock are convertible, cumulative securities which rank senior to the Company’s Series A Junior Participating Preferred Stock and the Company’s common stock.

The Series B Preferred Stock accumulated dividends at a rate of 4.0 % per annum through June 30, 2021, and 6.0 % per annum thereafter.

Dividends are declared at the sole discretion of the Board.

Dividends are paid at the end of each quarter based on the dividend amounts that accumulate beginning of the last payment date through the day prior to the end of each quarter.

In lieu of paying a dividend, the Company may elect to accrue the dividend owed to the holders of the Series B Preferred Stock.

Accrued dividend balances accumulate dividends at the prevailing dividend rate for each dividend period for which they are outstanding.

Each share of Series B Preferred Stock is convertible into Company’s common stock at any time at the option of the Holder.

Shares are converted based on the liquidation preference of $ 1,000 per share (the “ Liquidation Preference ”) plus any accrued or accumulated dividends through the date of the conversion at a conversion price of $ 3.85 per common share.

The Series B Preferred Stock, including any accumulated and unpaid dividends, automatically converts into common stock at any time after July 2, 2023, provided that the common stock has traded at $ 7.70 per common share or more (i) for 20 out of 30 consecutive trading days and (ii) on such date of conversion.

The holders of the Series B Preferred Stock, voting as a class, are entitled to appoint two members to the board of directors.

The holders of the Series B Preferred Stock are entitled to vote on all matters to be voted on by the Company’s shareholders on an as-converted basis as a single class with the common stock;

provided that the votes represented by a single holder of Series B Preferred Stock cannot exceed 19.9 % of the total voting stock of the Company and no share of Series B Preferred Stock held can entitle the holder to a number of votes that exceeds the quotient of the Liquidation Preference divided by $ 5.25 per share.

Holders of the Series B Preferred Stock are also entitled to the Liquidation Preference and all accumulated and unpaid dividends in the event of a liquidation, dissolution, or winding-up of the Company.

If the Company undergoes a change of control (as defined), the Company will have the option to repurchase some or all of the then-outstanding shares of Series B Preferred Stock for cash in an amount equal to the Liquidation Preference plus any accumulated and unpaid dividends, subject to the rights of the holders of the Series B Preferred Stock in connection with such change in control.

If the Company does not exercise such repurchase right, holders of the Series B Preferred Stock will have the option to (1) require the Company to repurchase any or all of their then-outstanding shares of Series B Preferred Stock for cash in an amount equal to the Liquidation Preference plus accumulated and unpaid dividends or (2) convert the Series B Preferred Stock into common stock and receive their pro rata consideration thereunder.

Since the contingent redemption of the Series B Preferred Stock by the holders in the event of a change in control is outside the Company’s control, the Series B Preferred Stock is classified as temporary equity.

At the time of the issuance of the Series B Preferred Stock, the Company’s common stock, into which the Company’s Series B Preferred Stock is convertible, had an estimated fair value exceeding the effective conversion price of the Series B Preferred Stock, giving rise to a beneficial conversion feature in the amount of $ 31.1 million.

This amount was immediately recognized as a deemed dividend on the commitment date since there is no stated redemption date and the Series B Preferred Stock is immediately convertible.

The Series B Preferred Stock instrument contains an increasing-rate cumulative dividend feature.

The Company determined the present value of the difference between the (1) dividends that will be payable in the period preceding commencement of the perpetual dividend and (2) the perpetual dividend amount for a corresponding number of periods in order to ascribe a fair value to this feature.

These amounts were discounted to present value using a market rate for dividend yield as of the date on which the Series B Preferred Stock was issued.

The Company calculated the amount of the increasing-rate dividend feature as $ 1.8 million.

This amount was amortized as a deemed dividend to preferred shareholders using the effective interest method through June 30, 2021.

During each of the years ended December 31, 2021 and 2020, the Company recognized $ 0.9 million of deemed dividends related to the amortization of the increasing-rate dividend feature.

Series B Preferred Stock

In December 2023, all 95,000 outstanding shares of the Company’s Series B Preferred Stock, together with accrued dividends, were mandatorily converted into shares of the Company’s Common Stock in accordance with the Series B Preferred Stock terms set forth in the Company’s Articles of Incorporation.

As a result of this conversion, the Company issued 29,761,650 shares of Common Stock.

The conversion of the shares ended the dividend accrual associated with the Series B Preferred Stock

Prior to the mandatory conversion, in October 2023, the Company repurchased 5,000 shares of the Company’s Series B Preferred Stock for $ 9.5 million (the “ Repurchase ”) pursuant to a Securities Purchase Agreement with certain entities managed by or affiliated with Hayfin Capital Management LLP (the “ Hayfin Shareholders ”).

In connection with the Repurchase, the Hayfin Shareholders entered into customary lock-up provisions requiring them to retain the balance of their equity positions for a period of at least one year.

Management assessed whether the consideration paid could have reflected a non pro-rata distribution and reached the conclusion that it was not.

The below table illustrates changes in the Company’s balance of the Series B Preferred Stock for the years ended December 31, 2023, 2022, and 2021 (in thousands, except per share amounts):

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Balance at December 31, 2020

Issuance of Series B Preferred Stock 100,000 59,540

Deemed dividends — 32,028

Balance at December 31, 2020

100,000 $ 91,568

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100,000 $ 92,494

The Company has not declared or paid any dividends on the Series B Preferred Stock since issuance.

Dividends in arrears as of December 31, 2022 were $ 13.8 million.

As this amount has not been declared, the Company has not recorded this amount on its consolidated balance sheet as of December 31, 2022.

As of December 31, 2022, based on accumulated dividends as of that date, the Series B Preferred Stock was convertible into an aggregate of 29,559,946 shares of the Company’s common stock.

Stock Incentive Plans

Repurchase of Series B Preferred Stock

( 5,000 ) ( 4,625 )

Conversion of Series B Preferred Stock

( 95,000 ) ( 87,869 )

Balance at December 31, 2023

Stock-Based Compensation Awards

The Company has two share-based compensation plans which provide for the granting of equity awards, including qualified incentive and non-qualified stock options and restricted stock awards:

the MiMedx Group, Inc.

2016 Equity and Cash Incentive Plan Amended and Restated through October 2, 2020 (the “ 2016 Plan ”), which was approved by shareholders on May 18, 2016, and the MiMedx Group, Inc.

2016 Equity and Cash Incentive Plan Amended and Restated through March 2, 2023 (the “ 2016 Plan ”), which was approved by shareholders on May 18, 2016, and the MiMedx Group, Inc.

Assumed 2006 Stock Incentive Plan (the “ Prior Incentive Plan ”).

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Outstanding at January 1, 2023 933,894 $ 6.46

Granted 3,694,000 3.77

Exercised ( 147,161 ) 6.78

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The intrinsic values of the options exercised during the years ended December 31, 2023, 2022 and 2021 were $ 0.2 million, $ 0.6 million, and $ 3.3 million, respectively.

Cash received from option exercise under all share-based payment arrangements for the years ended December 31, 2022, 2021 and 2020 was $ 0.7 million, $ 1.4 million, and $ 0.4 million, respectively.

The actual tax

benefit for the tax deductions from option exercise of the share-based payment arrangements totaled $ 0.2 million, $ 2.0 million, and $ 1.6 million, respectively, for the years ended December 31, 2022, 2021 and 2020.

Cash received from option exercise under all share-based payment arrangements for the

years ended December 31, 2023, 2022 and 2021 was $ 1.0 million, $ 0.7 million, and $ 1.4 million, respectively.

The actual tax benefit for the tax deductions from option exercise of the share-based payment arrangements totaled $ 0.2 million, $ 0.2 million, and $ 2.0 million, respectively, for the years ended December 31, 2023, 2022 and 2021.

The Company has a policy of using its available repurchased treasury stock to satisfy option exercises prior to the issuance of new shares of common stock.

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There was no unrecognized compensation expense at December 31, 2023.

During 2021 and 2020, certain stock option holders elected to return restricted shares to the Company as consideration to exercise stock options.

In total, 41,810 and 148,972 shares were returned to the Company during the year ended December 31, 2021 and 2020, respectively, for an aggregate fair value of $ 0.4 million and $ 0.9 million, respectively.

There were no similar transactions for the year ended December 31, 2022.

Equity Incentive Awards

The Company has issued several classes of stock awards to employees:

restricted stock (“ RSAs ”), restricted stock unit awards (“ RSUs ”), and performance stock unit awards (“ PSUs ”, collectively the “ Equity Incentive Awards ”).

restricted share awards (“ RSAs ”), restricted stock unit awards (“ RSUs ”), and performance stock unit awards (“ PSUs ”, collectively the “ Equity Incentive Awards ”).

