Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

MIMEDX is a pioneer and leader in placental biologics focused on addressing the needs of patients with acute and chronic non-healing wounds. We are also advancing a promising late-stage biologics pipeline targeted at decreasing pain and improving function for patients with knee osteoarthritis (“KOA”). To accomplish these goals, we operate under two defined internal business units: Wound & Surgical and Regenerative Medicine. All of our products are regulated by the FDA.

We have two classes of products: (1) Advanced Wound Care products, or Section 361 products, consisting of our tissue and cord sheet allograft products, as well as certain particulate products regulated under Section 361, and (2) Section 351 products, consisting of our micronized and certain other particulate products, which, prior to May 31, 2021, the date the FDA’s period of enforcement discretion ended (as described below), were used to treat a variety of clinical conditions, including both advanced wound care and musculoskeletal applications. Our Advanced Wound Care products include two product categories: Tissue/Other and Cord products. We apply Current Good Tissue Practices (“CGTP”) and Current Good Manufacturing Practices (“CGMP”) standards in addition to terminal sterilization to produce our allografts.

The Wound & Surgical business focuses on the Advanced Wound Care and Surgical Recovery markets through sales of our existing product portfolio (as described in detail in the Our Products section below) and product development to serve these primary end markets. This business unit is responsible for substantially all sales of our Advanced Wound Care products, as well as the sale of our Section 351 products internationally.

The Regenerative Medicine business focuses on progressing our placental biologics platform towards registration as an FDA-approved biological drug. Micronized dehydrated human amnion chorion membrane (“mDHACM”) is an injectable placental biologic product candidate in our late-stage pipeline targeted at achieving FDA approval for an indication to help decrease pain and improve function in patients suffering from KOA. Prior to May 31, 2021, this business unit was responsible for domestic sales of our Section 351 products. Regenerative Medicine does not currently generate revenue.

Our Products

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

EPIFIX and EPICORD products are marketed for external use, such as in Advanced Wound Care applications, while our AMNIOFIX, AMNIOEFFECT, AXIOFILL, and AMNIOCORD products are positioned for use in Surgical Recovery applications, including lower extremity repair, plastic surgery, vascular surgery and multiple orthopedic repairs and reconstructions.

In November 2017, the FDA published a series of guidance documents that established an updated framework for the regulation of cellular and tissue-based products. These guidance documents clarified the FDA’s views about the criteria that differentiate those products subject to regulation under Section 361 of the Public Health Service Act from those considered to be drugs, devices, and/or biological products subject to licensure under Section 351 of the Public Health Service Act and related regulations. The FDA exercised enforcement discretion under limited conditions with respect to IND applications and pre-market approval requirements for Section 351 products. The FDA’s period of enforcement discretion ended effective May 31, 2021. We are not currently marketing our micronized and certain particulate products affected by the guidance in the United States.

This discussion, which presents our results for the fiscal years ended December 31, 2022 and 2021, should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. Also please refer to Part I, Item 1, Business, and Part I, Item 1A, Risk Factors, which include detailed discussions of various items impacting our business, results of operations and financial condition. We intend for this discussion to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from period to period and the primary factors that accounted for those changes. We also discuss certain performance metrics that management uses to assess the Company's performance.

Our Annual Report for the year ended December 31, 2021 includes a discussion and analysis of our total company financial condition and results of operations for 2021 compared to 2020 in Part II, Item 7, Management’s Discussion and Analysis of

Financial Condition and Results of Operations. A discussion of the results of operations and financial condition for Wound & Surgical and Regenerative Medicine for 2021 compared to 2020 are presented herein.

Impact of COVID-19 Pandemic

The COVID-19 pandemic is still ongoing, though the effects on our operations, such as access restrictions to hospitals and difficulties obtaining donor materials that we observed during the year ended December 31, 2020 and, to a lesser degree, during the year ended December 31, 2021, did not materially affect our operations during the year ended December 31, 2022. We are continuously monitoring developments with respect to novel variants of the virus and government and societal responses to mitigate the spread of COVID-19, which could impact our operations.

We continue to exercise an abundance of caution with respect to the health and well-being of our employees. Our offices are open and staffed, and we are operating under a hybrid work model for some personnel as well as encouraging all employees to get vaccinated if they have not already done so. None of these efforts have materially affected the Company’s operations for the year ended December 31, 2022.

Components of and Key Factors Influencing Our Results of Operations

In assessing the performance of our business, we consider a variety of performance and financial measures. We believe the items discussed below provide insight into the factors that affect these key measures.

Net sales

Net sales is recognized based on the consideration we expect to receive from the sale at the point in time when control of the goods is transferred to the customer, which generally occurs upon our delivery to a third-party carrier. This consists of the gross selling price of the product, less any discounts, rebates, fees paid to GPOs, and returns.

We derive the majority of our revenue from selling our tissue and cord products in the United States. We are actively working to broaden our product portfolio in a number of clinical applications, while also seeking regulatory approval with the appropriate regulators to expand our geographic footprint, beginning in Japan. In early 2023, we announced the execution of an exclusive distribution agreement with Gunze Medical Limited to sell EPIFIX in Japan.

