MIMEDX GROUP, INC. 10-K

Item 8. Financial Statements and Supplementary Data Index to Financial Statements Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm (PCAOB ID: 34 ) F- 2 Consolidated Balance Sheets – As of December 31, 2024 and 2023 F- 4 Consolidated Statements of Operations – For the years ended December 31, 2024, 2023 and 2022 F- 5 Consolidated Statements of Cash Flows – For the years ended December 31, 2024, 2023 and 2022 F- 6 Consolidated Statements of Stoc kholders’ Equity (Deficit) – Fo r the years ended December 31, 2024, 2023 and 2022 F- 8 Notes to Consolidated Financial Statements F- 9 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of MiMedx Group, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of MiMedx Group, Inc. and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders' equity (deficit), and cash flows, for each of the three years in the period ended December 31, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, 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, 2024, 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 26, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits 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 financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the 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 financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Net Sales - Revenue Recognition — Refer to Note 2 in the financial statements Critical Audit Matter Description The Company sells its products primarily to individual customers and independent distributors (collectively referred to as “customers”). 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 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. 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. 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 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 Our audit procedures related to the timing of revenue recognition transactions included the following, among others: • We tested the effectiveness of controls over the recognition of ship and bill and consignment sales at or near year end. F- 2 • We created data visualizations using a detail of all revenue transactions and evaluated trends in the transactional revenue data with emphasis on activity at or near year end. • We evaluated and tested corollary relationships between revenue and related accounts. • We evaluated the appropriateness and consistency of the methods and assumptions utilized by management to estimate consignment revenue. • We tested a sample of consignment revenue transactions accrued as of year-end and evaluated whether the transactions were recorded in the correct period. • We tested 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 sale refunds issued after year end by agreeing to documents supporting the authorization for the issuance of the refund and evaluating if the refund was recorded in the correct period. /s/ Deloitte & Touche LLP Atlanta, Georgia February 26, 2025 We have served as the Company's auditor since 2021. F- 3 MIMEDX GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 31, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 104,416 $ 82,000 Accounts receivable, net 55,828 53,871 Inventory 23,807 21,021 Prepaid expenses 5,018 5,624 Other current assets 2,817 1,745 Total current assets 191,886 164,261 Property and equipment, net 5,944 6,974 Right of use assets 5,606 2,132 Deferred tax assets 28,306 40,777 Goodwill 19,441 19,441 Intangible assets, net 11,626 5,257 Other assets 1,106 205 Total assets $ 263,915 $ 239,047 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of long term debt $ 1,000 $ 1,000 Accounts payable 7,409 9,048 Accrued compensation 23,667 22,353 Accrued expenses 9,012 9,361 Current portion of Profit Share Payments 1,421 — Current liabilities of discontinued operations — 1,352 Other current liabilities 3,086 2,894 Total current liabilities 45,595 46,008 Long term debt, net 17,830 48,099 Other liabilities 7,383 2,223 Total liabilities $ 70,808 $ 96,330 Commitments and contingencies (Note 18) Stockholders’ equity Common stock; $ .001 par value; 250,000,000 shares authorized, 146,932,032 issued and outstanding at December 31, 2024 and 146,227,639 issued and outstanding at December 31, 2023 147 146 Additional paid-in capital 284,219 276,249 Accumulated deficit ( 91,259 ) ( 133,678 ) Total stockholders’ equity 193,107 142,717 Total liabilities and stockholders’ equity $ 263,915 $ 239,047 See notes to the consolidated financial statements. F- 4 MIMEDX GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) Year Ended December 31, 2024 2023 2022 Net sales $ 348,879 $ 321,477 $ 267,841 Cost of sales 60,073 54,634 48,316 Gross profit 288,806 266,843 219,525 Operating expenses: Selling, general and administrative 225,087 211,124 208,673 Research and development 12,341 12,665 12,701 Investigation, restatement and related ( 8,698 ) 5,176 12,177 Amortization of intangible assets 765 762 701 Impairment of intangible assets 446 — — Operating income (loss) 58,865 37,116 ( 14,727 ) Other expense, net Interest expense, net ( 1,006 ) ( 6,457 ) ( 5,016 ) Other expense, net ( 565 ) ( 26 ) ( 4 ) Income (loss) from continuing operations before income tax provision 57,294 30,633 ( 19,747 ) Income tax provision (expense) benefit from continuing operations ( 15,296 ) 36,806 ( 206 ) Net income (loss) from continuing operations 41,998 67,439 ( 19,953 ) Income (loss) from discontinued operations, net of tax 421 ( 9,211 ) ( 10,244 ) Net income (loss) $ 42,419 $ 58,228 $ ( 30,197 ) Net income (loss) available to common stockholders from continuing operations $ 41,998 $ 55,796 $ ( 26,533 ) Basic net income (loss) per common share: Continuing operations $ 0.29 $ 0.48 $ ( 0.24 ) Discontinued operations 0.00 ( 0.08 ) ( 0.09 ) Basic net income (loss) per common share: $ 0.29 $ 0.40 $ ( 0.33 ) Diluted net income (loss) per common share: Continuing operations $ 0.28 $ 0.43 $ ( 0.24 ) Discontinued operations 0.00 ( 0.06 ) ( 0.09 ) Diluted net income (loss) per common share: $ 0.28 $ 0.37 $ ( 0.33 ) Weighted average common shares outstanding - basic 146,979,354 116,495,810 112,909,266 Weighted average common shares outstanding - diluted 149,049,197 145,962,462 112,909,266 See notes to the consolidated financial statements. F- 5 MIMEDX GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2024 2023 2022 Cash flows from operating activities: Net income (loss) from continuing operations $ 41,998 $ 67,439 $ ( 19,953 ) Adjustments to reconcile net income (loss) from continuing operations to net cash flows provided by (used in) operating activities of continuing operations: Share-based compensation 16,933 16,959 11,328 Deferred income tax provision 12,472 ( 37,802 ) — Shares received in settlement of litigation ( 9,300 ) — — Amortization of intangible assets 3,762 762 701 Depreciation 2,279 2,665 3,345 Loss on extinguishment of debt 1,401 — — Non-cash lease expenses 1,310 1,268 1,259 Credit loss expense 595 1,449 2,820 Other 1,112 613 542 Increase (decrease) in cash resulting from changes in: Accounts receivable ( 2,552 ) ( 12,237 ) ( 5,937 ) Inventory ( 2,357 ) ( 7,838 ) ( 1,794 ) Prepaid expenses 606 ( 283 ) ( 1,371 ) Other assets ( 958 ) 1,535 ( 333 ) Accounts payable ( 1,410 ) 783 839 Accrued compensation 2,896 1,829 ( 1,859 ) Accrued expenses ( 789 ) ( 1,708 ) 2,366 Other liabilities ( 870 ) ( 497 ) 75 Net cash flows provided by (used in) operating activities of continuing operations 67,128 34,937 ( 7,972 ) Net cash flows used in operating activities of discontinued operations ( 930 ) ( 8,162 ) ( 9,921 ) Net cash flows provided by (used in) operating activities 66,198 26,775 ( 17,893 ) Cash flows from investing activities: Purchases of equipment ( 1,683 ) ( 1,987 ) ( 1,514 ) Cash paid for acquisitions ( 7,862 ) — — Other ( 38 ) ( 168 ) ( 1,146 ) Net cash flows used in investing activities ( 9,583 ) ( 2,155 ) ( 2,660 ) Cash flows from financing activities: Proceeds from Citizens Revolving Credit Facility 30,000 — — Proceeds from Citizens Term Loan Facility 19,783 — — Prepayment premium on Hayfin term loan ( 500 ) — — Deferred financing cost ( 1,101 ) — — Repayment of Hayfin term loan ( 50,000 ) — — Repayment of Citizens Revolving Credit Facility ( 30,000 ) — — Principal payments on Citizens Term Loan Facility ( 1,000 ) — — Proceeds from exercise of stock options 1,397 997 651 Stock repurchased for tax withholdings on vesting of restricted stock ( 2,641 ) — ( 1,190 ) Repurchase of Series B Preferred Shares — ( 9,515 ) — Other ( 137 ) ( 52 ) ( 41 ) Net cash flows used in financing activities ( 34,199 ) ( 8,570 ) ( 580 ) F- 6 Net change in cash 22,416 16,050 ( 21,133 ) Cash and cash equivalents, beginning of period 82,000 65,950 87,083 Cash and cash equivalents, end of period $ 104,416 $ 82,000 $ 65,950 See notes to the consolidated financial statements. F- 7 MIMEDX GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands, except share data) Common Stock Additional Paid-in Treasury Stock Accumulated Shares Amount Capital Shares Amount Deficit Total Balance at December 31, 2021 112,703,926 $ 113 $ 165,695 778,710 $ ( 4,017 ) $ ( 161,709 ) $ 82 Share-based compensation expense — — 12,666 — — — 12,666 Exercise of stock options 160,762 — ( 618 ) ( 151,239 ) 1,269 — 651 Issuance of restricted stock 840,759 1 ( 3,969 ) ( 882,251 ) 3,968 — — Restricted stock shares canceled/forfeited — — 30 5,338 ( 30 ) — — 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 ) Share-based compensation expense — — 17,178 — — — 17,178 Employee stock purchase plan 444,809 — 1,367 — — — 1,367 Issuance of restricted stock 2,185,604 2 ( 268 ) ( 73,335 ) 266 — — Restricted stock shares canceled/forfeited — — 378 90,367 ( 378 ) — — Exercise of stock options 130,129 — 885 ( 17,032 ) 112 — 997 Repurchase of Series B Preferred Stock — — ( 4,935 ) — — — ( 4,935 ) Conversion of Series B Preferred Stock 29,761,650 30 87,840 — — — 87,870 Net income — — — — — 58,228 58,228 Balance at December 31, 2023 146,227,639 $ 146 $ 276,249 — $ — $ ( 133,678 ) $ 142,717 Share-based compensation expense — — 16,933 — — — 16,933 Employee stock purchase plan 245,640 — 1,582 — — — 1,582 Issuance of restricted stock, net 1,451,067 2 ( 2,643 ) — — — ( 2,641 ) Exercise of stock options 207,686 — 1,397 — — — 1,397 Shares received in settlement of litigation ( 1,200,000 ) ( 1 ) ( 9,299 ) — — — ( 9,300 ) Net income — — — — — 42,419 42,419 Balance at December 31, 2024 146,932,032 $ 147 $ 284,219 — $ — $ ( 91,259 ) $ 193,107 See notes to the consolidated financial statements. F- 8 MIMEDX GROUP, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Nature of Business MiMedx Group, Inc. (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 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. 2. Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of MiMedx Group, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation. Reclassifications Current portion of long term debt of $ 1.0 million as of December 31, 2023, which was presented in other current liabilities in previously-issued financial statements, has been reclassified to be presented in a separate line item, still within current liabilities, in these consolidated financial statements to conform to current year presentation. Use of Estimates The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“ GAAP ”). GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported consolidated statements of operations during the reporting period. Actual results could differ from those estimates. Significant estimates include estimates of useful lives of property and equipment and intangible assets, 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 and the probable achievement of performance conditions associated with share-based payment awards, estimates of returns and allowances, estimate of fair value of Profit Share Payments (as defined below), and valuation of deferred tax assets. Segment Reporting The application of GAAP requires the use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s chief operating decision maker (“ CODM ”) organizes segments within the Company for which separate financial information is available regarding resource allocation and assessing performance. The Company has concluded that its Chief Executive Officer (“ CEO ”) is its CODM. 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. The Company assessed that the CODM assesses performance and resources as one reportable segment. Refer to Note 13, Segment Information, for further discussion. Cash and Cash Equivalents Cash and cash equivalents include cash held at various banks. The Company considers all highly-liquid investments purchased with an original maturity of three months or less at the date of purchase and money market mutual funds to be cash equivalents. F- 9 Market Concentrations and Credit Risk The Company places its cash and cash equivalents on deposit with U.S.-based financial institutions. The U.S. Federal Deposit Insurance Corporation (“ FDIC ”) provides insurance coverage for deposits up to $250,000 for substantially all depository accounts. As of December 31, 2024 and 2023, the Company had cash and cash equivalents of approximately $ 103.7 million and $ 81.3 million, respectively, in excess of the insured amounts in three depository institutions. Accounts Receivable Accounts receivable represent amounts due from customers for which revenue has been recognized. Generally, the Company does not require collateral or any other security to support its receivables. Accounts receivable is presented net of the Company’s allowance for doubtful accounts. The allowance for credit losses 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 and the character of the customer, 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. Individual receivables are written-off after all reasonable efforts to collect the funds have been made. Actual write-offs may differ from the amounts reserved. Inventory Inventory is valued at the lower of cost or net realizable value. Costs of inventory sold are recognized using the first–in, first-out (“ FIFO ”) method. Inventory is tracked through raw material, work-in-process, and finished goods stages as the product progresses through various production steps and stocking locations. Labor and overhead costs are absorbed through the various production processes up to when the work order closes. Historical yields and normal capacities are utilized in the calculation of production overhead rates. Inventory is written down to the lower of cost or net realizable value to reflect slow-moving inventory as well as inventory no longer needed due to diminished demand or regulatory action. 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 . Leasehold improvements are depreciated on a straight-line method over the shorter of the estimated useful lives and the remaining lease term. Asset Retirement Obligations 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 then-prevailing incremental borrowing rate. At such point in time, an asset and liability are recorded for the amount of the expected liability. The asset amount is depreciated, straight-line, over the life of the underlying asset, while the liability is accreted to the amount of the expected outflow through selling, general and administrative expense using the effective interest method. Subsequent revisions to estimates for future cash flows related to the asset retirement obligations are recorded as equal increases or decreases to the retirement asset and liability. Intangible Assets, Net Intangible assets are assets which lack physical substance and (a) grant the Company with a legal right or (b) are capable of being separated and sold. Intangible assets acquired outside of a business combination are capitalized based on the cost to acquire the assets, allocated pro rata based on the fair value of the individual assets acquired. Any contingent consideration issued in connection with the acquisition of assets is capitalized at the time at which all contingencies regarding its payment are resolved. The Company amortizes the capitalized cost of finite-lived intangible assets over a period generally reflective of the anticipated contributions to cash flow generation. Amortization of intangible assets is recorded as part of cost of sales or operating expenses in the consolidated statements of operations depending on the nature of the underlying intangible asset and its use in the Company’s operations. F- 10 Impairment of Long-lived Assets The Company evaluates the recoverability of its long-lived assets (property, equipment, right of use, and intangible assets with finite lives) whenever adverse events or changes in business climate indicate that the expected undiscounted future cash flows from the related assets may be less than their carrying amounts. When a situation arises which results in a conclusion that it is more likely than not that an asset is not recoverable, the Company estimates cash flows expected to be derived from the continuing use and eventual disposition of the asset. If the sum of those undiscounted cash flows does not exceed the net book value of the asset, the Company estimates the fair value of the asset. Impairment loss is recorded to the extent that the net book value exceeds the fair value of the asset. Impairment reviews are based on an estimated future cash flow approach that requires significant judgment with respect to future revenue and expense growth rates, selection of appropriate discount rate (as applicable), asset groupings, and other assumptions and estimates. The Company uses estimates that are consistent with its business plans and a market participant view of the assets being evaluated. Actual results may differ from these estimates. Goodwill and Indefinite-lived Intangible Assets The Company assesses goodwill for impairment at least annually on October 1 and more frequently whenever events or substantive changes in circumstances indicate that it is more likely than not that goodwill is impaired. In performing the goodwill impairment test, the Company first assesses qualitative factors to determine the existence of impairment. If the qualitative factors indicate that the carrying value of a reporting unit exceeds its fair value, the Company proceeds to a quantitative test to measure the existence and amount, if any, of goodwill impairment. The Company may also choose to bypass the qualitative assessment and proceed directly to the quantitative test. In performing the quantitative test, impairment loss is recorded to the extent that the carrying value of the reporting unit exceeds its assessed fair value. The Company determines the fair value of reporting units using the income and market approaches, as applicable. Under the income approach, the fair value of a reporting unit is the present value of its future cash flows as viewed from the lens of a hypothetical market participant in an orderly transaction. These future cash flows are derived from expectations of revenue, expenses, tax deductions and credits, working capital flows, capital expenditures, and other projected sources and uses of cash, as applicable. Value indications are developed by discounting expected cash flows to their present value using a discount rate commensurate with the risks associated with the reporting unit subject to testing. Under the market approach, the Company uses market multiples derived from various comparable companies based on measures salient to investors in those companies. Impairment loss is recorded to the extent the carrying value of a reporting unit exceeds the fair value. No impairment loss is recognized if the fair value of the reporting unit exceeds the carrying value. Patent Costs 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 capitalized $ 0.0 million, $ 0.2 million, and $ 0.2 million of patent costs for the years ended December 31, 2024, 2023, and 2022, respectively. Leases The Company determines if a contract is, or contains, a lease at inception. Leases provide the Company with the right to control an underlying asset for a contractual term, subject to certain renewal and other rights, in exchange for a series of stipulated cash flows. Right of use (“ ROU ”) assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Lease assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company calculates the present value of lease payments by discounting the lease payments using the Company’s incremental borrowing rate for a collateralized or secured borrowing over a term equivalent to that of the lease. Lease payments that vary according to an index or rate are measured using the index or rate at lease inception. 