The following is summary information for such awards for the year ended December 31, 2023.

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RSAs are considered common shares issued and outstanding upon grant, while shares underlying the RSUs and PSUs are considered issued and outstanding only upon vesting.

Therefore, all RSAs noted below as unvested are considered issued and outstanding as of December 31, 2022, while unvested RSUs and PSUs are not considered issued and outstanding as of December 31, 2022.

RSAs, RSUs, and PSUs are not reflected in weighted average common shares outstanding for purposes of calculated basic net loss per common share.

Therefore, all RSAs noted below as unvested are considered issued and outstanding as of December 31, 2023, while shares underlying unvested RSUs and PSUs are not considered issued and outstanding as of December 31, 2023.

RSAs, RSUs, and PSUs are not reflected in weighted average common shares outstanding for purposes of calculating basic net loss per common share.

A summary of Equity Incentive Award activity, by class of award, for the year ended December 31, 2023 is presented below:

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For the years ended December 31, 2023, 2022, and 2021 the Company recognized share-based compensation as follows (in thousands):

Years Ended December 31,

Year Ended December 31,

2023 2022 2021

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Performance Stock Units

The Company granted 441,965 PSUs to certain executive officers during the year ended December 31, 2022.

The Company granted PSUs to certain executive officers during the years ended December 31, 2023 and 2022.

These PSUs vest based on and to the extent that stipulated cumulative net sales targets are achieved.

Of the granted PSUs:

• 25 % can vest based on net sales achieved for the year ended December 31, 2022,

• 25 % can vest based on net sales achieved for the two-year period ending December 31, 2023, and

• the remaining award can vest based on net sales achieved for the three-year period ending December 31, 2024.

Achievement of the performance targets allow for vesting of 50 % to 150 % of the PSUs granted.

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To the extent that the vesting percentage in a subsequent period exceeds the vesting percentage achieved in a previous period, a recipient is eligible to receive the amount of shares from the previous period based on the vesting percentage in the subsequent period.

If total shareholder return (“ TSR ”), as defined below, is negative, vesting is limited to 100 % of the award for all periods, regardless of actual achievement against the stipulated net sales targets.

All of the PSUs require recipients to continue employment with the Company through the vesting date, which will occur upon approval of the results with respect to the established targets by the Compensation Committee of the Board of Directors after December 31, 2024, but no later than March 15, 2025.

The TSR is calculated as the average trading price of the Company’s common stock during the final 30 trading days of 2024, adjusted for dividends paid on the Company’s common stock, less the average trading price during the final 30 trading days of 2021.

Since TSR is based on the Company’s share price, it represents a market condition, which is incorporated in the grant date fair value of the shares in excess of 100 % vesting.

These awards are not reflected in the table above.

The fair value of these awards on the date of grant was estimated using a Monte Carlo simulation, the inputs for which were informed by a Black-Scholes option pricing model.

The assumptions used in determining the fair value of these PSUs were as follows:

Risk-free interest rate 2.68 %

Expected term (years) 2.74

Expected volatility (annualized) 63.7 %

Dividend yield — %

Closing stock price on grant date $ 4.62

Grant date fair value $ 2.78

The expected term was derived from the date of the grant through the latest date of the resolution of the market condition.

The risk-free interest rate was derived based on the U.S.

Treasury Yield curve in effect at the date of grant for maturities of similar periods to the concluded term.

The expected volatility was based on the Company’s historical daily stock price movements for a term similar in length to the expected term.

The dividend yield was based on the Company’s history of dividends on its common stock.

Expense related to PSUs is recognized, straight-line, based on the grant date fair value of the relevant shares, over the requisite service period related to each individual tranche, limited to the extent that the achievement of the associated performance condition associated with that tranche is probable.

These expectations are derived from the Company’s actual results, latest budget, and forecasts for net sales in the associated periods.

Subsequent adjustments to the expectation for vesting are reflected as a cumulative adjustment to expense.

The fair value of the portion of the award subject to a market condition and expense recognized on such awards are not subsequently reconsidered based on the probability of or actual achievement of the market condition.

Accordingly, the Company may recognize share-based compensation expense for awards that do not ultimately vest.

If total shareholder return (“ TSR ”) is negative, vesting is limited to 100 % of the award for all periods, regardless of actual achievement against the stipulated net sales targets.

Employee Stock Purchase Plan

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(the “ ESPP ”).

The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.

The ESPP qualifies as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code.

All regular full-time employees of the Company (including officers) and all other employees who meet the eligibility requirements of the plan may participate in the ESPP.

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The aggregate number of shares which may be issued and sold under the ESPP is 3 million shares of common stock.

The first Purchase Period under the ESPP commenced on August 1, 2022 and resulted in a purchase of shares on January 31, 2023.

For the year ended December 31, 2022, the Company recorded $ 0.2 million in stock-based compensation related to the ESPP.

As of December 31, 2022, the Company had cumulative payroll deferrals under the ESPP for future share purchases of $ 0.6 million.

For the years ended December 31, 2023 and 2022, the Company recorded $ 0.5 million and $ 0.2 million, respectively, in stock-based compensation related to the ESPP.

As of December 31, 2023 and 2022, the Company had cumulative payroll deferrals under the ESPP for future share purchases of $ 0.7 million and $ 0.6 million, respectively.

This amount is included in accrued compensation in the consolidated balance sheet.

No shares have been issued under the plan to date.

Unrecognized stock compensation for the period is less than $ 0.1 million to be recognized over a weighted average period of 0.08 years.

2020 RSU Modification

During the year ended December 31, 2019, the Company granted a fixed-dollar value RSU award to the members of its Board in the amount of $ 1.6 million.

The RSU awards vested at the date of the 2019 Annual Meeting and were settled in common stock with the number of shares of common stock based on the closing price of the Company’s share price on August 5, 2020, a date thirty days after the Company became current on its SEC filings.

Upon this event, these awards were modified from a fixed dollar-amount of awards to be settled in a variable number of shares to a fixed number of shares based on the closing price of the Company’s common stock on August 5, 2020.

This event constituted a modification of the awards from liability-based awards to equity-based awards.

This event did not change the total amount of expense recognized.

Prior to August 5, 2020, the Company recorded $ 1.3 million of expense, of which $ 0.9 million was recognized during the year ended December 31, 2020.

The Company reclassified $ 1.3 million of recorded liability to additional paid-in capital to reflect this modification on August 5, 2020.

Subsequent to the modification, $ 0.3 million of expense was recognized as additional paid-in capital during the year ended December 31, 2020.

CEO Performance Grant

On January 27, 2023, the Board of Directors appointed Joseph H.

Capper to serve as Chief Executive Officer.

The Company entered into a Letter Agreement with Mr.

Capper that included, among other things, a grant of 3,300,000 PSUs (the “ CEO Performance PSUs ”) and a non-qualified stock option (the “ CEO Performance Option ”, collectively with the CEO Performance PSUs, the “ CEO Performance Grant ”) for 3,600,000 shares of the Company’s common stock.

In addition to continued employment with the Company, the occurrence and extent of vesting of each component of the CEO Performance Grant is dependent upon the Company’s operating and share price performance:

the CEO Performance PSUs vest on the basis of achieved revenue growth, while the CEO Performance Option vests on the basis of share price appreciation.

CEO Performance PSUs

The CEO Performance PSUs vest in a single tranche on the earlier of the filing date of the Company’s 2026 Annual Report on Form 10-K and March 15, 2027.

The occurrence and extent of vesting depends on the Company’s compound annual growth rate (“ CAGR ”) achieved with respect to its revenue growth between the year ended December 31, 2022 and the year ending December 31, 2026.

The PSUs may vest with respect to 50 % to 200 % of the granted number of PSUs, depending on the extent of CAGR achievement.

Failure to achieve the CAGR associated with 50 % of achievement would result in no vesting.

Management determined the probable level of vesting using internally-developed forecasts for the relevant period representing the Company’s best estimate for revenue, with a factor applied to calculate the highest level of CAGR evaluated to be probable of occurring based on that estimate.

The Company recognized $ 1.7 million of expense related to the CEO Performance PSUs during year ended December 31, 2023.

CEO Performance Option

The CEO Performance Option grants Mr.

Capper the right to purchase up to 3,600,000 shares of common stock for $ 3.70 per share.