Cost of goods sold and gross profit

Cost of goods sold includes product testing costs, quality assurance costs, personnel costs, manufacturing costs, raw materials and product costs, depreciation and facility costs associated with our manufacturing and warehouse facilities. Fluctuations in our cost of goods sold correspond with the fluctuations in these costs as well as sales volume.

Gross profit is calculated as net sales less cost of goods sold. Gross margin is calculated as gross profit divided by net sales. Our gross margin is affected by product and geographic sales mix, realized pricing of our products, the efficiency of our manufacturing operations and the costs of materials used to make our products. Regulatory actions, including with respect to reimbursement for our products, may require costly expenditures or result in pricing pressure, and may decrease our gross profit and gross margin.

Selling, general and administrative expense

Selling, general and administrative (“SG&A”) expense includes costs to execute our sales strategy. These include personnel costs pertaining to our sales force and sales support functions, including salaries, commissions and other incentive compensation, commissions to sales agents, customer support, travel expenses, and bad debt expense. We expect our SG&A expense to fluctuate based on revenue fluctuations, geographic changes, and any changes to the size of our headcount, particularly that of our sales and marketing forces. Certain of these costs scale with sales, but can fluctuate depending on sales mix. For example, we pay sales agents a greater commission than our internal sales force, meaning that we could incur greater commission expenses if a greater proportion of our sales are through sales agents.

SG&A expense also includes costs related to functions which support both of our business units, such as legal, finance, human resources, and other such functions. These costs include personnel costs associated with these units, as well as insurance, and certain professional fees. These costs tend to fluctuate based on headcount, which will vary depending on our projected business needs.

Research and development expense

Research and development expense relates to our investments in clinical trials to expand our product pipeline and platforms, as well as expenditures in improvements to our manufacturing process and the enhancement of existing products. Our research and development costs also include expenses such as salaries and benefits related to our research department, consulting costs and advisory costs, and regulatory costs.

We expense research and development costs as incurred. Fluctuations in research and development expenses can be impacted by the timing and cadence of our clinical trials.

Investigation, restatement and related expense

Investigation, restatement and related expense primarily relates to legal fees advanced to certain former officers and directors of the Company under certain indemnification agreements and our liability from legal proceedings taken against us which arose from the findings of the Audit Committee Investigation. The timing and extent of these expenses depend on the stage and status of legal proceedings. Other activity includes amounts received from certain director and officer insurance providers.

Interest expense

We incur interest expense primarily through stated interest on our outstanding term loan. The interest on our term loan is tied to the three-month London Interbank Offered Rate (“LIBOR”), subject to a floor of 1.5%. Increases in LIBOR could cause our interest expense to increase. Other activity influencing interest expense relates to the amortization of deferred financing costs and original issue discount associated with credit facilities outstanding.

Results of Operations for 2022 Compared to 2021

Total Company

Year Ended December 31,

(in thousands)

Impairment of intangible assets — 53 (53) (100.0) %

Net Sales

We recorded net sales for the year ended December 31, 2022 of $267.8 million, an increase of $9.2 million or 3.6% over 2021 net sales of $258.6 million.

Our sales by product were as follows (amounts in thousands):

Year Ended December 31, Change

Advanced Wound Care

The increase in net sales reflects sales growth in our Advanced Wound Care products of $25.2 million or 10.5%, year-over-year. Our sales growth in this area was a result of our focus on the application of these products into areas of Surgical Recovery, including the introduction of AMNIOEFFECT and AXIOFILL to the market during 2022. We saw further gains as a result of our prior initiatives to expand, realign and train our sales team.

The increase was partially offset by our inability to sell our Section 351 products in the United States as a result of the end of the FDA’s period of enforcement discretion on May 31, 2021. Sales of our Section 351 products were $2.4 million for the year ended December 31, 2022 compared to $17.6 million for the year ended December 31, 2021, a decrease of $15.2 million. Sales of Section 351 products during the year ended December 31, 2022 were derived from outside the United States.

Gross Margin and Cost of Sales

Gross margin in 2022 was 82.0%, compared to 83.3% in 2021. Cost of sales and gross profit for 2021 included inventory write-downs of $1.7 million related to our Section 351 products, resulting from the end of enforcement discretion and products which were discontinued. There were no significant unusual write-downs during 2022. Decreases in margins were driven by negative impacts from production variances, primarily due to lower product levels.

Cost of sales for the year ended December 31, 2022 was $48.3 million, an increase of $5.0 million, or 11.6%, compared to $43.3 million for the year ended December 31, 2021. In addition to the factors affecting gross margin discussed above, overall increases in sales volume contributed to the increase in cost of sales.

Selling, General and Administrative Expense

SG&A expense increased $10.4 million, or 5.3%, to $208.8 million for 2022, compared to $198.4 million for 2021. The increase in SG&A expense was driven by:

•an increase in travel expenses, reflecting the lifting of travel restrictions that were in place during the year ended December 31, 2021,

•increases in sales commissions, resulting from higher sales volumes through sales agents, who carry higher commission rates than our internal sales force.