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. This determination is reassessed as new information arises and is accounted for prospectively. As an accounting policy election, the Company does not capitalize leases having initial terms of 12 months or fewer. The Company has made an accounting policy election not to separate lease components from non-lease components in the event that the agreement contains both. F- 11 Modifications to existing leases are recognized on the modification date. In such cases, the lease liability is remeasured based on the estimated present value of lease payments from the modification date. The difference between the lease liability immediately before and immediately after lease modification is reflected as an equal and offsetting adjustment to the associated ROU asset. Operating lease right of use assets and the related liabilities are included in right of use asset, other current liabilities, and other liabilities, respectively, in the consolidated balance sheets. Lease expense associated with operating leases is recognized, straight-line, over the lease term. 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. Finance lease right of use assets are amortized, straight-line, over the lease term as depreciation expense. Interest expense is recognized using the effective interest method on finance lease liabilities as part of interest expense, net. Treasury Stock Except for shares retired by the Company upon repurchase, shares repurchased by the Company are recorded as treasury stock at the cost to acquire such shares. Subsequent issuances of shares held in treasury are assumed to be released on a FIFO basis. During 2024, all shares repurchased were retired. 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 18, 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. Subsequent revisions to the Company’s accrual are made as new information emerges and are accounted for prospectively. The Company discloses all ongoing legal matters for which a loss is reasonably possible, regardless of whether an estimate can be reasonably determined. Due to the fact that legal proceedings and other contingencies are inherently unpredictable, the Company’s estimates of the probability and amount of any such liabilities involve significant judgment regarding future events. The actual costs of resolving a claim may be substantially different from the amount of reserve the Company recorded. The Company records a receivable from its insurance carriers only when the resolution of any dispute has been reached and realization of the amounts equal to the potential claim for recovery is considered probable. Any recovery of an amount in excess of the related recorded contingent loss will be recognized only when all contingencies relating to recovery have been resolved. Revenue Recognition The Company sells its products primarily to individual customers and independent distributors (collectively referred to as “ customers ”). 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. 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. 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. Revenue is recognized based on the consideration the Company expects to receive from the sale. This consists of the gross selling price of the product, less any discounts, rebates or other amounts paid to customers, fees paid to Group Purchasing Organizations (“ GPOs ”), and returns (collectively, “ deductions ” or “ sales deductions ”). Gross selling price is a standard set by the Company for all customers unless a contract governing the sale provides for a specified price. Sales deductions are specified in individual contracts with customers. The Company estimates the total sales deductions which a specific customer will achieve over the relevant term and applies the reduction to sales as they are made throughout the period. Sales deductions owed to customers and other parties are accrued and recorded in accrued expenses on the consolidated balance sheets. F- 12 The Company acts as the principal in all of its customer arrangements and records revenue on a gross basis. Shipping is considered immaterial in the context of the overall customer arrangement, and damages or loss of goods in transit are rare. Therefore, shipping is not deemed a separately recognized performance obligation and the Company has elected to treat shipping costs as activities to fulfill the promise to transfer the product. The Company maintains a returns policy that allows its customers to return product that is damaged or non-conforming, ordered in error, or due to a recall. The estimate of the provision for returns is based upon historical experience with actual returns. The Company’s payment terms for customers are typically 30 to 60 days from receipt of title of the goods. Cost of Sales Cost of sales includes all costs directly related to bringing the Company’s products to their final selling destination. Amounts include direct and indirect costs to manufacture products including raw materials, personnel costs and direct overhead expenses necessary to convert collected tissues into finished goods, costs to acquire product from third-party manufacturers, product testing costs, quality assurance costs, facility costs associated with the Company’s manufacturing and warehouse facilities, including depreciation, freight charges, costs to operate equipment and other shipping and handling costs for products shipped to customers. The Company obtains raw material in the form of human placenta donations from participating mothers who give birth via scheduled Caesarean section. Research and Development Costs 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. Advertising expense Advertising expense consists primarily of print media promotional materials. Advertising costs are expensed as incurred. Advertising expense for the year ended December 31, 2024, 2023, and 2022 was $ 0.6 million, $ 0.6 million, and $ 0.2 million respectively. Income Taxes 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. Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. The Company recognizes deferred tax assets to the extent that it believes these assets are more likely than not to be realized. The Company evaluates the realizability of its deferred tax assets quarterly. 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. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates the Company uses to manage the underlying business. 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. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the tax provision (benefit) in the period that includes the enactment date. The calculation of income tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations both for U.S. federal income tax purposes and across numerous state jurisdictions. Accounting Standards Codification (“ 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 F- 13 litigation processes, on the basis of the technical merits. 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 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. Accrued interest and penalties, if any, are included within the other liabilities line in the consolidated balance sheets and recorded as a component of income tax expense. Share-based Compensation The Company grants share-based awards to employees and members of the Company’s Board of Directors (the “ Board ”). Awards to employees and the Board are generally made annually. Grants are issued outside of the annual cadence for certain new hires, promotions, and other events. 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 Company has three types of awards to employees and directors: restricted stock units (“ RSUs ’), performance stock units (“ PSUs ”), and stock options. The amount of expense to be recognized is determined by the fair value of the award using inputs available as of the grant date. The basis of fair value for RSUs and PSUs is the closing stock price on the date of the grant. The fair value of stock options is determined based on an appropriate option pricing model using inputs available as of the grant date, generally using a Black-Scholes model. In each case, the fair value is adjusted for the presence of a market condition using an appropriate pricing model. For awards with service-based vesting conditions only, the Company recognizes the grant date fair value as share-based compensation expense on a straight-line basis through the vesting date of the last tranche of the award. 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 case, the Company recognizes share-based compensation expense to the extent that vesting is “probable”. The Company recognizes the cumulative effect of changes in the probability outcomes in the period in which the changes occur. The resolution of a market condition is not subsequently considered in expense recognition. Consequently, the Company could recognize expense for awards that do not ultimately vest. 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 historical Series B Convertible Preferred Stock (“ Series B Preferred Stock ”), which fully converted during 2023. 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 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 F- 14 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 even if the dilutive adjustments are antidilutive to that calculation. The Company used the if-converted method to calculate the dilutive effect of the Series B Preferred Stock. 