The CEO Performance Option vests based on the satisfaction of service and market conditions.

Capper may vest in 25 % of the CEO Performance Option on each of the first four anniversary dates of the date of grant provided that he remains employed by the Company and provided that specified share price goals are achieved at any point between the date of grant and January 31, 2027.

There are three separate share price goals associated with the CEO Performance Option.

If specified share price goals are met at one level, one-third of the option may vest, at a second level, a further one-third may vest, and at a third level, the full amount of the option may vest.

Satisfaction of the share price goals is based on the average of the closing price of

the Company’s common stock during any 20 consecutive trading days through January 31, 2027 exceeding the stipulated share price goal.

The CEO Performance Option expires on February 1, 2030.

Treasury Stock

Repurchases of shares of Common Stock in connection with the satisfaction of employee tax withholding obligations upon vesting of restricted stock and exercise of stock options for the years ended December 31, 2022, 2021, and 2020 were 249,442 , 469,239 , and 435,492 , respectively, for an aggregate purchase price of $ 1.2 million, $ 4.8 million, and $ 2.3 million, respectively.

Net Sales by Product

MIMEDX has two classes of products:

(1) Advanced Wound Care, or Section 361, products, consisting of its tissue and cord sheet allograft products as well as certain particulate products regulated under Section 361, and (2) Section 351 products, consisting of the Company’s micronized and certain other particulate products.

Advanced Wound Care is further disaggregated between the Company’s Tissue/Other and Cord products.

Information regarding the business units responsible for the sale of each of these classes of product can be found in Note 13, Segment Information .

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

Year Ended December 31,

2022 2021 2020

Advanced Wound Care

Tissue/Other $ 241,992 $ 216,418 $ 192,566

Cord 23,211 23,599 16,073

Advanced Wound Care 265,203 240,017 208,639

Section 351 2,379 17,610 31,828

259 988 7,767

$ 267,841 $ 258,615 $ 248,234

(1) “Other” includes the Remaining Contracts and other revenue transactions in the indicated period relating to performance obligations settled prior to October 1, 2019, the date at which the Company changed its pattern of revenue recognition.

For all practical purposes, the Company is not able to allocate these revenue transactions to different product groups.

This revenue is reflected as part of the Wound & Surgical segment.

Net Sales by Site of Service

MIMEDX has three sites of service for its products (1) Hospital settings and wound care clinics, which are stable reimbursement settings in which products are used for surgical applications, (2) Private offices, which generally represents doctors and practitioners with independent operations, and (3) Other, which includes federal facilities, international sales, and other sites of service.

Repurchases of shares of Common Stock in connection with the satisfaction of employee tax withholding obligations upon vesting of restricted stock and exercise of stock options for the years ended December 31, 2023, 2022, and 2021 were 0, 249,442 , and 469,239 , respectively, for an aggregate purchase price of $ 0 , $ 1.2 million, and $ 4.8 million, respectively.

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

Stock price on grant date $ 3.70

Exercise price $ 3.70

Risk-free interest rate 3.58 %

Expected volatility (annualized) 75.00 %

Dividend yield — %

Weighted average grant date fair value $ 1.93

The risk-free interest rate was derived based on the U.S.

Treasury Yield curve in effect at the date of grant for maturities of similar periods to the contractual term.

The expected volatility was estimated principally based on the Company’s historical daily stock price movements for a term similar in length to the contractual term.

The dividend yield was based on the Company’s history of dividends on its common stock.

The fair value was determined using an expected term which reflects the anticipated holding and post-vesting behavior pattern, calculated for each individual simulation.

The total grant date fair value of the CEO Performance Option was $ 7.0 million.

The fair value associated with each tranche of the award will be recognized, straight-line, over the associated requisite service period for that tranche, subject to acceleration if the market condition is met prior to the end of the derived service period.

Failure to meet the market condition for an award does not result in reversal of previously-recognized expense, so long as the service is provided for the duration of the required service period.

The Company recognized $ 2.6 million of expense related to the CEO Performance Option during year ended December 31, 2023.

Net Sales By Care Setting

MIMEDX has three sites of service for its products (1) Hospital settings and wound care clinics, which are stable reimbursement settings in which products are used for both wound and surgical applications, (2) Private offices, which generally represents doctors and practitioners with independent operations, and (3) Other, which includes federal facilities, international sales, and other sites of service.

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

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Other 38,688 27,477 25,357

Total $ 267,841 $ 258,615 $ 248,234

Disaggregation of Revenue by Customer

Prior to May 31, 2021, the conclusion of the FDA’s enforcement discretion period, the Company evaluated its revenue on the basis of its two primary distribution channels:

(1) direct to customers (healthcare professionals and/or facilities) (“ Direct Customers ”);

and (2) sales through distributors (“ Distributors ”).

Below is a summary of net sales by each customer type (in thousands):

Year Ended December 31,

$ 321,477 $ 267,841 $ 242,019

Direct Customers $ 261,508 $ 250,009 $ 240,690

Distributors 6,333 8,606 7,544

Total $ 267,841 $ 258,615 $ 248,234

The Company did not have significant foreign operations or a single external customer from which 10% or more of revenues were derived during the years ended December 31, 2023, 2022, or 2021.

Segment Information

The Company has two reportable segments:

Wound & Surgical and Regenerative Medicine.

• Wound & Surgical focuses on the Advanced Wound Care and Surgical Recovery markets through the sale of the Company’s existing product portfolio and product development to serve these primary end markets.

Its platform technologies include tissue allografts derived from human placental membrane (EPIFIX®, AMNIOFIX®, and AMNIOEFFECT®), tissue allografts derived from human umbilical cord (EPICORD® and AMNIOCORD®), and a particulate extracellular matrix derived from human placental disc (AXIOFILL®™).

This segment is also responsible for the international sales of the Company’s Section 351 products.

• The Regenerative Medicine business focuses solely on Regenerative Medicine technologies, specifically progressing the Company’s placental biologics platform towards registration as an FDA-approved biological drug.

mDHACM is the lead product candidate in its late-stage pipeline targeted at achieving FDA approval for an indication to help decrease pain and improve function in patients suffering from KOA.

The Company’s Corporate function includes expenses incurred by executive, finance, human resource, information systems, legal, other functions which are generally shared and whose activities are not specifically identifiable solely to either of the other segments.

It also includes amortization of intangible assets.

The Company has another operating segment related to an expiring dental sales contract, reflecting all sales of the Company’s dental product.

All net sales and cost of sales presented in the Corporate & Other columns below relate to this operating segment.

Wound & Surgical net sales reflects sales of the Company’s Advanced Wound Care products (as discussed in Note 12, Revenue ), except for sales of the Company’s dental product.

In addition, Wound & Surgical reflects international sales of the Company’s Section 351 products, which represent all Section 351 sales not reflected in Regenerative Medicine.

The Company evaluates the performance of its segments and allocates resources based on segment contribution, defined as net sales less (i) cost of sales, (ii) selling, general and administrative expense, (iii) research and development expense, and (iv) amortization of intangible assets.

Prior period results were recast on the basis of new operating segments.

The only components which comprise loss before income tax provision that are not included in operating loss are interest expense, net and other expense, net.

Net sales and segment contribution for each reportable segment for the year ended December 31, 2022 were as follows (in thousands):

Wound & Surgical Regenerative Medicine Corporate & Other Consolidated

Net sales $ 264,906 $ — $ 2,935 $ 267,841

Cost of sales 44,462 — 3,854 48,316

Selling, general and administrative expense 145,887 — 62,902 208,789

Research and development expense 7,836 14,993 — 22,829

Amortization of intangible assets — — 701 701

Segment contribution $ 66,721 $ ( 14,993 )

Investigation, restatement and related expense 12,177

Operating loss $ ( 24,971 )

Supplemental information

Depreciation expense $ 1,791 $ 165 $ 1,389 $ 3,345

Share-based compensation $ 6,513 $ 1,158 $ 4,995 $ 12,666

Net sales and segment contribution for each reportable segment for the year ended December 31, 2021 were as follows (in thousands):

Wound & Surgical Regenerative Medicine Corporate & Other Consolidated

Net sales $ 238,940 $ 16,596 $ 3,079 $ 258,615

Cost of sales 35,204 3,655 4,424 43,283

Selling, general and administrative expense 123,583 12,910 61,866 198,359

Research and development expense 5,864 11,480 — 17,344

Amortization of intangible assets — — 820 820

Segment contribution $ 74,289 $ ( 11,449 )

Investigation, restatement and related expense 3,791

Impairment of intangible assets 53

Operating loss $ ( 5,035 )

Supplemental information

Depreciation expense $ 1,644 $ 246 $ 2,473 $ 4,363

Share-based compensation $ 5,158 $ 1,461 $ 8,138 $ 14,757

Net sales and segment contribution for each reportable segment for the year ended December 31, 2020 were as follows (in thousands):

Wound & Surgical Regenerative Medicine Corporate & Other Consolidated

Net sales $ 213,489 $ 32,362 $ 2,383 $ 248,234

Sales Returns Allowance

Activity related to the Company’s sales returns allowance during the year ended December 31, 2023 was as follows (in thousands):

Sales Returns Allowance

Balance at December 31, 2021 $ 788

Additions charged to expense or revenue

Deductions and write-offs

Balance at December 31, 2022

Additions charged to expense or revenue 3,899

Deductions and write-offs ( 3,462 )

Balance at December 31, 2023

The Company received a Warning Letter on December 21, 2023, relating to the inspections and classification of AXIOFILL.