•an increase in bad debt expense resulting from the deterioration of credit for certain specific customers, and

•an increase in severance costs incurred with the intention of reducing corporate costs. This effect was partially offset by a year-over-year decrease in share-based compensation expense, primarily driven by the reversal of previously recognized share-based compensation expense associated with forfeitures of awards from the separated individuals.

These amounts were offset, primarily, by year-over-year decreases in professional service expenses.

Research and Development Expense

Our research and development expense increased $5.5 million, or 31.6%, to $22.8 million for the year ended December 31, 2022, compared to $17.3 million for the year ended December 31, 2021. The increase reflects higher personnel costs and clinical trial-related expenses to support clinical research efforts, primarily connected to our commercial and late-stage pipelines.

Investigation, Restatement and Related Expense

Investigation, restatement, and related expenses increased $8.4 million to $12.2 million for the year ended December 31, 2022, compared to $3.8 million for the year ended December 31, 2021. In 2021, we received funds from insurance providers and reductions in legal expenses that were reflected as reductions to expense for the year ended December 31, 2021.

We remain subject to indemnification agreements with certain former officers and directors of the Company (other than Messrs. Petit and Taylor, our former Chief Executive Officer and Chief Operating Officer) for whom legal proceedings are still ongoing, in particular, our former Chief Financial Officer.

Amortization of Intangible Assets

Amortization expense related to intangible assets decreased $0.1 million from $0.8 million for the year ended December 31, 2021 to $0.7 million for the year ended December 31, 2022. The decrease was the result of the avoidance of amortization expense from assets that had become fully-amortized during 2021.

Impairment of Intangible Assets

Impairment of intangible assets was $0.1 million for the year ended December 31, 2021, reflecting the impairment of a supplier relationship asset. There were no impairments in 2022.

Interest Expense, Net

Interest expense was $5.0 million for each of the years ended December 31, 2022 and 2021. The rise in LIBOR rates during 2022 caused an increase in interest expense on our outstanding term loan. In addition, we recognized interest income on our income tax receivable resulting from the Coronavirus Aid, Relief, and Economic Security Act. These effects were offset by the avoidance of interest expense associated with the delayed draw term loan facility option under the Hayfin Loan Agreement that terminated on June 30, 2021.

We expect interest expense to increase in future quarters as a result of rising interest rates.

Income Tax Provision Expense

The effective tax rate for 2022 and 2021 was (0.7)% and (2.5)%, respectively on pre-tax book losses of $30.0 million and $10.0 million, respectively. There were no discrete items which materially influenced the effective tax rate in either period, and net operating losses generated were offset by a valuation allowance.

Segment Results

Wound & Surgical

Our Wound & Surgical business focuses on the Advanced Wound Care and Surgical Recovery markets through sales of our existing product portfolio and product development to serve these end markets. Its platform technologies include tissue allografts derived from human placental membrane (EPIFIX®, AMNIOFIX®, and AMNIOEFFECTTM), tissue allografts derived from human umbilical cord (EPICORD® and AMNIOCORD®), and a particulate extracellular matrix derived from human placental disc (AXIOFILLTM). This segment is also responsible for the international sales of our Section 351 products.

Several factors affect reported net sales for our Wound & Surgical business in any period, including product, payer and geographic sales mix, operational effectiveness, pricing realization, marketing and promotional efforts, timing of orders and shipments, regulatory actions including healthcare reimbursement scenarios, competition, and business acquisitions that involve our customers or competitors.

SG&A expense includes costs to execute our sales strategy. These include personnel costs pertaining to our sales force and sales support functions, including salaries, commissions and other incentive compensation, commissions to sales agents, customer support, travel expenses, and bad debt expense.

Research and development expenses for Wound & Surgical focus on the expansion of our product portfolio into similar areas of healthcare, specifically Advanced Wound Care and Surgical Recovery.

Wound & Surgical Results of Operations 2022 Compared to 2021

Year Ended December 31,

(in thousands)

Our Wound & Surgical business recorded $264.9 million of net sales for the year ended December 31, 2022, a $26.0 million, or 10.9%, increase compared to the $238.9 million we recorded for the year ended December 31, 2021. This increase was the result of our focus on the application of these products into areas of Surgical Recovery, including the introduction of AMNIOEFFECT and AXIOFILL to the market during 2022. We saw further gains as a result of our prior initiatives to expand, realign and train our sales team.

Cost of sales for the year ended December 31, 2022 was $44.5 million, a $9.3 million, or 26.3%, increase compared to the $35.2 million recognized for the year ended December 31, 2021. Cost of sales increased due to negative impacts from production variances, primarily due to lower production levels, as well as increases in sales volume.