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. 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 The respective carrying value of certain on-balance sheet financial instruments approximated their fair values due to the short-term nature and type of these instruments. These financial instruments include cash and cash equivalents, accounts receivable, notes receivable, and certain other financial assets and liabilities. The Company measures certain non-financial assets at fair value on a non-recurring basis. These non-recurring valuations include evaluating assets such as long-lived assets, and non-amortizing intangible assets for impairment, allocating value to assets in an acquired asset group, and accounting for business combinations. The Company uses the fair value measurement framework to value these assets and reports these fair values in the periods in which they are recorded or written down. Fair value financial instruments are recorded in accordance with the fair value measurement framework. The fair value measurement framework includes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair values in their broad levels. These levels from highest to lowest priority are as follows: • Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities; • Level 2: Quoted prices in active markets for similar assets or liabilities or observable prices that are based on inputs not quoted on active markets, but corroborated by market data. • Level 3: Unobservable inputs or valuation techniques that are used when little or no market data is available. The determination of fair value and the assessment of a measurement’s placement within the hierarchy require judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various valuation methodologies which incorporate unobservable inputs, management estimates, and assumptions. Management’s assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include: estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist it in determining fair value, as appropriate. Although the Company believes that the recorded fair value of its financial instruments is appropriate, these fair values may not be indicative of net realizable value or reflective of future fair values. Government Assistance The Company receives benefits from various government entities for various purposes from time to time. With respect to any benefits that are not dependent on income (which are subject to the policy described under Income Taxes , above), the Company F- 15 recognizes such benefits at the point in time in which all barriers to receive the assistance have been overcome in an amount equal to the expected benefit. Benefits are reflected in the consolidated statements of operations in the line item to which the associated benefit relates. Recently Adopted Accounting Pronouncements 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, 2024, the Company adopted this standard. Refer to Note 13, Segment Information, for further discussion. Recently Issued Accounting Pronouncements Not Yet Adopted 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.. In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40)” , which requires disclosure of specified information about certain costs and expenses. The amendments in ASU 2024-03 are intended to improve financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to the financial statements. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements. ASUs issued and not yet effective as of December 31, 2024, 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. 3. Accounts Receivable, Net Accounts receivable, net, consists of the following (in thousands): December 31, 2024 2023 Accounts receivable, gross $ 58,960 $ 57,015 Allowance for doubtful accounts ( 3,132 ) ( 3,144 ) Accounts receivable, net $ 55,828 $ 53,871 Activity related to the Company’s allowance for doubtful accounts during the year ended December 31, 2024 was as follows (in thousands): Allowance for Doubtful Accounts Balance at December 31, 2022 $ 3,783 Bad debt expense 1,449 Write-offs ( 2,088 ) Balance at December 31, 2023 $ 3,144 Bad debt expense 595 Write-offs ( 607 ) Balance at December 31, 2024 $ 3,132 F- 16 4. Inventory Inventory consists of the following (in thousands): December 31, 2024 2023 Raw materials $ 1,010 $ 825 Work in process 8,580 8,521 Finished goods 14,217 11,675 Inventory $ 23,807 $ 21,021 Consignment inventory, included as a component of finished goods in the table above, was $ 5.1 million and $ 4.0 million as of December 31, 2024 and 2023, respectively. 5. Property and Equipment, Net Property and equipment, net, consists of the following (in thousands): December 31, 2024 2023 Lab and clean room equipment $ 15,549 $ 13,954 Furniture and office equipment 1,951 1,989 Leasehold improvements 8,213 8,141 Construction in progress 686 1,791 Asset retirement cost 867 938 Finance lease assets — 189 Property and equipment, gross 27,266 27,002 Less: accumulated depreciation and amortization ( 21,322 ) ( 20,028 ) Property and equipment, net of accumulated depreciation and amortization $ 5,944 $ 6,974 Depreciation expense for each of the years ended December 31, 2024, 2023, and 2022 was recorded in certain captions of the consolidated statements of operations for those periods in the amounts shown in the table below (in thousands): Year Ended December 31, 2024 2023 2022 Cost of sales $ 1,408 $ 1,569 $ 1,816 Selling, general, and administrative expense 544 795 1,243 Research and development expense 327 301 286 Total $ 2,279 $ 2,665 $ 3,345 F- 17 6. Leases The Company has leases for corporate offices and manufacturing facilities. None of the Company’s leases require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Supplemental balance sheet information related to the Company’s leases, including the financial statement caption in which the amounts are presented, is as follows (amounts in thousands, except lease term and discount rate): Operating Leases Finance Leases December 31, December 31, 2024 2023 2023 Assets Right of use asset $ 5,606 $ 2,132 $ — Property and equipment, net — — 51 Total assets $ 5,606 $ 2,132 $ 51 Liabilities Other current liabilities $ 1,307 $ 1,495 $ 53 Other liabilities 4,705 893 5 Total liabilities $ 6,012 $ 2,388 $ 58 Weighted-average remaining lease term (years) 4.3 2.0 1.1 Weighted-average discount rate 6.9 % 8.3 % 8.3 % The Company had no finance lease obligations or associated right of use assets outstanding as of December 31, 2024. Information related to lease costs are as follows (amounts in thousands): Year Ended December 31, 2024 2023 2022 Operating lease cost $ 1,478 $ 1,532 $ 1,620 Amortization of finance lease ROU assets 51 47 47 Interest expense on finance lease liabilities 2 7 10 Maturities of lease liabilities are as follows (amounts in thousands): Year Ending December 31, Operating Leases 2025 $ 1,671 2026 1,725 2027 1,355 2028 1,346 2029 794 Thereafter — Total lease payments 6,891 Less: imputed interest ( 879 ) Lease liability $ 6,012 Asset Retirement Obligations Certain lease agreements require the Company to return designated areas of leased space to its original condition upon termination of the lease agreement, for which the Company records an asset retirement obligation and a corresponding capital asset in an amount equal to the estimated fair value of the obligation. In subsequent periods, the asset retirement obligation is F- 18 accreted for the change in its present value and the capitalized asset is depreciated, both over the term of the associated lease agreement. Asset retirement obligations of $ 1.2 million are included in other liabilities in the consolidated balance sheets as of both December 31, 2024 and 2023. 7. Goodwill and Intangible Assets, Net Goodwill In concert with the disbanding of its Regenerative Medicine business unit during the fourth quarter of 2023, management concluded that the Company operated as a single operating segment beginning at that time. This operating segment reflected its sole reporting unit for goodwill impairment testing purposes. For the annual impairment test performed on October 1, 2024, 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 and the Company did not proceed to the quantitative assessment. There was no impairment of goodwill in 2023 or 2022. The following table indicates the changes in the carrying amount of goodwill for 2024 and 2023 (in thousands): Goodwill Balance as of January 1, 2023 $ 19,441 Activity — Balance as of December 31, 2023 $ 19,441 Activity — Balance as of December 31, 2024 $ 19,441 Intangible Assets, Net Intangible assets, net, are summarized as follows (in thousands): December 31, 2024 December 31, 2023 Gross Carrying Amount Accumulated amortization Net Carrying Amount Gross Carrying Amount Accumulated amortization Net Carrying Amount Amortized intangible assets Patents and know-how $ 10,320 $ ( 8,488 ) $ 1,832 $ 10,039 $ ( 7,818 ) $ 2,221 Customer and supplier relationships 7,659 ( 1,147 ) 6,512 — — — Tradenames and trademarks 2,937 ( 1,850 ) 1,087 — — — Licenses 1,000 ( 104 ) 896 1,000 ( 54 ) 946 Total amortized intangible assets $ 21,916 $ ( 11,589 ) $ 10,327 $ 11,039 $ ( 7,872 ) $ 3,167 Unamortized intangible assets Tradenames and trademarks $ 1,008 $ 1,008 $ 1,008 $ 1,008 Patents in process 291 291 1,082 1,082 Total intangible assets $ 23,215 $ 11,626 $ 13,129 $ 5,257 Amortization expense and impairment expense for the years ended December 31, 2024, 2023, and 2022, is summarized in the table below (amounts in thousands): F- 19 Year ended December 31, 2024 2023 2022 Amortization of intangible assets Cost of sales $ 2,997 $ — $ — Operating expense 765 762 701 Total amortization of intangible assets $ 3,762 $ 762 $ 701 Impairment of intangible assets $ 446 $ — $ — The impairment of intangible assets in 2024 related to patents which were abandoned. Expected future amortization of intangible assets as of December 31, 2024, is as follows (in thousands): Estimated Amortization Year Ending December 31, Expense 2025 $ 3,008 2026 1,766 2027 1,765 2028 1,763 2029 607 Thereafter 1,418 Total amortization expense $ 10,327 8. Accrued Expenses Accrued expenses consist of the following (in thousands): December 31, 2024 2023 External commissions $ 3,843 $ 4,136 Accrued GPO Fees 411 1,338 Estimated returns 1,990 1,096 Legal costs 459 834 Accrued rebates 1,223 745 Accrued inventory receipts 871 174 Other 215 1,038 Total $ 9,012 $ 9,361 9. Long Term Debt Citizens Credit Agreement F- 20 On January 19, 2024 (the “ Closing Date ”), 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 Secured Overnight Financing Rates (“ 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, plus a fallback provision of 0.1 %. 