The Company continues to engage with the FDA on this matter, working through the process outlined by the FDA to obtain a formal determination of AXIOFILL’s classification.

Discontinued Operations

Disbanding of Regenerative Medicine Business Unit

On June 20, 2023, the Company announced the disbanding of its Regenerative Medicine business unit and the suspension of its Knee Osteoarthritis clinical trial program.

During the fourth quarter of 2023, the Company completed the regulatory obligations associated with the clinical trial.

Financial Statement Impact of Discontinued Operations

The income and expenses of the discontinued operation have been classified as loss (income) from discontinued operations in the consolidated statements of operations as of December 31, 2023, 2022, and 2021 as follows (in thousands):

Year Ended December 31,

2023 2022 2021

$ — $ — $ 16,596

Cost of sales

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Research and development expense

Amortization of intangible assets — — 1,073 1,073

Segment contribution $ 76,286 $ 1,224

Investigation, restatement and related expense 59,465

Impairment of intangibles 1,027

Operating loss $ ( 45,398 )

Supplemental information

Depreciation expense $ 1,755 $ 451 $ 3,576 $ 5,782

Share-based compensation $ 4,373 $ 1,256 $ 9,728 $ 15,357

The Company does not allocate any assets to the reportable segments.

No asset information is reported or disclosed to the CODM in the financial information for each segment.

8,017 10,128 7,412

Restructuring expense

Income tax provision benefit

Net (loss) income from discontinued operations

$ ( 9,211 ) $ ( 10,244 ) $ 2,016

The assets and liabilities of the discontinued operations have been classified as discontinued operations in the consolidated balance sheet as of December 31, 2023 and 2022 as follows (in thousands):

Year Ended December 31,

Current assets:

Prepaid Expenses $ — $ 1,331

Current assets of discontinued operations

Noncurrent assets of discontinued operations

Total assets of discontinued operations

Current liabilities:

Accounts payable $ — $ 393

Accrued compensation

Accrued expenses 1,041 90

Total liabilities of discontinued operations

$ 1,352 $ 1,479

As a result of the announcement of the disbanding of Regenerative Medicine business unit, the Company evaluated goodwill associated with the Regenerative Medicine reporting unit for potential impairment.

The Company estimated fair value for the reporting unit using the income approach;

specifically, a discounted cash flow method.

As a result of this assessment, management concluded that the carrying value of the reporting unit exceeded its fair value by an amount that exceeded its goodwill balance.

Accordingly, the Company recognized an impairment loss for the full amount of the goodwill ascribed to the Regenerative Medicine reporting unit.

The goodwill impairment loss is included as a component of discontinued operations in the audited consolidated statement of operations for the year ended December 31, 2023.

Goodwill related to the Regenerative Medicine business unit of $ 0.5 million is included as a component of assets of discontinued operations in the consolidated balance sheet for the year ended December 31, 2022.

Impairment expense of $ 0.5 million was recorded as part of loss from discontinued operations for the year ended December 31, 2023.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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Net operating loss $ 13,712 $ 23,719

Capitalized research and development expenditures 10,843 3,586

Research and development and other tax credits 8,117 8,384

Interest limitation carry forward 4,898 3,970

Accrued expenses 3,660 3,551

Capitalized research and development expenditures 3,586 —

Share-based compensation 3,266 3,145

Interest limitation carry forward 1,873 4,898

Allowance for doubtful accounts 778 1,033

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Sales return and allowances 270 163

Accrued settlement costs 50 235

Property and equipment 84 —

Other 437 885

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Federal statutory rate 21.00 % 21.00 % 21.00 %

Tax credits 5.85 % 2.01 % 0.32 %

Employee retention credit — % 3.37 % — %

NOL carryback rate differential — % — % 10.99 %

Meals and entertainment ( 0.10 ) % ( 1.13 ) % ( 0.50 ) %

State taxes, net of federal benefit ( 0.55 ) % 4.53 % ( 0.20 ) %

Uncertain tax positions ( 0.58 ) % 0.02 % 0.24 %

Share-based compensation 2.81 % ( 6.06 ) % 19.49 %

Nondeductible compensation 1.78 % ( 3.19 ) % ( 11.51 ) %

Meals and entertainment 1.21 % ( 0.15 ) % ( 0.94 ) %

Deferred tax adjustments 1.31 % ( 4.35 ) % 12.23 %

Share-based compensation ( 4.03 ) % 23.31 % ( 1.24 ) %

Uncertain tax positions 0.36 % ( 0.49 ) % 0.01 %

Employee retention credit — % — % 2.82 %

Tax credits ( 3.17 ) % 4.90 % 0.93 %

State taxes, net of federal benefit ( 21.77 ) % ( 0.83 ) % 3.79 %

Valuation allowance ( 123.50 ) % ( 12.50 ) % ( 46.75 ) %

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Effective tax rate ( 120.15 ) % ( 1.04 ) % ( 2.05 ) %

The effective tax rate for the year ended December 31, 2023 was significantly influenced by the reversal of a valuation allowance, reflecting a change in the determination of the likelihood of the realizability of certain of the Company’s deferred tax assets as of that date.

This re-evaluation was the result of the conclusion of that the Company’s disbanded Regenerative Medicine segment qualified as a discontinued operation, in concert with the Company’s operating results.

Current and deferred income tax (benefit) expense is as follows (in thousands):

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Federal ( 31,633 ) — —

State ( 9,144 ) — —

Total deferred ( 40,777 ) — —

Total expense (benefit) $ 206 $ 247 $ ( 12,259 )

Income tax provision (benefit) expense

$ ( 39,779 ) $ 206 $ 247

Certain items of income and expense are not reported in tax returns and financial statements in the same year.

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A valuation allowance of $ 0.9 million and $ 47.6 million was recorded against the deferred tax asset balance as of December 31, 2023 and 2022, respectively.

The Company maintains a full valuation allowance because it is not more likely than not the deferred tax assets will be utilized based on all available positive and negative evidence.

Valuation allowances are reflected against the Company’s deferred tax assets to reflect the extent to which the realization of those assets are not more likely than not to be realized based on all available positive and negative evidence.

In the event that the weight of the evidence changes in the future, any reduction in the valuation allowance would result in an income tax benefit.

At December 31, 2023 and 2022, the Company had income tax net operating loss (“ NOL ”) carryforwards for federal and state purposes of $ 43.5 million and $ 85.7 million and $ 84.9 million and $ 109.8 million, respectively.

A portion of the Company’s NOLs and tax credits are subject to annual limitations due to ownership change limitations provided by Internal Revenue Code Section 382.

A portion of the Company’s tax credits are subject to annual limitations due to ownership change limitations provided by Internal Revenue Code Section 382.

All of the Company’s federal NOL carryforwards have been generated since 2018 and will carry forward indefinitely.

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the remainder of the Company’s state NOLs will carryforward indefinitely.

As of December 31, 2022, the Company has recorded a deferred tax asset for both federal and state NOL carryforwards of approximately $ 17.8 million and $ 5.9 million, respectively.

As of December 31, 2021, the Company has recorded a deferred tax asset for federal and state NOL carryforwards of $ 17.7 million and approximately $ 5.6 million, respectively.

As of December 31, 2023, the Company has recorded $ 9.1 million and $ 4.6 million deferred tax asset for federal and state NOL carryforwards, respectively.

As of December 31, 2022, the Company has recorded a deferred tax asset for federal and state NOL carryforwards of $ 17.8 million and $ 5.9 million, respectively.