SG&A expense was $145.9 million for the year ended December 31, 2022, a $22.3 million, or 18.0%, increase over the year ended December 31, 2021, during which we incurred $123.6 million of expenses. The increase was driven by travel expenses, sales commissions, and bad debt expense. Travel expenses increased due to the lifting of restrictions that were in place during the year ended December 31, 2021 due to the COVID-19 pandemic. Increases in sales commissions reflected our focus on sales of products into areas of Surgical Recovery, resulting in a proportional increase in sales through sales agents, who carry higher commission rates than our internal sales force. The increase in bad debt expense was primarily the result of the deterioration of credit for certain specific customers.

Research and development expense was $7.8 million for the year ended December 31, 2022, compared to $5.9 million for the year ended December 31, 2021, an increase of $2.0 million, or 33.6%. The increase was primarily the result of expenses related to AMNIOEFFECT and AXIOFILL, both of which launched during the year ended December 31, 2022.

Wound & Surgical Results of Operations 2021 Compared to 2020

Year Ended December 31,

(in thousands)

Our Wound & Surgical business recorded $238.9 million of net sales for the year ended December 31, 2021, a $25.5 million, or 11.9%, increase compared to the $213.5 million we recorded for the year ended December 31, 2020. This increase was primarily the result of an increase in sales volume due to lessening of restrictions implemented at the onset of the COVID-19 pandemic, including access to hospitals and travel restrictions. The increase also reflected the initial results of our commercial focus on areas of Surgical Recovery. Finally, we saw growth in new products, such as EPICORD Expandable, which launched in September 2020.

Cost of sales for the year ended December 31, 2021 was $35.2 million, a $5.0 million, or 16.6%, increase compared to the $30.2 million recognized for the year ended December 31, 2020. Cost of sales increased due to year-over-year increases in sales volumes as well as the unfavorable effects of production variances, year-over-year.

SG&A expense was $123.6 million for the year ended December 31, 2021, a $20.5 million, or 19.9%, increase over the year ended December 31, 2020, during which we incurred $103.0 million of expenses. The increase was driven by salaries, travel expenses, and sales commissions. Salary expenses increased due to the restoration of full-salary levels, which were reduced for

a portion of 2020 as part of our response to the COVID-19 pandemic. Salary expenses also increased as a result of merit increases and costs associated with expansion of our sales force. Travel expenses increased due to the lifting of restrictions that were in place during the year ended December 31, 2020 due to the COVID-19 pandemic, as well as result of inflationary pressures experienced during the year ended December 31, 2021. Increases in sales commissions reflected higher sales volumes.

Research and development expense was $5.9 million for the year ended December 31, 2021, compared to $4.0 million for the year ended December 31, 2020, an increase of $1.9 million, or 47.4%. The increase was driven by higher personnel costs due to headcount increases and the restoration of full salary levels and merit increases, which were restricted for a portion of 2020.

Regenerative Medicine

Our Regenerative Medicine business focuses solely on Regenerative Medicine technologies, specifically progressing our placental biologics platform towards registration as an FDA-approved biological drug. mDHACM is the lead product candidate in its late-stage pipeline targeted at achieving FDA approval for an indication to help decrease pain and improve function in patients suffering from KOA.

Prior to May 31, 2021, net sales for the Regenerative Medicine segment consisted of domestic sales of Section 351 products. Regenerative Medicine does not currently generate revenue, and will only produce revenue if and after such time that the FDA approves a BLA for mDHACM. After that point in time, we re-focused our sales and marketing efforts exclusively toward the advancement of our Wound & Surgical products in the United States. For this reason, our Regenerative Medicine segment does not generate meaningful SG&A expense.

Research and development expenditures for Regenerative Medicine are driven by clinical trial activities, primarily those undertaken by our clinical research organization, which we have engaged to provide full operational support related to our upcoming KOA clinical trial program.

Regenerative Medicine Results of Operations 2022 Compared to 2021

Year Ended December 31,

(in thousands)

Selling, general and administrative expense — 12,910 (12,910) (100.0) %

Research and development expense was $15.0 million for the year ended December 31, 2022, compared to $11.5 million for the year ended December 31, 2021, an increase of $3.5 million, or 30.6%. The increase was primarily the result of increases in headcount and the incurrence of clinical trial expenses to support our clinical research efforts.

Regenerative Medicine Results of Operations 2021 Compared to 2020

Year Ended December 31,

(in thousands)

Our Regenerative Medicine business recorded $16.6 million of net sales for the year ended December 31, 2021, a $15.8 million, or 48.7%, decrease compared to the $32.4 million we recorded for the year ended December 31, 2020. Likewise, cost of sales for the year ended December 31, 2021 was $3.7 million, a $2.2 million, or 37.6%, decrease compared to the year ended

December 31, 2020, where we recognized cost of sales of $5.9 million. These decreases reflected our inability to sell our Section 351 products in the United States as a result of the end of the FDA’s period of enforcement discretion on May 31, 2021.

SG&A expense for the year ended December 31, 2021 was $12.9 million, a $4.6 million, or 26.4%, decrease from the year ended December 31, 2020, where we recognized $17.5 million. This decrease reflected the re-focusing of our sales and marketing efforts toward the advancement of our Wound & Surgical business.