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), 1.88 % (for year three and four), and 2.5 % (for year five) based on the aggregate principal amount outstanding under the Term Loan Facility on the Closing Date, 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. As of December 31, 2024, the Company is in compliance with all financial covenants under the Citizens Credit Agreement. Original issue discount and deferred financing costs incurred as part of the Credit Facilities were allocated between the Term Loan Facility and the Revolving Credit Facility on the basis of the maximum potential principal outstanding permitted under the Citizens Credit Agreement. The allocation of the deferred financing costs and original issue discount between the Term Loan Facility and the Revolving Credit Facility were as follows (in thousands): January 19, 2024 Term Loan Facility Revolving Credit Facility Total Long term debt, net Other assets Original issue discount $ 224 $ 839 $ 1,063 Deferred financing costs 54 202 256 On the Closing Date, 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 Term Loan, as defined below, 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 ”) . The Company recorded a loss on extinguishment of debt of $ 1.4 million. This amount is reflected as a part of interest expense, net on the consolidated statement of operations for the year ended December 31, 2024. The composition of the loss on extinguishment of debt was as follows (amounts in thousands): January 19, 2024 Unamortized deferred financing costs $ 781 Unamortized original issue discount 120 Prepayment premium 500 Loss on extinguishment of debt $ 1,401 F- 21 During February 2024, the Company repaid the initial $ 30.0 million drawing under the Revolving Credit Facility and had no outstanding borrowings under this facility as of December 31, 2024. Deferred financing costs and original issue discount allocated to the Revolving Credit Facility are amortized straight-line through the expiration of the commitment term. The Revolving Credit Facility is currently subject to a commitment fee of 0.25 % per annum of the amount undrawn, which is recognized as interest expense. Hayfin Loan Agreement In June 2020, the Company entered into a Loan Agreement with, among others, Hayfin Services, LLP, and affiliate of Hayfin Capital Management, LLP (as amended from time to time, the “ Hayfin Loan Agreement ”), under which Hayfin provided the Company with a senior secured term loan of $ 50.0 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. 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, 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 $ 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 above) during that period, therefore representing the current obligation that was not refinanced on a long-term basis. This amount is classified as current portion of long term debt in the Company’s consolidated balance sheets. As noted above, the Hayfin Loan Agreement was terminated as a result of the Debt Refinancing Transactions. There were no continuing obligations as part of the Hayfin Loan Agreement as of December 31, 2024. The balances of the Term Loan Facility as of December 31, 2024 and the Hayfin Term Loan as of December 31, 2023 were as follows (amounts in thousands): December 31, 2024 December 31, 2023 Current portion of long term debt Long term debt, net Current portion of long term debt Long term debt, net Outstanding principal $ 1,000 $ 18,000 $ 1,000 $ 49,000 Deferred financing costs — ( 33 ) — ( 781 ) Original issue discount — ( 137 ) — ( 120 ) Total $ 1,000 $ 17,830 $ 1,000 $ 48,099 Interest expense related to the Term Loan Facility and 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, 2024 2023 2022 Stated interest $ 1,797 $ 6,078 $ 4,559 Amortization of deferred financing costs 47 438 405 Accretion of original issue discount 91 67 62 Interest expense $ 1,935 $ 6,583 $ 5,026 F- 22 Interest expense related to the Revolving Credit Facility included in interest expense, net in the consolidated statements of operations, was as follows (amounts in thousands): Year Ended December 31, 2024 Commitment fee $ 178 Amortization of deferred financing costs 63 Accretion of original issue discount 168 Interest expense $ 409 Scheduled principal payments due on the Term Loan Facility, by year, as of December 31, 2024 through maturity are as follows (in thousands): Year ending December 31, Principal 2025 $ 1,000 2026 1,500 2027 1,500 2028 2,000 2029 13,000 Thereafter — Long term debt $ 19,000 As of December 31, 2024, the fair value of the Term Loan Facility was $ 18.7 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 Facility were discounted to December 31, 2024 using this discount rate to derive the fair value. 10. Basic and Diluted Net Loss Per Common Share Net loss per common share is calculated using two methods: basic and diluted. Basic Net Loss Per Common Share The following table provides a reconciliation of net loss to net loss available to common shareholders and calculation of basic net loss per common share for each of the years ended December 31, 2024, 2023, and 2022 (amounts in thousands, except share and per-share amounts): F- 23 Year ended December 31, 2024 2023 2022 Net income (loss) from continuing operations $ 41,998 $ 67,439 $ ( 19,953 ) Income (loss) from discontinued operations, net of tax 421 ( 9,211 ) ( 10,244 ) Net income (loss) 42,419 58,228 ( 30,197 ) Adjustments to reconcile to net loss available to common stockholders: Accumulated dividend on previously converted Series B Preferred Stock — 6,753 6,580 Preferred share repurchase in excess of book value — 4,890 — Total adjustments — 11,643 6,580 Net income (loss) available to common stockholders from continuing operations $ 41,998 $ 55,796 $ ( 26,533 ) Weighted average common shares outstanding 146,979,354 116,495,810 112,909,266 Basic net income (loss) per common share: Continuing operations $ 0.29 $ 0.48 $ ( 0.24 ) Discontinued operations 0.00 ( 0.08 ) ( 0.09 ) Basic net income (loss) per common share $ 0.29 $ 0.40 $ ( 0.33 ) Diluted Net Loss Per Common Share The following table sets forth the computation of diluted net loss per common share (in thousands, except share and per-share amounts): F- 24 Year ended December 31, 2024 2023 2022 Net income (loss) available to common stockholders from continuing operations $ 41,998 $ 55,796 $ ( 26,533 ) Adjustments: Dividends on previously converted Series B Preferred Stock — 6,466 6,580 Preferred share repurchase in excess of book value — 5,177 — Less: antidilutive adjustments — ( 5,177 ) ( 6,580 ) Total adjustments — 6,466 — Numerator Net income (loss) available to common stockholders from continuing operations 41,998 62,262 ( 26,533 ) Income (loss) from discontinued operations, net of tax 421 ( 9,211 ) ( 10,244 ) Weighted average common shares outstanding 146,979,354 116,495,810 112,909,266 Adjustments: Potential common shares (a) Previously converted Series B Preferred Stock — 27,457,905 — Restricted stock unit awards 1,447,217 1,452,153 — Outstanding stock options 473,015 396,779 — Performance stock unit awards 149,611 137,425 — Restricted stock awards — 22,136 — Employee stock purchase plan — 254 — Total adjustments 2,069,843 29,466,652 — Weighted average common shares outstanding adjusted for potential common shares 149,049,197 145,962,462 112,909,266 Diluted net income (loss) per common share: Continuing operations $ 0.28 $ 0.43 $ ( 0.24 ) Discontinued operations 0.00 ( 0.06 ) ( 0.09 ) Diluted net income (loss) per common share $ 0.28 $ 0.37 $ ( 0.33 ) (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: Year ended December 31, 2024 2023 2022 Series B Preferred Stock — 1,219,348 27,850,916 Restricted stock unit awards — — 546,883 Restricted stock awards — — 217,971 Outstanding stock options — — 65,720 Performance stock unit awards — — 5,251 Employee stock purchase plan — — 18,852 Potential common shares — 1,219,348 28,705,593 F- 25 11. Equity Series B Preferred Stock Repurchase 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. Mandatory Conversion In December 2023, the remaining 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 to the holders of the Series B Preferred Stock. The conversion of the shares ended the dividend accrual associated with the Series B Preferred Stock The below table illustrates changes in the Company’s balance of the Series B Preferred Stock for the year ended December 31, 2023. (in thousands, except per share amounts): Series B Preferred Stock Shares Amount Balance at December 31, 2022 100,000 $ 92,494 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 — $ — There was no activity related to the Series B Preferred Stock during the year ended December 31, 2022. As a result of their conversion in December 2023, there were no shares of Series B Preferred Stock outstanding at any point during the year ended December 31, 2024. 