Unrecognized Tax Benefits

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands) included in other liabilities in the consolidated balance sheets:

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands) included in the consolidated balance sheets:

2023 2022 2021

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Unrecognized tax benefits - December 31 $ 807 $ 645 $ 469

Included in the balance of unrecognized tax benefits are tax benefits of $ 0.6 million and $ 0.5 million for the years ended December 31, 2022 and 2021, respectively, that, if recognized, would affect the effective tax rate.

Included in the balance of unrecognized tax benefits are tax benefits of $ 0.8 million and $ 0.6 million as of December 31, 2023 and 2022, respectively, that, if recognized, would affect the effective tax rate.

Of these amounts, $ 0.1 million and $ 0 , respectively, are recorded as other liabilities in the consolidated balance sheets as of those dates.

The remaining balance is reflected as a reduction to the related deferred tax asset.

The Company recognizes accrued interest related to unrecognized tax benefits and penalties as income tax expense.

Related to the unrecognized tax benefits noted above, the Company accrued $ 0.0 million of interest during the years ended December 31, 2023 and 2022.

The Company accrued and recognized $ 0.1 million of interest during 2020.

The Company is subject to taxation in the U.S.

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Additional prior years may be open to the extent attributes are being carried forward to an open tax year.

On March 27, 2020, the U.S.

government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “ CARES Act ”) which, among other changes, eliminated the taxable income limit for certain net operating losses (“ NOL ”), allowed businesses to carry back NOLs arising in 2018, 2019, and 2020 to the five prior years, and provided a payment delay of employer payroll taxes during 2020 after the date of enactment.

These provisions allowed the Company to carry back federal tax losses related to 2018 and 2019.

The Company recorded net tax receivable totaling $ 11.3 million in 2020 related to these provisions, of which $ 1.2 million had been collected as of December 31, 2020, and another $ 9.2 million was collected during the year ended December 31, 2021.

The remaining $ 0.9 million is reflected in income tax receivable on the consolidated balance sheets as of December 31, 2022 and 2021.

The Company had a deferred payment of $ 2.2 million in employer taxes that was included as part of accrued compensation on the consolidated balance sheet as of December 31, 2021.

$ 1.1 million was paid in January 2022 and the remaining balance paid in December 2022.

Supplemental Disclosure of Cash Flow and Non-Cash Investing and Financing Activities

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

Years Ended December 31,

Year Ended December 31,

2023 2022 2021

Cash paid for interest $ 6,034 $ 4,569 $ 4,327

Income taxes paid 181 169 208

Income taxes (refunded) paid ( 548 ) 181 169

Cash paid for operating leases 1,635 1,567 1,522

Non-cash activities:

Conversion of Series B Preferred Stock 87,870 — —

Issuance of shares pursuant to employee stock purchase plan 1,367 — —

Purchases of equipment included in accounts payable 228 417 8

Financing costs incurred but not paid for Citizens Financing Transaction

Legal fees associated with the Repurchase of Series B Preferred Stock

Lease right of use asset and liability — ( 37 ) 2,251

2 unchanged sentences

Note receivable for sale of property and equipment — — 75

Amendment fee on previous term loan — — 722

Deferred financing costs — — 53

Commitments and Contingencies

4 unchanged sentences

Year ending December 31, Meeting Space Commitments

Total $ 1,383

Separation Agreement with Timothy R.

On September 15, 2022, the Company entered into a Separation Agreement and General Release with Timothy R.

In 2022, the Company entered into a Separation Agreement and General Release with Timothy R.

Wright, the former Chief Executive Officer of the Company (the “ Separation Agreement ”).

3 unchanged sentences

The terms of the severance benefits provided in the Separation Agreement were the same as those provided for in the original employment Letter Agreement between Mr.

Wright and the Company dated April 8, 2019.

Wright and the Company dated

April 8, 2019.

The $ 3.1 million was recorded as part of selling, general and administrative expense on the consolidated statement of operations for the year ended December 31, 2022.

Of the $ 3.1 million, $ 1.9 million is reflected in accrued compensation and $ 1.2 million is reflected in other liabilities in the consolidated balance sheet as of December 31, 2022.

No payments were required to be made to Mr.

Wright under the terms of the Separation Agreement during the year ended December 31, 2022.

Nordic Agreement

In June 2022, the Company entered into a collaboration agreement (the “ Nordic Agreement ”) with Nordic Bioscience Clinical Development A/S (“ NBCD ”) to provide full operational support for the Company’s upcoming Knee Osteoarthritis (“ KOA ”) clinical trial program.

As part of the agreement, NBCD will perform site selection and monitoring, manage patient recruitment and enrollment, data management, statistical analysis and reporting activities for the duration of the trial.

Under the terms of the Nordic Agreement, as of December 31, 2022, the Company was obligated to pay $ 13.3 million upon the achievement of specified milestones over the course of the clinical trial.

The milestones are based upon various factors including, but not limited to, site selection and enrollment, patient enrollment, patient completion, and certain other activities related to clinical trial operations.

These milestone payments are revised semi-annually based on fluctuations in the consumer price index.

The Company has the ability to terminate the Nordic Agreement with 30 days written notice to NBCD.

At such time, the Company would be required to pay for services performed through the date of termination and any non-cancelable obligations.

In addition to the $ 13.3 million, the Company will reimburse NBCD for actual expenses incurred related to third-party vendors to be contracted and managed by NBCD.

As of December 31, 2022, the Company has paid $ 2.0 million under the Nordic Agreement, relating to milestones which have been achieved from inception through that date.

During the year ended December 31, 2022, the Company recognized $ 1.0 million of expense related to the Nordic Agreement.

This amount is included as part of research and development expense in the consolidated statement of operations.

The remaining $ 1.0 million is reflected in prepaid expenses on the consolidated balance sheet as of December 31, 2022.

In January 2023, the Company executed a change order to the Nordic Agreement.

Refer to Note 21, Subsequent Events , for more details.

Turn Agreement

On December 7, 2022, the Company acquired intellectual property rights pursuant to a Platform Intellectual Property License (the “Turn Agreement” ) with Global Health Solutions, Inc.

Turn Therapeutics or “Turn” ).

The Turn Agreement provided MIMEDX with an exclusive, worldwide, sub-licensable license to use Turn’s proprietary antimicrobial technology platform (PermaFusion®) to develop antimicrobial line extensions and new products.

In addition, the Turn Agreement granted the Company the commercial rights to Turn’s placental collagen matrix product, FleX™ AM (“ FleX ”), contingent upon Turn’s receipt of FDA 510(k) clearance and other conditions.

During the year ended December 31, 2022, the Company paid $ 1.0 million upon the execution of the Turn Agreement to acquire the license.

This amount was capitalized and is included as part of intangible assets, net, on the consolidated balance sheet as of December 31, 2022.

The Company is obligated to make additional payments upon the meeting of regulatory and product commercial milestones, including $ 9.6 million if and when Turn receives 510(k) clearance from the FDA for FleX.

This amount is not reflected in the consolidated balance sheet as of December 31, 2022.

Payments made to Mr.

Wright under the terms of the Separation Agreement during the year ended December 31, 2023 totaled $ 1.9 million.

A total of $ 1.2 million is reflected in accrued compensation in the consolidated balance sheet as of December 31, 2023.

Litigation and Regulatory Matters

In the ordinary course of business, the Company and its subsidiaries may be a party to pending and threatened legal, regulatory, and governmental actions and proceedings (including those described below).

eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual recovery, loss, fines or penalties related to each pending matter may be.

In view of the inherent difficulty of predicting the outcome of such matters, particularly where the plaintiffs or claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Company generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the eventual recovery, loss, fines or penalties related to each pending matter may be.

In accordance with applicable accounting guidance, the Company accrues a liability when those matters present loss contingencies that are both probable and estimable.

The Company's financial statements at December 31, 2023 reflect the Company's current best estimate of probable losses associated with these matters, including costs to comply with various settlement agreements, where applicable.

As of December 31, 2022, the Company had reserved $ 0.2 million related to expected settlement costs related to legal matters.

The Company paid $ 0.7 million toward the resolution of legal matters involving the Company during the year ended December 31, 2022.

In addition, insurance providers paid $ 0.6 million on the Company’s behalf to settle legal matters.

The Company paid $ 6.7 million to settle legal proceedings during 2021.

In addition, $ 1.1 million was paid on the Company’s behalf through an insurance provider during 2021 relating directly to settlement matters.

The Company had zero and $ 0.2 million accrued as of December 31, 2023 and December 31, 2022, respectively, related to expected settlement costs related to legal matters.