Research and development expense was $11.5 million for the year ended December 31, 2021, compared to $7.7 million for the year ended December 31, 2020, an increase of $3.7 million, or 48.4%. The increase was driven by higher personnel costs due to headcount increases to support investments in our clinical trials and the restoration of full salary levels and merit increases, which were restricted for a portion of 2020. We also incurred higher consulting fees in 2021, primarily to assist in the evaluation of the results of our clinical trials.

Corporate

Our Corporate function represents activities which support both of our business units, such as legal, finance, human resources, and other supporting functions. Corporate expenses include personnel costs associated with these units, as well as insurance, and certain professional fees.

SG&A expense for the Corporate function was $62.9 million, or 23.5% of net sales, for the year ended December 31, 2022, compared to $61.9 million, or 23.9% of consolidated net sales for the year ended December 31, 2021. The increase was primarily the result of an increase in severance costs associated with headcount reductions to lower ongoing costs. This effect was partially offset by a year-over-year decrease in share-based compensation expense, primarily driven by forfeitures of awards from the separated individuals.

SG&A expense for the Corporate function was $61.9 million, or 23.9% of consolidated net sales, for the year ended December 31, 2021, compared to $60.4 million, or 24.3% of consolidated net sales for the year ended December 31, 2020. The increase reflected greater personnel costs and professional services fees.

Liquidity and Capital Resources

We require capital for our operating activities, including costs associated with the sale of product through direct and indirect sales channels, the conduct of clinical trials and other research and development activities, compliance costs, costs to sell and market our products, regulatory fees, and legal and consulting fees in connection with ongoing litigation and other matters. We generally fund our operating capital requirements through our operating activities and cash reserves. We expect to use capital in the near and medium term to commence late-stage clinical trials for certain of our products, invest in the international expansion of our business and the broadening of our product portfolio, and invest in certain capital projects.

As of December 31, 2022, we had $66.0 million of cash and cash equivalents.

Our net working capital at December 31, 2022 was $90.6 million, a decrease of $15.5 million from $106.2 million at December 31, 2021. Our current ratio was 3.1 to 1 as of December 31, 2022 and 3.5 to 1 as of December 31, 2021.

The Company is currently paying its obligations in the ordinary course of business. We believe that our anticipated cash from operating activities and existing cash and cash equivalents will enable us to meet our operational liquidity needs for the twelve months following the filing date of this Annual Report.

Contractual Obligations

Contractual obligations associated with ongoing business activities are expected to result in cash payments in future periods. The table below summarizes the amounts and estimated timing of these future cash payments as of December 31, 2022 (in thousands):

Less than

Contractual Obligations Total 1 year 1-3 years 3-5 years Thereafter

Hayfin Term Loan Principal $ 50,000 $ — $ 50,000 $ — $ —

Severance obligations to former employees 3,677 2,513 1,164 — —

Finance lease obligations 115 55 60 — —

(1) Reflects an interest rate of 11.5% through maturity.

Nordic Agreement

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

As part of the agreement, NBCD will perform site selection and monitoring, manage patient recruitment and enrollment, data management, statistical analysis and reporting activities for the duration of the trial. Under the terms of the Nordic Agreement, we are obligated to pay $10.2 million upon the achievement of specified milestones over the course of the clinical trial. These amounts are not included in the table above because the timing of these payments is inherently uncertain.

The milestones are based upon various factors including, but not limited to, site selection and enrollment, patient enrollment, patient completion, and certain other activities related to clinical trial activities. The milestone payments are revised semi-annually based on fluctuations in the consumer price index. We have the ability to terminate the Nordic Agreement with 30 days written notice to NBCD. At such time, we would be required to pay for services performed through the date of termination and any non-cancelable obligations. In addition to the milestone payments, the Company will reimburse NBCD for actual expenses incurred related to third-party vendors to be contracted and managed by NBCD.

On January 24, 2023, we executed a change order to the Nordic Agreement (the “Change Order”), primarily to reflect additional elements required in conducting the trial. The Change Order modified the scope of NBCD’s responsibilities under the Nordic Agreement, shifting certain activities to other vendors to be administered by NBCD and certain other activities to MIMEDX. These responsibilities primarily related to areas of patient recruitment and screening and statistical analysis, among other areas of the trial. Pursuant to the Change Order, the total payments owed to NBCD relating to NBCD’s responsibilities decreased from $13.3 million to $10.2 million. While our total obligation to NBCD has decreased pursuant to the Change Order, we expect to pay these expenses to other vendors. We have paid $2.0 million under the Nordic Agreement as of December 31, 2022 relating to milestones which have been achieved through that date.