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 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 ”). During the years ended December 31, 2024, 2023, and 2022 the Company used only the 2016 Plan to make grants. The 2016 Plan permits the grant of equity awards to the Company’s employees, directors, consultants and advisors for up to 13,400,000 share s o f the Company’s common stock plus (i) the number of shares of the Company’s common stock that remain available for issuance under the Prior Incentive Plan, and (ii) the number of shares that are represented by outstanding awards that later become available because of the expiration or forfeiture of the award without the issuance of the underlying shares. Awards granted under the 2016 Plan are subject to a vesting schedule as set forth in each individual agreement. F- 26 A summary of share-based compensation expense recognized for each of the years ended December 31, 2024, 2023, and 2022 is as follows (in thousands): Year Ended December 31, 2024 2023 2022 Cost of sales $ 1,546 $ 1,533 $ 1,213 Selling, general and administrative 14,646 14,776 9,578 Research and development 741 650 537 Total share-based compensation 16,933 16,959 11,328 Income tax benefit, before consideration of valuation allowance ( 4,233 ) ( 4,240 ) ( 2,832 ) Total share-based compensation, net of tax benefit $ 12,700 $ 12,719 $ 8,496 Stock Options The Company grants stock options to certain of its employees. Each stock option granted reflects the right to purchase one share of stock for a stipulated price. Except for the CEO Performance Option (as defined below), all of the Company’s stock option grants outstanding as of December 31, 2024 vest exclusively based on continued service to the Company through each relevant vesting date. All stock options outstanding vest in four equal annual tranches. A summary of stock option activity for the year ended December 31, 2024 is presented below: Number of Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding at January 1, 2024 4,042,520 $ 4.06 Granted 344,026 8.63 Exercised ( 207,686 ) 6.79 Unvested options forfeited — — Vested options expired ( 123,334 ) 7.17 Outstanding at December 31, 2024 4,055,526 4.21 5.16 21,952 Exercisable at December 31, 2024 341,000 $ 4.21 4.87 $ 1,851 With the exception of the CEO Performance Option (as defined and explained below), all options granted during the years ended December 31, 2024 and 2023 were valued using a Black-Scholes model. The below table reflects the material inputs used to value the options granted during those periods (exclusive of the CEO Performance Option). Year ended December 31, 2024 2023 Stock price on grant date $ 8.63 $ 6.44 Exercise price $ 8.63 $ 6.44 Expected term (years) 4.75 4.75 Risk-free interest rate 4.2 % 4.3 % Expected volatility (annualized) 66 % 77 % Dividend yield — % — % Weighted average grant date fair value $ 4.93 $ 4.10 There were no options granted during the year ended December 31, 2022. The intrinsic values of the options exercised during the years ended December 31, 2024, 2023, and 2022 were $ 0.2 million, $ 0.2 million, and $ 0.6 million, respectively. Cash received from option exercise under all share-based payment arrangements for the years ended December 31, 2024, 2023, and 2022 was $ 1.4 million, $ 1.0 million, and $ 0.7 million, respectively. The actual tax benefit for the tax deductions from option exercise of the share-based payment arrangements totaled $ 0.1 million, F- 27 $ 0.2 million, and $ 0.2 million, respectively, for the years ended December 31, 2024, 2023, and 2022. The Company has a policy of using its available repurchased treasury stock, if any, to satisfy option exercises prior to the issuance of new shares of common stock. There was $ 3.4 million unrecognized compensation expense related to unvested stock options at December 31, 2024, which is expected to be recognized over 2.33 years. Restricted Stock Units The Company grants RSUs to certain employees and to its Board of Directors. RSUs reflect contracts reflecting the right to receive on share of Common Stock on a specified date, provided the recipient continues to provide service to the Company through the relevant vesting date. RSUs generally vest over a one - to three-year period. Prior to 2024, the Company’s RSUs granted to its employees granted in three equal tranches on the first three anniversary dates of the date of grant. Beginning in 2024, RSUs granted to employees generally vest in a single tranche on the third anniversary date of the date of grant. Awards granted to the Company’s Board of Directors vest in a single tranche on the first anniversary date of the date of grant. Historically, the Company also granted Restricted Stock Awards (“ RSAs ”) to employees. RSAs conferred one share of common stock to the recipient which was returnable if the associated vesting conditions were not satisfied. The RSAs had similar vesting conditions to RSUs. The Company did not grant any RSAs during the year ended December 31, 2024, nor does it have any unvested RSAs outstanding as of December 31, 2024. A summary of RSU activity for the year ended December 31, 2024 is presented below: Number of Shares Weighted-Average Grant Date Fair Value Unvested at January 1, 2024 3,908,739 $ 5.38 Granted 2,046,126 8.11 Vested ( 1,803,810 ) 6.06 Forfeited ( 639,232 ) 6.29 Unvested at December 31, 2024 3,511,823 $ 6.46 The total fair value of RSUs and RSAs vested during the years ended December 31, 2024, 2023 and 2022, was $ 10.9 million $ 10.3 million, and $ 10.9 million, respectively. As of December 31, 2024, there was $ 15.0 million of stock-based compensation expense related to RSUs which is expected to be recognized over 1.90 years. Performance Stock Units The Company grants PSUs to certain employees, primarily its Executive Leadership Team. Like RSUs, PSUs reflect the right to receive one share of Common Stock based on the achievement of specified performance conditions. As of December 31, 2024, all performance conditions associated with PSUs are associated with the achievement of specified net sales targets. In each case, the PSU agreements allow for vesting in excess of the number of shares granted. In all cases except for the CEO Performance PSUs (as defined and explained below), achievement of performance conditions alone can expand the award by up to 150 %. Certain of these PSUs are subject to Total Shareholder Return provisions which can limit or expand the number of shares conferred upon the recipient. PSUs also require the recipient to provide continuous service through a specified date or event. F- 28 A summary of PSU activity for the year ended December 31, 2024 is presented below: PSU Number of Shares Weighted-Average Grant Date Fair Value Unvested at January 1, 2024 3,727,272 $ 3.84 Granted 450,532 9.41 Vested — — Forfeited — — Unvested at December 31, 2024 4,177,804 $ 4.44 No PSUs vested during the years ended December 31, 2024, 2023 and 2022. As of December 31, 2024, there was $ 6.7 million of unrecognized stock-based compensation expense related to unvested PSUs, which is expected to be recognized over 2.08 years. This amount reflects the level of vesting determined to be “probable” for all such awards. Any subsequent adjustments to expense would be reflected as a cumulative catch-up adjustment in the period of the re-evaluation. If all unvested PSUs were determined to be probable of vesting to their maximum extent, it would result in a cumulative catch-up adjustment of $ 7.8 million as of December 31, 2024. Conversely, the determination that none of the unvested PSUs are probable of vesting would result in a benefit of $ 5.9 million. 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 $ 2.5 million of expense related to the CEO Performance PSUs during year ended December 31, 2024. 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. Mr. 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. F- 29 The Company estimated the fair value of the awards using a Monte Carlo simulation using the following assumptions: Assumption Stock price on grant date $ 3.70 Exercise price $ 3.70 Risk-free interest rate 3.6 % Expected volatility (annualized) 75 % 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 $ 2.4 million of expense related to the CEO Performance Option during year ended December 31, 2024. Employee Stock Purchase Plan The Company’s 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. The ESPP provides eligible employees an opportunity to acquire the Company’s common stock on a semi-annual basis at a purchase price of 85 % of the lower of the closing price per share of the Company’s common stock on the first day and the last day of each six-month purchase period (the “ Purchase Period ”). The aggregate number of shares which may be issued and sold under the ESPP is 3 million shares of common stock. For the years ended December 31, 2024, 2023 and 2022, the Company recorded $ 0.6 million, $ 0.5 million, and $ 0.2 million, respectively, in stock-based compensation expense related to the ESPP. As of December 31, 2024 and 2023, the Company had cumulative payroll deferrals under the ESPP for future share purchases of $ 0.6 million and $ 0.7 million, respectively. This amount is included in accrued compensation in the consolidated balance sheet. Unrecognized stock compensation for the period is less than $ 0.1 million to be recognized over a weighted average period of 0.08 years. Share Withholding for Employee Taxes 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, 2024, 2023, and 2022 were 354,263 , 0 , and 249,442 , respectively, for an aggregate purchase price of $ 2.6 million, $ 0 , and $ 1.2 million, respectively. 12. Revenue Net Sales By Product Category MIMEDX has two product categories: (1) Wound, which reflects products typically used in Advanced Wound Care settings, including the treatment of chronic, non-healing wounds, and (2) Surgical, which reflects products principally used in surgical settings, including the closure of acute wounds or the protect and reinforce tissues and/or regions of interest. The Company manages its product portfolio and pipeline based upon opportunities in each of these settings. F- 30 Below is a summary of net sales by product line (in thousands): Year Ended December 31, 2024 2023 2022 Wound $ 231,004 $ 205,660 $ 175,970 Surgical 117,875 115,817 91,871 Total $ 348,879 $ 321,477 $ 267,841 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, 2024, 2023, or 2022. 