The actual costs of resolving these matters may be in excess of the amounts accrued.

The Company paid $ 0.2 million, $ 0.7 million, and $ 6.7 million toward the resolution of legal matters involving the Company during the years ended December 31, 2023, 2022, and 2021, respectively.

In addition, insurance providers paid $ 0.6 million and $ 1.1 million on the Company’s behalf to settle legal matters for the years ended December 31, 2022 and December 31, 2021, respectively.

In addition, during 2021, the Company received funds from certain director and officer insurance policies for previously-incurred legal expenses under the Company’s indemnification agreements.

These funds were recognized as a reduction to investigation, restatement and related expense on the consolidated statement of operations.

The Company paid $ 7.4 million to settle legal proceedings during 2020.

In addition, $ 3.5 million was paid on the Company’s behalf through an insurance provider during 2020.

The actual costs of resolving these matters may be in excess of the amounts reserved.

Securities Class Action

On January 16, 2019, the United States District Court for the Northern District of Georgia entered an order consolidating two purported securities class actions ( MacPhee v.

MiMedx Group, Inc.

filed February 23, 2018 and Kline v.

MiMedx Group, Inc.

filed February 26, 2018).

The order also appointed Carpenters Pension Fund of Illinois (“ CPFI ”) as lead plaintiff.

On May 1, 2019, CPFI filed a consolidated amended complaint, naming as defendants the Company, Michael J.

Senken, Parker H.

“Pete” Petit, William C.

Taylor, Christopher M.

Cashman and Cherry Bekaert & Holland LLP.

The amended complaint alleged violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act.

It asserted a class period of March 7, 2013 through June 29, 2018.

Following the filing of motions to dismiss by the various defendants, CPFI was granted leave to file an amended complaint.

CPFI filed its amended complaint against the Company, Michael J.

Senken, Parker H.

Petit, William C.

Taylor, and Cherry Bekaert & Holland (Christopher Cashman was dropped as a defendant) on March 30, 2020;

defendants filed motions to dismiss on May 29, 2020.

On March 25, 2021, the Court granted defendants’ respective motions to dismiss, finding that CPFI lacked standing to bring the underlying claims and also could not establish loss causation because it sold all of its shares in MIMEDX prior to any corrective disclosures, and dismissed the case.

On April 22, 2021, CPFI filed a motion for reconsideration of the dismissal and for leave to amend to add a new plaintiff to attempt to cure the standing and loss causation issues.

The Company opposed CPFI’s motions and the hearing on the same was held on September 24, 2021.

On January 28, 2022, the Court denied CPFI’s motion to reconsider and motion to substitute class representative.

On February 25, 2022, CPFI filed a Notice of Appeal in the 11th Circuit Court of Appeals.

Oral arguments were held on January 24, 2023.

On November 4, 2022, Troy Welker and Min Turner, former optionholders of the Company, brought a lawsuit in Fulton County State Court against the Company, former directors Terry Dewberry and Charles Evans, and former officers Parker H.

On November 4, 2022, Troy Welker and Min Turner, former option holders of the Company, brought a lawsuit in Fulton County State Court against the Company, former directors Terry Dewberry and Charles Evans, and former officers Parker H.

“Pete” Petit, William C.

Taylor, and Michael Senken alleging violations of the Georgia Racketeer Influenced and Corrupt Organizations (“ RICO ”) Act against all defendants, and conspiracy to violate the Georgia RICO Act and breach of fiduciary duty against the individual defendants.

The Company is defending against the allegations and removed the case to the United States District Court for the Northern District of Georgia.

Plaintiffs have filed a motion to remand back to state court, which is currently pending.

Investigations

On February 8, 2021, the Company received a subpoena issued by the Department of Defense Office of Inspector General seeking records regarding the sales of the Company’s micronized and other products to federal medical facilities and federal contracting offices, including those operated by the Department of Veterans Affairs or the Department of Defense.

The subpoena also seeks information regarding the Company’s communications with the FDA regarding its products.

The Company understands that the Office of the United States Attorney for the Western District of Washington Civil Division is overseeing the investigation, which is being conducted principally by agents employed by the Department of the Army Criminal Investigation Command.

The Company is cooperating with the government’s investigation and at this time the Company is unable to predict the outcome of the investigation, including whether the investigation will result in any action or proceeding against the Company.

On motion by the Company, the case has been moved to the Fulton County Business Court.

The Company and the individual defendants filed answers and motions to dismiss, which were denied on the RICO claims, but granted with respect to the breach of fiduciary duty claims against the individual defendants.

The Company is defending against the allegations and is obligated to indemnify certain of its current and former officers and directors who are party to this proceeding.

Former Employee Litigation and Related Matters

On January 12, 2021, the Company filed suit in the Circuit Court of the Eleventh Judicial District in and for Miami-Dade County, Florida (MiMedx Group, Inc.

) against its former CEO, Parker H.

al.) against its former CEO, Parker H.

“Pete” Petit, and its former COO, William C.

Taylor, seeking a determination of its rights and obligations under indemnification agreements with Petit and Taylor following a federal jury’s guilty verdict against Petit for securities fraud and Taylor for conspiracy to commit securities fraud.

The Company is seeking a declaratory judgment that it is not obligated to indemnify or advance expenses to Petit and Taylor in connection with certain cases to which Petit and Taylor are parties and also seeking to recoup amounts previously paid on behalf of Petit and Taylor in connection with such cases.

Taylor, seeking a determination of its rights and obligations under indemnification agreements with Petit and Taylor and seeking reimbursement of amounts previously advanced under the indemnification agreements following a federal jury’s guilty verdict against Petit for securities fraud and Taylor for conspiracy to commit securities fraud.

On April 22, 2021, Petit and Taylor filed an answer and asserted counterclaims against the Company alleging breach of their indemnification agreements, breach of the covenant of good faith and fair dealing with respect to their indemnification agreements, and seeking a declaration that the Company remains obligated to indemnify and advance fees in connection with certain cases.

Petit and Taylor simultaneously filed a motion seeking to compel the Company to advance and reinstate its payments of Petit and Taylor’s legal expenses.

Petit and Taylor simultaneously also filed a motion seeking to compel the Company to advance and reinstate its payments of Petit and Taylor’s legal expenses.

The Company opposed Petit and Taylor’s motion and a hearing was set for June 23, 2021.

1 unchanged sentence

such mediation was held on August 11, 2021.

Following the mediation, the Company and Taylor reached an agreement to settle the matter between them.

Negotiations with Petit are ongoing.

Following the mediation, the Company and Mr.

Taylor reached an agreement to settle the matter between them.

Negotiations with Mr.

Petit are ongoing.

Other Matters

Under the Florida Business Corporation Act and agreements with its current and former officers and directors, the Company is obligated to indemnify its current and former officers and directors who are made party to a proceeding, including a proceeding brought by or in the right of the corporation, with certain exceptions, and to advance expenses to defend such matters.

The Company has already borne substantial costs to satisfy these indemnification and expense advance obligations and may continue to do so in the future.

In addition to the matters described above, the Company is a party to a variety of other legal matters that arise in the ordinary course of the Company’s business, none of which is deemed to be individually material at this time.

Previously-Settled Matters

The matters discussed below have been settled with the counterparty and their resolution has been disclosed in previously-issued financial statements.

There are no contingent or continuing obligations associated with these matters.

Shareholder Derivative Suits

On December 6, 2018, the United States District Court for the Northern District of Georgia entered an order consolidating three shareholder derivative actions (Evans v.

Petit, et al.

filed September 25, 2018, Georgalas v.

Petit, et al.

filed September 27, 2018, and Roloson v.

Petit, et al.

filed October 22, 2018) that had been filed in the Northern District of Georgia.

On January 22, 2019, plaintiffs filed a verified consolidated shareholder derivative complaint.

The consolidated action sets forth claims of breach of fiduciary duty, corporate waste and unjust enrichment against certain former officers, and certain current and former directors, of the Company:

Petit, William C.

Taylor, Michael J.

Senken, John E.

Cranston, Alexandra O.

Haden, Joseph G.

Terry Dewberry, Charles R.

Evans, Larry W.

Papasan, Luis A.

Aguilar, Bruce L.

Hack, Charles E.

Koob, Neil S.

Yeston and Christopher M.

The allegations generally involve claims that the defendants breached their fiduciary duties by causing or allowing the Company to misrepresent its financial statements as a result of improper revenue recognition.

The Company filed a motion to stay on February 18, 2019, pending the completion of the investigation by the Company’s Special Litigation Committee.