Turn Agreement

As described above under Item 1. “Business-Our Product Portfolio & Pipeline”, we acquired intellectual property rights pursuant to the Turn Agreement. We paid an up-front cash payment of $1.0 million upon the execution of the agreement, and are obligated to make additional payments upon the meeting of regulatory and product commercial milestones, including $9.6 million if and when Turn receives 510(k) clearance from the FDA for FleX. In addition, we are obligated to pay royalties on the sales of FleX and any products derived from PermaFusion. These amounts are not included in the table above because the timing of these payments are inherently uncertain.

Term Loan

On June 30, 2020, we entered into a Loan Agreement with, among others, Hayfin Services, LLP, (“Hayfin”) an affiliate of Hayfin Capital Management, LLP (the “Hayfin Loan Agreement”), under which Hayfin provided us with a senior secured term loan of $50 million (the “Term Loan”). The Term Loan matures on June 30, 2025 (the “Maturity Date”). On February 28, 2022, we executed an Amendment to the Hayfin Loan Agreement (as amended, the “Amended Hayfin Loan Agreement”).

No principal payments are due on the Term Loan until the Maturity Date. Interest is payable on the Term Loan for principal outstanding quarterly through the Maturity Date. Interest on any borrowings under the Term Loan is equal to LIBOR (subject to a floor of 1.5%) plus a margin of 6.75%. If LIBOR is unavailable, the loan will carry interest at the greatest of the Prime Rate, the Federal Funds Rate plus 0.5% per annum, and 2.5% plus the 6.75% margin. An additional 3.0% margin would be applied to the interest rate upon the occurrence of an Event of Default as defined in the Amended Hayfin Loan Agreement. As of December 31, 2022, the Term Loan carried an interest rate of 11.5%.

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

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

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

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

The Amended Hayfin Loan Agreement also specifies that any prepayment of the Term Loan, voluntary or mandatory, as defined in the agreement, would subject us to a prepayment premium applicable as of the date of the prepayment, as follows:

•On or before July 2, 2023: 2% of the principal balance repaid.

•After July 2, 2023 but on or before July 2, 2024: 1% of the principal balance repaid.

•After July 2, 2024: no premium.

The Amended Hayfin Loan Agreement also includes certain negative covenants and events of default customary for facilities of this type, and upon the occurrence of such events of default, subject to customary cure rights, all outstanding loans under the Amended Hayfin Loan Agreement may be accelerated or the lenders’ commitments terminated. Mandatory prepayments are also required in the event of a change in control, incurring other indebtedness, certain proceeds from disposal of assets and insured casualty event (as defined in the Amended Hayfin Loan Agreement). Annually, we are required to prepay the outstanding loans based on the percentage of our Excess Cash Flow (as defined in the Amended Hayfin Loan Agreement), if such is generated. To date, we have not been required to make any prepayments under this provision.

While we currently have sufficient cash to repay all such amounts in an event of default, we may require alternative financing to cover other obligations. Even if alternative financing were available in an event of default under the Amended Hayfin Loan Agreement, it might be on unfavorable terms, and the interest rate charged on any new borrowings may be substantially higher than the interest rate under the Amended Hayfin Loan Agreement, thus adversely affecting our future cash flows, liquidity, and results of operations.

Series B Preferred Stock

We have 100,000 shares of Series B Preferred Stock outstanding as of December 31, 2022.

The Series B Preferred Stock currently accumulates dividends at a rate of 6.0% per annum. Dividends are declared at the sole discretion of our board of directors. Dividends, if declared, are paid in cash at the end of each quarter based on dividend amounts that accumulate beginning on the last payment date through the day prior to the end of each quarter. In lieu of paying a dividend in cash, we may elect to accrue the dividend owed to shareholders. Dividend balances accumulate at the prevailing dividend rate for each dividend period for which they are outstanding.

Each share of Series B Preferred Stock, including any accrued and unpaid dividends, is convertible into our common stock at any time at the option of the holder at a conversion price of $3.85 per common share, or 259.74 common shares for each Series B Preferred Share prior to any accrued and unpaid dividends. The Series B Preferred Stock, including any accrued and unpaid dividends, automatically converts into common stock at any time after July 2, 2023, provided that the common stock has traded at $7.70 or higher (i) for 20 out of 30 consecutive trading days and (ii) on such date of conversion.

If we undergo a change of control, we will have the option to repurchase some or all of the then-outstanding shares of Series B Preferred Stock for cash in an amount equal to the liquidation preference and any accumulated and unpaid dividends, subject to the rights of the holders of the Series B Preferred Stock in connection with such change in control. If we do not exercise such repurchase right, holders of the Series B Preferred Stock will have the option to (1) require us to repurchase any or all of our then-outstanding shares of Series B Preferred Stock for cash in an amount equal to the liquidation preference or (2) convert the Series B Preferred Stock, including accrued and unpaid dividends into common stock and receive its pro rata consideration thereunder.

We have not declared or paid any cash dividends on our Series B Preferred Stock since their issuance. Dividends in arrears as of December 31, 2022 were $13.8 million. Assuming we do not declare or pay a cash dividend, the holders do not exercise their option to convert, and the other conversion or redemption features are not triggered, we would accumulate and accrue $7.0 million of dividends in 2023, $15.3 million in aggregate in 1-3 years, and $17.2 million in aggregate in 3-5 years.