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): Year Ended December 31, 2024 2023 2022 Hospital $ 187,440 $ 187,000 $ 163,206 Private Office 112,388 95,789 77,158 Other 49,051 38,688 27,477 Total $ 348,879 $ 321,477 $ 267,841 Reimbursement Changes On April 13, 2025, new Local Coverage Determinations (“ LCDs ”) are currently scheduled to go into effect which will modify the reimbursement of skin substitutes in physician office settings. Among other changes, many allografts that have been covered will no longer be reimbursed for Diabetic Foot Ulcers and/or Venous Leg Ulcers. While EPIFIX and EPICORD continue to be covered under the new LCD, certain of our other products are not currently included. In the past LCDs have been delayed or terminated. The Company cannot be certain they will go into effect in April 2025 . Sales Returns Allowance Activity related to the Company’s sales returns allowance during the year ended December 31, 2024 was as follows (in thousands): Sales Returns Allowance Balance at December 31, 2022 $ 659 Additions 3,899 Deductions and write-offs ( 3,462 ) Balance at December 31, 2023 1,096 Additions 4,314 Deductions and write-offs ( 3,420 ) Balance at December 31, 2024 $ 1,990 F- 31 13. Segment Information The Company determines its operating segment based on how the Chief Operating Decision Maker (“ CODM ”) reviews the business and makes resource allocation decisions. The Company concluded that Joseph Capper, the Company’s Chief Executive Officer, is the CODM. The Company has a single operating segment, which has not been aggregated with other operating segments. The Company defines its segment on the basis in which internal reported financial information is regularly reviewed by the CODM to analyze financial performance and make capital allocation decisions. The CODM uses several measures of profit or loss to assess Company performance and allocate resources. Of these measures, net income (loss) is the measure that most aligns to GAAP. Other measures used by the CODM includes adjusted earnings before interest, taxes, depreciation and amortization. The CODM assesses actual results against budgets and forecasts, and uses this information to inform various strategic investments into the Company’s operations, including headcount and compensation. Each financial statement caption included on the consolidated statements of operations reflects a significant segment expense evaluated by the CODM. In addition to this, the CODM also evaluates selling and marketing expense and general and administrative expense, both of which are components of selling, general, and administrative expense on the consolidated statements of operations. Selling and marketing expense reflects costs associated with the sale of the Company’s products, as well as the costs of functions that support these efforts. This includes salaries and commissions associated with the Company’s direct sales force, commissions paid to sales agents, and expenses incurred by other sales support functions. General and administrative expense reflects expenses incurred by the Company’s operating functions which do not directly advance the Company’s sales efforts, such as the Company’s finance, legal and human resource functions, among other departments. The below table presents selling and marketing and general administrative expense for each of the years ended December 31, 2024, 2023, and 2022. Year Ended December 31, 2024 2023 2022 Selling and marketing $ 175,562 $ 161,833 $ 151,227 General and administrative 49,525 49,291 57,446 Selling, general and administrative $ 225,087 $ 211,124 $ 208,673 Below is a breakout of interest expense and interest income for each of the years ended December 31, 2024, 2023, and 2022. Year Ended December 31, 2024 2023 2022 Interest income $ 2,932 $ 118 $ 32 Interest expense ( 3,938 ) ( 6,575 ) ( 5,048 ) Interest expense, net $ ( 1,006 ) $ ( 6,457 ) $ ( 5,016 ) To see depreciation expense, amortization expense, income tax expense and significant noncash items for this segment please refer to Note 5, Property and Equipment, Net , Note 7, Goodwill and Intangible Assets, Net , Note 16, Income Taxes and Note 17, Supplemental Disclosure of Cash Flow and Non-Cash Investing and Financing Activities , respectively. The CODM is not provided and does not review segment assets at a different asset level or category than the presentation on the consolidated balance sheet. 14. Acquisitions During 2024, the Company entered into various Asset Purchase Agreements (“ APAs ”) and associated Manufacturing and Supply Agreements (“ MSAs ”) in an effort to inorganically expand its product offering. These transactions were accounted for as acquisitions of assets and the Company did not assume any liabilities associated with these activities. F- 32 Total consideration for these transactions during 2024 was $ 7.9 million. Additional payments may be required in future periods in connection with these transactions. TELA and Regenity Agreements On March 15, 2024, the Company entered into an Asset Purchase Agreement (the “ TELA APA ”) with TELA Bio, Inc. (“ TELA ”) to obtain exclusive rights to sell and market a 510(k)-cleared collagen particulate xenograft product in the United States. TELA held these rights pursuant to a Manufacturing and Supply Agreement (the “ TELA-Regenity Supply Agreement ”) between TELA and Regenity Biosciences, Inc. (“ Regenity ”), which retains all intellectual property rights and regulatory clearances related to the product. Pursuant to the TELA APA, the Company paid $ 5.0 million of initial consideration to TELA; additionally, the Company paid $ 0.4 million to acquire TELA’s remaining product inventory, and will be required to make additional payments (the “ Profit Share Payments ”) of between a minimum of $ 3.0 million and a maximum of $ 7.0 million based on MIMEDX’s net sales of the product over the two years following its commercialization of the product, which occurred during the second quarter of 2024. In connection with the execution of the TELA APA, the Company was able to renegotiate the terms of the TELA-Regenity Supply Agreement, ultimately replacing it with a new Manufacturing and Supply Agreement (the “ Supply Agreement ”) with Regenity. The Supply Agreement maintains MIMEDX’s exclusive right to sell and market the product in the United States. The transaction was accounted for as an acquisition of assets, as substantially all the fair value of the acquired assets was concentrated in the acquired exclusive distribution rights. The cost to acquire the assets on the transaction date was $ 8.1 million, reflecting the $ 5.0 million of initial consideration, $ 0.4 million to acquire inventory, and $ 2.7 million, which represented the fair value of the minimum amount of the Profit Share Payments. This amount reflected the anticipated timing of such Profit Share Payments, discounted to present value at a discount rate approximating the Company’s borrowing rate plus a risk premium, all of which reflect Level 3 inputs as of the acquisition date. These costs were allocated amongst the assets acquired. The Company assigned $ 7.6 million to the distribution rights acquired and $ 0.5 million to inventory. The amount ascribed to the distribution rights will be amortized over five years , generally reflective of the period of time over which the distribution rights are anticipated to contribute to cash flow generation. Any Profit Share Payments exceeding the $ 3.0 million minimum will be capitalized in the period incurred as a part of the acquired assets and amortized over the remaining life of such assets. 15. Discontinued Operations Disbanding of Regenerative Medicine Business Unit In the second quarter of 2023, the Company announced the disbanding of its Regenerative Medicine reportable segment and the suspension of its Knee Osteoarthritis clinical trial program. The announcement reflected the abandonment of the Company’s efforts to pursue a Biological License Application for its micronized dehydrated amnion chorion membrane product and a major definitive strategic shift in the Company’s focus toward its continuing commercial pipeline as its primary source of value creation. The Company completed the regulatory obligations associated with the clinical trial during the fourth quarter of 2023, at which time material run-off operations had ceased and Regenerative Medicine met the criteria for presentation as a discontinued operation. Financial Statement Impact of Discontinued Operations The income and expenses of the discontinued operation have been classified as income (loss) from discontinued operations in the consolidated statements of operations as of December 31, 2024, 2023, and 2022 as follows (in thousands): Year Ended December 31, 2024 2023 2022 Selling, general and administrative expense $ ( 221 ) $ — $ 116 Research and development expense ( 200 ) 8,017 10,128 Restructuring expense — 4,168 — Income tax provision benefit — ( 2,974 ) — Income (loss) from discontinued operations $ 421 $ ( 9,211 ) $ ( 10,244 ) F- 33 The assets and liabilities of the discontinued operations have been classified as discontinued operations in the consolidated balance sheet as of December 31, 2024 and 2023 as follows (in thousands): December 31, 2024 2023 Current liabilities: Accrued compensation $ — $ 311 Accrued expenses — 1,041 Current liabilities of discontinued operations $ — $ 1,352 Goodwill 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. Impairment of goodwill of $ 0.5 million was recorded as part of loss from discontinued operations for the year ended December 31, 2023. 16. Income Taxes 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. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands): December 31, 2024 2023 Deferred Tax Assets: Capitalized research and development expenditures $ 9,970 $ 10,843 Research and development and other tax credits 6,752 8,117 Share-based compensation 3,933 3,266 Net operating loss 3,713 13,712 Accrued expenses 3,038 3,660 Lease liabilities 1,456 600 Allowance for doubtful accounts 778 778 Intangible assets 580 — Sales return and allowances 494 270 Property and equipment 295 84 Interest limitation carry forward — 1,873 Other 155 437 Deferred Tax Liabilities: Prepaid expenses ( 949 ) ( 1,045 ) Right of use asset ( 1,392 ) ( 571 ) Interest limitation carry forward ( 12 ) — Intangible assets — ( 337 ) Net Deferred Tax Assets 28,811 41,687 Less: Valuation allowance ( 505 ) ( 910 ) Net Deferred Tax Assets after Valuation Allowance $ 28,306 $ 40,777 F- 34 The reconciliation of the federal statutory income tax rate of 21 % to the effective rate is as follows: Year ended December 31, 2024 2023 2022 Federal statutory rate 21.0 % 21.0 % 21.0 % State taxes, net of federal benefit 4.1 % ( 21.8 ) % ( 0.8 ) % Nondeductible compensation 1.1 % 1.8 % ( 3.2 ) % Deferred tax adjustments 0.9 % 1.3 % ( 4.4 ) % Meals and entertainment 0.6 % 1.2 % ( 0.2 ) % Uncertain tax positions — % 0.4 % ( 0.5 ) % Valuation allowance — % ( 123.5 ) % ( 12.5 ) % Tax credits ( 0.7 ) % ( 3.2 ) % 4.9 % Share-based compensation ( 1.0 ) % 2.8 % ( 6.1 ) % Other 0.7 % ( 0.2 ) % 0.6 % Effective tax rate 26.7 % ( 120.2 ) % ( 1.0 ) % The effective tax rate for the year ended December 31, 2023 was significantly impacted by the reversal of a valuation allowance. In the period, the Company noted that it was no longer in a cumulative three-year loss on a continuing operations basis, after excluding the effects of permanent book-tax differences. The absence of such negative evidence, coupled with the Company’s expectation for future taxable income generation, led to a change in our assessment of the realizability of our deferred tax assets. Current and deferred income tax expense (benefit) is as follows (in thousands): Year Ended December 31, 2024 2023 2022 Current: Federal $ 703 $ 576 $ — State 2,121 422 206 Total current 2,824 998 206 Deferred: Federal 11,626 ( 31,633 ) — State 846 ( 9,144 ) — Total deferred 12,472 ( 40,777 ) — Income tax provision expense (benefit) $ 15,296 $ ( 39,779 ) $ 206 Certain items of income and expense are not reported in tax returns and financial statements in the same year. The tax effects of such temporary differences are reported as deferred income tax assets and liabilities. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefit that, based on available evidence, is not expected to be realized. The Company establishes a valuation allowance for deferred tax assets for which realization is not more likely than not. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. A valuation allowance of $ 0.5 million and $ 0.9 million was recorded against the deferred tax asset balance as of December 31, 2024 and 2023, respectively. In the event that the weight of the evidence changes in the future, any increase or decrease in the valuation allowance would result in a income tax expense or benefit, respectively. At December 31, 2024 and 2023, the Company had income tax net operating loss (“ NOL ”) carryforwards for federal and state purposes of $ 0.7 million and $ 64.2 million and $ 43.5 million and $ 85.7 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. If not utilized, the federal and state tax NOL carryforwards will expire between 2028 and 2038. As of December 31, 2024, the Company has recorded a deferred tax asset for both federal and state NOL carryforwards of approximately F- 35 $ 0.1 million and $ 3.6 million, respectively. As of December 31, 2023, the Company has recorded a deferred tax asset for federal and state NOL carryforwards of $ 9.1 million and $ 4.6 million, respectively. Unrecognized Tax Benefits The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands) included in the consolidated balance sheets: 2024 2023 2022 Unrecognized tax benefits - January 1 $ 807 $ 645 $ 469 Increases - tax positions in current period 53 124 98 Increases - tax positions in prior period — 38 78 Decreases in prior year positions ( 29 ) — — Unrecognized tax benefits - December 31 $ 831 $ 807 $ 645 Included in the balance of unrecognized tax benefits are tax benefits of $ 0.8 million and $ 0.8 million as of December 31, 2024 and 2023, respectively, that, if recognized, would affect the effective tax rate. Of these amounts, $ 0.2 million and $ 0.1 million, 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 no interest during the years ended December 31, 2024 or 2023. The Company is subject to taxation in the U.S. and various state jurisdictions. As of December 31, 2024, the Company’s tax returns for 2020 through 2023 generally remain open for exam by taxing jurisdictions. Additional prior years may be open to the extent attributes are being carried forward to an open tax year. 17. 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): Year Ended December 31, 2024 2023 2022 Cash paid for interest $ 2,698 $ 6,034 $ 4,569 Income taxes paid (refunded) 3,247 ( 548 ) 181 Cash paid for operating leases 1,618 1,635 1,567 Non-cash activities: Conversion of Series B Preferred Stock — 87,870 — Fair value of shares received in settlement of litigation 9,300 — — Minimum Profit Share Payments pursuant to TELA APA 2,731 — — Issuance of shares pursuant to employee stock purchase plan 1,582 1,367 — Purchases of equipment included in accounts payable — 228 417 Financing costs incurred but not paid for Citizens Financing Transaction — 138 — Legal fees associated with the Repurchase of Series B Preferred Stock — 45 — Lease right of use asset and liability 5,333 — ( 37 ) Contingent consideration payable 441 — — 18. Commitments and Contingencies Contractual Commitments The Company has commitments for meeting spaces, generally for hotel and conference spaces for company functions. These commitments generally contain renewal options. F- 36 The estimated meeting space commitments are as follows (in thousands): Year ending December 31, Meeting Space Commitments 2025 $ 237 2026 108 Total $ 345 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). 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 legal matters present loss contingencies that are both probable and estimable. The Company's financial statements at December 31, 2024 reflect the Company's current best estimate of probable losses associated with pending matters, including costs to comply with various settlement agreements, where applicable. The Company had zero accrued as of December 31, 2024 and December 31, 2023, respectively, related to expected settlement costs related to legal matters. The actual costs of resolving pending litigation matters may be in excess of the amounts accrued. The Company paid $ 0.6 million, $ 0.2 million, and $ 0.7 million toward the resolution of legal matters involving the Company during the years ended December 31, 2024, 2023, and 2022, respectively. In addition, insurance providers paid $ 0.6 million on the Company’s behalf to settle legal matters for the year ended December 31, 2022. During the second quarter 2024, the Company received 1.2 million shares of its own common stock in the settlement of certain legal matters. The Company accounted for the repayment of shares as a loss recovery, as the repayment related to the recoupment of legal fees previously incurred, but not in excess of the amount originally recorded. The Company recorded $ 9.3 million, reflecting the fair value of the returned shares on the date of the prevailing agreement, as a reduction to investigation, restatement and related expense on the consolidated statements of operations, where the legal fees to which this recovery originally related were recorded as they were incurred, for the year ended December 31, 2024. The Company is a party to a variety of 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. AXIOFILL The Company received a Warning Letter on December 21, 2023, relating to the inspections and classification of AXIOFILL. The Company received a determination letter in March 2024 reaffirming the FDA’s position that AXIOFILL does not meet the regulatory classification requirements of a Human Cell, Tissue or Cellular or Tissue-based Product under Section 361 of the Public Health Service Act. The Company strongly disagrees with this determination. On March 25, 2024, MIMEDX filed suit in the U.S. District Court for the Northern District of Georgia against the FDA, the U.S. Department of Health and Human Services, Xavier Becerra, in his official capacity as Secretary of Health and Human Services, and Robert Califf, M.D. in his official capacity as Commissioner of Food and Drugs at FDA alleging violations of the Administrative Procedure Act and asking the Court to vacate FDA’s designation, declare FDA’s designation as arbitrary, capricious, an abuse of discretion, and contrary to law, and declare that AXIOFILL meets the criteria to be regulated under Section 361 of the Public Health Services Act. The parties have each filed motions for summary judgment in the case, which have been fully briefed. F- 37 19. 401(k) Plan 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 $ 23,000 per year (annual limit for 2024). Employees age 50 or over in 2024 could make additional pre-tax contributions of up to $ 7,500 . In 2024, 2023 and 2022, the Company matched 50 % of employee contributions up to 8 % of the employee’s eligible compensation. The matching contribution for the years ended December 31, 2024, 2023, and 2022 was $ 2.6 million, $ 2.7 million, and $ 3.3 million, respectively. 20. Government Assistance Employee Retention Credit 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. The Company reflected the ERC as a reduction to the respective captions on the consolidated statements of operations associated with the employees to which the payroll tax benefit related. The Company has recorded $ 1.0 million as part of other current assets in the consolidated balance sheets as of December 31, 2024 and 2023, reflecting the amount of ERC outstanding as of those dates. F- 38 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.