The Special Litigation Committee completed its investigation relating to this action and filed an executive summary of its findings with the Court on July 1, 2019.

The parties (together with parties from the

Hialeah derivative lawsuit, the Nix and Demaio derivative lawsuit, and the Murphy derivative lawsuit, each described below) held a mediation on February 11, 2020.

Following continued discussions, on May 1, 2020, the parties notified the Court that plaintiffs and the Company had reached an agreement in principle to settle this consolidated derivative action, which settlement also encompasses all claims asserted in the Hialeah derivative lawsuit, the Nix and Demaio derivative lawsuit, and the Murphy derivative lawsuit.

The hearing on final approval was held on December 21, 2020 and the Court entered an Order granting final approval of the settlement the same day.

On October 29, 2018, the City of Hialeah Employees Retirement System (“ Hialeah ”) filed a shareholder derivative complaint in the Circuit Court for the Second Judicial Circuit in and for Leon County, Florida (the “ Florida Court ”).

The complaint alleges claims for breaches of fiduciary duty and unjust enrichment against certain former officers, and certain current and former directors, of the Company:

Petit, William C.

Taylor, Michael J.

Senken, John E.

Cranston, Alexandra O.

Haden, Joseph G.

Terry Dewberry, Charles R.

Evans, Bruce L.

Hack, Charles E.

Koob, Larry W.

Papasan, and Neil S.

The Company moved to stay the action on February 7, 2019, to allow the prior-filed consolidated derivative action in the Northern District of Georgia to be resolved first and to allow the Company’s Special Litigation Committee time to complete its investigation.

The Company also filed a motion to dismiss on April 8, 2019.

As discussed above, the plaintiff participated in the mediation that took place in connection with the prior-filed consolidated derivative action in the Northern District of Georgia and is a party to the agreement settling that consolidated derivative action.

In accordance with the terms of the settlement, Hialeah filed a motion for leave to dismiss its derivative action with prejudice on January 4, 2021.

On May 15, 2019, two individuals purporting to be shareholders of the Company filed a shareholder derivative complaint in the Superior Court for Cobb County, Georgia.

(Nix and Demaio v.

Evans, et al.) The complaint alleges claims for breaches of fiduciary duty, corporate waste and unjust enrichment against certain current and former directors and officers of the Company:

Petit, William C.

Taylor, Michael J.

Senken, John E.

Cranston, Alexandra O.

Haden, Chris Cashman, Lou Roselli, Mark Diaz, Charles R.

Evans, Luis A.

Aguilar, Joseph G.

Terry Dewberry, Bruce L.

Hack, Charles E.

Koob, Larry W.

Papasan and Neil S.

The allegations generally involved claims that the defendants breached their fiduciary duties by causing or allowing the Company to misrepresent its financial statements as a result of improper revenue recognition.

The Court ordered this matter stayed pending the resolution of the consolidated derivative suit pending in the Northern District of Georgia.

As discussed above, the plaintiffs participated in the mediation that took place in connection with the prior-filed consolidated derivative action in the Northern District of Georgia and are a party to the agreement settling that consolidated derivative action.

In accordance with the terms of the settlement, plaintiffs filed a notice of settlement and voluntary dismissal with prejudice on January 13, 2021.

On August 12, 2019, John Murphy filed a shareholder derivative complaint in the United States District Court for the Southern District of Florida (Murphy v.

Petit, et al.).

The complaint alleged claims for breaches of fiduciary duty and unjust enrichment against certain former officers, and certain current and former directors, of the Company:

Petit, William C.

Taylor, Michael J.

Senken, John E.

Cranston, Alexandra O.

Haden, Charles R.

Evans, Luis A.

Aguilar, Joseph G.

Terry Dewberry, Bruce L.

Hack, Charles E.

Koob, Larry W.

Papasan and Neil S.

The Company filed a motion to transfer this action to the Northern District of Georgia.

Prior to resolution of that motion, the plaintiff voluntarily dismissed this action without prejudice.

Pursuant to the terms of the settlement, this action is deemed dismissed with prejudice.

Qui Tam Matters

On January 19, 2017, a former employee of the Company filed a qui tam False Claims Act complaint in the United States District Court for the District of South Carolina ( United States of America, ex rel.

Jon Vitale v.

MiMedx Group, Inc.

) alleging that the Company’s donations to the patient assistance program, Patient Access Network Foundation, violated the Anti-Kickback Statute and resulted in submission of false claims to the government.

The government declined to intervene and the complaint was unsealed on August 10, 2018.

The Company filed a motion to dismiss on October 1, 2018.

The Company’s motion to dismiss was granted in part and denied in part on May 15, 2019.

The parties have reached an agreement to resolve this matter.

On January 20, 2017, two former employees of the Company, filed a qui tam False Claims Act complaint in the United States District Court for the District of Minnesota (Kruchoski et.

MiMedx Group, Inc.).

An amended complaint was filed on January 27, 2017.

The operative complaint alleges that the Company failed to provide truthful, complete and accurate information about the pricing offered to commercial customers in connection with the Company’s Federal Supply Schedule contract.

On May 7, 2019, the Department of Justice (“ DOJ ”) declined to intervene, and the case was unsealed.

In April 2020,

without admitting the allegations, the Company agreed to pay $ 6.5 million to the DOJ to resolve this matter.

This amount was paid during the year ended December 31, 2020.

Former Employee Matters

In December 2019, MiMedx received notice of a complaint filed in July 2018 with the Occupational Safety and Health Administration (“OSHA”) section of the Department of Labor (“DOL”) by Thomas Tierney, a former Regional Sales Director, against MiMedx and the referenced individuals, Tierney v.

MiMedx Group, Inc., Parker Petit, William Taylor, Christopher Cashman, Thornton Kuntz, Jr.

and Alexandra Haden, DOL No.

4-5070-18-243.

Tierney alleged that he was terminated from MiMedx in retaliation for reporting concerns about revenue recognition practices, compliance issues, and the corporate culture, in violation of the anti-retaliation provisions of the Sarbanes-Oxley Act.

The parties settled this matter and OSHA dismissed the complaint on May 20, 2020.

Intellectual Property Litigation

The NuTech Action

On March 2, 2015, the Company filed a patent infringement lawsuit against NuTech Medical, Inc.

(“ NuTech ”) and DCI Donor Services, Inc.

(“ DCI ”) in the United States District Court for the Northern District of Alabama ( MiMedx Group, Inc.

NuTech Medical, Inc.

The Company has alleged that NuTech and DCI infringed and continue to infringe on the Company’s patents through the manufacture, use, sale and/or offering of their tissue graft product.

The Company also asserted that NuTech knowingly and willfully made false and misleading representations about its products to customers and prospective customers.

The Company is seeking permanent injunctive relief and unspecified damages.

The case was stayed pending the restatement of the Company’s financial statements.

Since the Company has completed its restatement, the case resumed.

The parties reached a settlement in the matter and the case was dismissed with prejudice.

The Osiris Action

On February 20, 2019, Osiris Therapeutics, Inc.

(“ Osiris ”) refiled its trade secret and breach of contract action against the Company (which had been dismissed in a different forum) in the United States District Court for the Northern District of Georgia ( Osiris Therapeutics, Inc.

MiMedx Group, Inc.

The parties reached a settlement in the matter and the case was dismissed with prejudice on October 26, 2020.

In addition to the matters described above, the Company is a party to a variety of other legal matters that arise in the ordinary course of the Company’s business, none of which are deemed to be individually material at this time.

Due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s business, results of operations, financial position or liquidity.

The Company has a 401(k) plan (the “ 401(k) Plan ”) covering all employees who have completed one month of service.

Under the 401(k) Plan, participants could defer up to 90 % of their eligible wages to a maximum of $ 22,500 per year (annual limit for 2023).

Employees age 50 or over in 2022 could make additional pre-tax contributions up to $ 6,500 .

Employees age 50 or over in 2022 could make additional pre-tax contributions of up to $ 7,500 .

In 2023, 2022 and 2021, the Company matched 50 % of employee contributions up to 8 % of the employee’s eligible compensation.

In 2020, the Company matched 50 % of employee contributions up to 5 % of the employee’s eligible compensation.

The matching contribution for the years ended December 31, 2023, 2022, and 2021 was $ 2.7 million, $ 3.3 million, and $ 2.7 million, respectively.

Related Party Transactions

The Company has employed Thomas Koob as its Chief Scientific Officer (a non-executive officer) since 2006.