As of December 31, 2022, the Series B Preferred Stock was convertible into 29,559,946 common shares.

Refer to Item 8, Note 11, Equity, for more detailed discussion regarding the rights and preferences of our Series B Preferred Stock.

Regulatory Items

There is a possibility that the FDA may rule that our cord-derived products do not meet the requirements to be regulated solely under the authority of Section 361 of the Public Health Service Act. In such a case, in order to continue to market the products, we would be required to obtain the appropriate FDA clearance or approval. The loss of our ability to market and sell our umbilical cord-derived product would have an adverse effect on the Company’s revenue, business, financial condition, and results of operations. Sales of our cord products were $23.2 million and $23.6 million in 2022 and 2021, respectively.

Reimbursement Developments

Recently, several wide-ranging proposals have been published for public comment, including relating to payment methodology within the physician office, and are under consideration by the U.S. Centers for Medicare and Medicaid Services. In addition, three Medicare Administrative Contractors have recently published for public comment changes to their Local Coverage Determinations that they are considering. If adopted, these proposals would significantly change Medicare policies governing the reimbursement of skin substitute products principally when used for wound treatment in the private physician office setting. Refer to Item 1A, Risk Factors — Our revenues depend on adequate reimbursement from public and private insurers and health systems and changes to the ways in which our products are reimbursed in various sites of service could adversely impact our financial results.

Other Liquidity Considerations

Further, our liquidity will be impacted by expected and unexpected costs, investments in clinical trials to support BLAs, and contingent liabilities:

•Advancement of our clinical trials will involve substantial cost. Products subject to the FDA’s BLA requirements must comply with a range of pre- and post-market provisions. Pre-market compliance includes the conduct of clinical trials in support of BLA approval, the development and submission of a BLA, and the production of product for use in the

clinical trials that meets the FDA’s quality expectations. See Item 1A - Risk Factors - “Obtaining and maintaining the necessary regulatory approvals for certain of our products will be expensive and time consuming and may impede our ability to fully exploit our technologies,” and“If any of the BLAs are approved, the Company would be subject to additional regulation which will increase costs and could result in adverse sanctions for non-compliance.”

•The continued expansion of our product lines and the development of new products will require continuous investment in intellectual property and research and development.

•International expansion of our business will require investment through the costs to achieve necessary regulatory approvals and reimbursement schemes, establishing a physical presence through office and warehouse space, identifying and hiring employees, and other costs to establish ongoing operations.

•We are exposed to potential liabilities and reputational risk associated with litigation, regulatory proceedings, and government enforcement actions. The amounts, if any, for which we may be liable resulting from such proceedings are highly uncertain. See Item 3, Legal Proceedings and Item 8, Note 16, Commitments and Contingencies andItem 1A, “Risk Factors” - “We are currently, and may in the future be, subject to substantial litigation and ongoing investigations that could cause us to incur significant legal expenses and result in harm to our business.”

•The application of CGMP requires investment in our manufacturing establishments for production for our micronized products. The transition process includes development and enhancement of production processes, procedures, test and assays, and it requires extensive validation work. It can also involve the procurement and installation of new production or lab equipment. These efforts require human capital, expertise and resources. See Item 1A. – “Risk Factors” under the heading “Certain of our products no longer qualify for regulation as human cells, tissues and cellular and tissue-based products solely under Section 361 of the Public Health Service Act (“Section 361”), which has resulted in removal of the applicable products from the market, made the introduction of some new tissue products more expensive, significantly delayed the expansion of our tissue product offerings and subjected us to additional post-market regulatory requirements. Additional regulatory requirements may be imposed in the future.”

Discussion of Cash Flows

Operating Activities

During the year ended December 31, 2022, net cash used in operating activities increased $15.9 million to $17.9 million compared to $2.0 million for the year ended December 31, 2021. The increase in cash used was primarily the result of increases in selling, general, and administrative expenses and research and development expenses during the year ended December 31, 2022. In addition, cash used for the year ended December 31, 2021 was positively impacted by an income tax refund of $9.2 million and insurance settlements of $8.0 million.

Investing Activities

During the year ended December 31, 2022, net cash used in investing activities was $2.7 million, a decrease of $0.7 million, compared to $3.4 million for the year ended December 31, 2021. The primary reason for the decrease was a $1.7 million decrease in capital expenditures, year-over-year, offset by $1.0 million of payments made pursuant to the Turn Agreement.

Financing Activities

During the year ended December 31, 2022, net cash used in financing activities was $0.6 million, a decrease of $2.8 million compared to cash used in financing activities of $3.4 million for the year ended December 31, 2021. Activity in 2022 was driven by year-over-year decreases in the cash paid for shares repurchased for tax withholding ($3.6 million), offset by decreases in proceeds from option exercises ($0.8 million).