Thomas Koob is the brother of a former director, Charles Koob.

Subsequent to the Company’s employment of Thomas Koob, Charles Koob was appointed as a director of the Company in March 2008.

Charles Koob's term as a Director expired at the 2020 Annual Meeting held on November 20, 2020.

In 2020, the Company paid Thomas Koob an annual salary of $ 0.2 million and provided equity, incentive compensation and other compensation of $ 0.3 million.

The Company had no related party transactions for the years ended December 31, 2022 or 2021.

Restructuring

2018 Restructuring

Set forth below are disclosures relating to restructuring initiatives that resulted in material cash expenditures during the year ended December 31, 2020.

Employee retention and certain other employee benefit-related costs related to the Company’s restructuring were expensed ratably over an agreed-upon service period.

One-time employee separation and related employee benefit costs were generally expensed as incurred.

In December 2018, the Company announced a reduction of the Company’s workforce by approximately 240 full-time employees, or 24 % of its total workforce, of which approximately half were sales personnel as part of the plans to implement a broad-based organizational realignment, cost reduction and efficiency program to better ensure the Company’s cost structure was appropriate given its revenue expectations.

The Company’s restructuring program concluded in 2020.

All obligations related to the Company’s restructuring program were settled as of December 31, 2020.

Changes to this liability during the year ended December 31, 2020 was as follows (in thousands):

Liability balance as of December 31, 2019 3,561

Cash distributions ( 3,561 )

Liability balance as of December 31, 2020 $ —

2022 Reorganization

On September 2, 2022, the Company separated from its Chief Executive Officer.

Subsequent to this event, the Company realigned the organization to improve profitability.

As part of these efforts, the Company incurred $ 2.0 million of one-time employee separation costs.

Of this amount, $ 0.6 million was outstanding as of December 31, 2022.

The remaining amount is reflected as part of accrued compensation on the consolidated balance sheet as of that date.

Government Assistance

Employee Retention Credit

The CARES Act provided an employee retention credit (“ ERC ”), which was a refundable tax credit against certain payroll taxes.

The Coronavirus Aid, Relief, and Economic Security Act (“ CARES Act ”) provided an employee retention credit (“ ERC ”), which was a refundable tax credit against certain payroll taxes.

Upon determination that the Company overcame the barriers required to receive the credit, the Company qualified and filed to claim the ERC.

1 unchanged sentence

For the year ended December 31, 2021, the Company recorded $ 1.6 million as a reduction to selling, general and administrative expense .

Of this amount, $ 1.4 million and $ 1.6 million were reflected as part of other current assets in the consolidated balance sheets as December 31, 2022 and 2021, respectively.

Of this amount, $ 1.0 million and $ 1.4 million were reflected as part of other current assets in the consolidated balance sheets as of December 31, 2023 and 2022, respectively.

During year ended December 31, 2023, the Company received $ 0.4 million relating to the ERC.

Subsequent Events

Nordic Agreement Change Order

On January 24, 2023, the Company executed a change order to the Nordic Agreement (the “ Change Order ”), primarily to reflect additional elements required in conducting the trial.

The Change Order modified the scope of NBCD’s responsibilities under the Nordic Agreement, shifting certain activities to other vendors to be administered by NBCD and certain other activities to MIMEDX.

These responsibilities primarily related to areas of patient recruitment and screening and statistical analysis, among other areas of the trial.

Pursuant to the Change Order, the total payments owed to NBCD relating to NBCD’s responsibilities decreased from $ 13.3 million to $ 10.2 million.

Hiring of Chief Executive Officer

On January 27, 2023, the Board of Directors appointed Joseph H.

Capper to serve as Chief Executive Officer.

The Company entered into a Letter Agreement with Mr.

Capper that included, among other things, a grant of 3,300,000 PSUs and a grant of a non-qualified stock option (the “ Option ”) for 3,600,000 shares of the Company’s common stock.

The PSUs vest over a four-year performance period ending December 31, 2026 based upon the achievement of specified performance conditions, up to a maximum of 200 % of the granted PSUs, and subject to Mr.

Capper’s continued employment.

The Option vests over a four-year period ending January 31, 2027 contingent upon the achievement of share price performance goals and subject to Mr.

Capper’s continued employment.

Capper will is eligible to vest in 25 % of the Option on or after each of the first four anniversary dates subsequent to the date of grant, provided certain share price performance targets are achieved at any point during the four-year vesting period.

In concert with the hiring of Mr.

Todd Newton stepped down and ceased to serve as Interim Chief Executive Officer.

Capper’s hiring, 200,000 RSUs granted to Mr.

Newton pursuant to the Interim Executive Employment Agreement between him and the Company vested immediately.

Newton remains on the Board of Directors.

Schedule II Valuation and Qualifying Accounts

MIMEDX GROUP, INC.

AND SUBSIDIARIES

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

Years ended December 31, 2022, 2021 and 2020 (in thousands)

Beginning of Year Additions charged to Expense or Revenue Deductions

and write-offs Balance at

For the year ended December 31, 2022

Allowance for product returns $ 2,549 $ 2,449 $ ( 2,304 ) $ 2,694

For the year ended December 31, 2021

Allowance for product returns $ 2,321 $ 2,508 $ ( 2,280 ) $ 2,549

For the year ended December 31, 2020

Allowance for product returns $ 4,115 $ 705 $ ( 2,499 ) $ 2,321

$ 95 Million Credit Agreement with Citizens and Bank of America

On January 19, 2024, the Company entered into a Credit Agreement (the “ Citizens Credit Agreement ”) with certain lenders party thereto, and Citizens Bank, N.A., as administrative agent (the “ Agent ”).

The Citizens Credit Agreement provides for senior secured credit facilities in an aggregate principal amount of up to $ 95.0 million consisting of:

(i) a $ 75.0 million senior secured revolving credit facility (the “ Revolving Credit Facility ”) with a $ 10.0 million letter of credit sublimit and a $ 10.0 million swingline loan sublimit, and (ii) a $ 20.0 million senior secured term loan facility (the “ Term Loan Facility ” and, together with the Revolving Credit Facility, the “ Credit Facilities ”).

All obligations are required to be paid in full on January 19, 2029 (the “ Maturity Date ”).

The Company has the option to obtain one or more incremental term loan facilities and/or increase the commitments under the Revolving Credit Facility in an aggregate principal amount equal to the greater of (i) $ 50.0 million and (ii) 1.00 times the Company’s Consolidated EBITDA as defined therein, each subject to the existing or any new lenders’ election to extend additional term loans or revolving commitments.

At the Company’s option, borrowings under the Citizens Credit Agreement (other than any swingline loan) will bear interest at a rate per annum equal to (i) the Alternate Base Rate, as defined therein, or (ii) a Term SOFR as defined therein, in each case plus an applicable margin ranging from 1.25 % and 2.50 % with respect to Alternate Base Rate borrowings and 2.25 % and 3.50 % for Term SOFR borrowings.

Swingline loans will bear interest at a rate per annum equal to one-month Term SOFR plus the applicable margin.

The applicable margin will be determined based on the Company’s consolidated total net leverage ratio.

The Company is required to pay a quarterly commitment fee on any unused portion of the Revolving Credit Facility, letter of credit fees, and other customary fees to the Agent and the Lenders.

The Term Loan Facility will amortize on a quarterly basis at 1.25 % (for year one and two), 1.875 % (for year three and four), and 2.5 % (for year five) based on the aggregate principal amount outstanding under the Term Loan Facility, with the remainder due on the Maturity Date.

The Company must make mandatory prepayments in connection with certain asset dispositions and casualty events, subject in each case to customary reinvestment rights.

The Company may prepay borrowings under the Credit Facilities at any time, without premium or penalty, and may, at its option, reduce the aggregate unused commitments under the Revolving Credit Facility in whole or in part, in each case subject to the terms of the Credit Agreement.

The Company must also comply with certain financial covenants, including a maximum total net leverage ratio and a minimum consolidated fixed charge coverage ratio, as well as other customary restrictive covenants.

In addition, on January 19, 2024, the Company borrowed $ 30.0 million under the Revolving Credit Facility and $ 20.0 million under the Term Loan Facility.

Proceeds from the initial drawings under the Credit Facilities together with cash on hand were

used to repay in full the $ 50.0 million principal amount and other outstanding obligations under the Hayfin Loan Agreement and to pay related fees, premiums, costs and expenses (collectively with the entry into the Citizens Credit Agreement and the initial borrowings thereunder, the “ Debt Refinancing Transactions ”).

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

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data