Non-GAAP Financial Measures

In addition to our GAAP results, we provide the following Non-GAAP measures: Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) and Adjusted EBITDA. We believe that the presentation of these measures provides important supplemental information to management and investors regarding our performance. These measurements are not, and should not be used as, a substitute for GAAP measures. Company management uses these Non-GAAP measures as aids in monitoring our on-going financial performance from quarter-to-quarter and year-to-year on a regular basis and for benchmarking against comparable companies.

We provide EBITDA and Adjusted EBITDA to facilitate comparisons to results of other companies. We use EBITDA as a measure of our operating performance, planning, and budgeting purposes as it eliminates the effects of financing and investing activities, as well as irregular and non-cash expenses. EBITDA is widely used by investors and analysts to measure operating performance and evaluate enterprise value.

EBITDA consists of GAAP net loss excluding: (i) depreciation, (ii) amortization of intangibles, (iii) interest expense, net, (iv) loss on extinguishment of debt, and (v) income tax provision.

Adjusted EBITDA is intended to provide an enduring, normalized view of EBITDA and our broader business operations that we expect to experience on an ongoing basis by removing from EBITDA certain items which may be irregular, non-recurring, or non-cash items not excluded when calculating EBITDA. This enables us to identify underlying trends in our business that could otherwise be masked by such items.

Adjusted EBITDA consists of GAAP net loss excluding: (i) depreciation, (ii) amortization of intangibles, (iii) interest expense, net, (iv) loss on extinguishment of debt, (v) income tax provision, (vi) costs incurred in connection with Audit Committee Investigation and Restatement, (vii) share-based compensation, and (vii) impairment of intangible assets.

A reconciliation of GAAP net loss to EBITDA and Adjusted EBITDA appears in the table below (in thousands):

Year Ended December 31,

Non-GAAP Adjustments:

Loss on extinguishment of debt — — 8,201

Additional Non-GAAP Adjustments:

Impairment of intangible assets — 53 1,027

Critical Accounting Estimates

This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these financial statements requires that we make judgments and estimates which may affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We derive these judgments and estimates on historical experience and other relevant factors which we believe to be reasonable. Actual results may differ from these estimates.

Net Sales

Description

We record estimates for returns and allowances as a reduction to net sales based on our expectation for such returns.

Judgments and Uncertainties

We sell our products to individual customer and independent distributors (collectively referred to as “customers”). Customers obtain and use products either through ship and bill sales or consignment arrangements. We recognize revenue as performance obligations are fulfilled, which generally occurs upon the shipment of product to customers for ship and bill sales or upon implantation for consignment sales. We recognize revenue based on consideration we expect to receive from the sale. This consists of the gross selling price of the product, less any discounts, rebates, fees paid to GPOs, and an expectation for sales returns.

We maintain a return policy that allows our customers to return product for any reason within 30 days of sale, and to return product that is damaged or non-conforming, ordered in error, or due to recall at any time.

We derive an expectation for product returns based on historical return patterns and other factors, including shifts in our regulatory environment and product recalls. Determinations involving other factors are based on our estimates for product at customer sites that are eligible for return.

Additions or reversals to our return allowance, as determined necessary, are accounted for prospectively and recorded as a decrease or increase to net sales, respectively. Actual returns are recorded against the recorded accrual.

Sensitivity of Estimate to Change

We have accrued $0.7 million for sales returns as of December 31, 2022. Changes in return patterns or unforeseen changes in regulations or identified product recalls could cause returns significantly in excess of this estimate.

Contingencies

Description

We record contingent liabilities related to legal and other proceedings at such point in time when loss is probable and reasonably estimable.

Judgments and Uncertainties

We evaluate the probability of loss and the range of potential losses based on salient details about a case. These evaluations consider evidence derived from discussions with counsel and include the merits and jurisdiction of the proceeding, the nature and the number of other similar current and past proceedings, damages sought by the counterparty, settlement offers we have extended to the counterparty and other factors. From this information, we make a judgmental determination of whether loss from a case is probable and whether a reasonable estimate of loss can be derived. In situations where a reasonable estimate is a range of estimates, we record the most likely amount in the range or, if no single amount is more likely than any of the others, we record the minimum amount of the range.

Sensitivity of Estimate to Change

As of December 31, 2022, we have reserved $0.2 million for potential losses relating to legal proceedings discussed in Item 8, Note 16, Commitments and Contingencies. The outcome of court judgments could lead to a change in our evaluation of probability of loss or our estimate for such loss. In addition, court judgments may result from matters for which we had previously assessed loss as being not probable or which result in losses which materially depart from our estimate, either favorably or unfavorably.

We believe that our estimates applied are based on reasonable assumptions, but are inherently uncertain. Actual results may differ from the assumptions and judgments used to derive our accrual.

Income Taxes

Description

We record a valuation allowance to offset our net deferred tax asset to the extent that realization is not likely.

Judgments and Uncertainties

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. Transactions which result in lower taxable income in the future give rise to deferred tax assets.

We evaluate our ability to recover deferred tax assets based on projected future taxable income, scheduled reversals of deferred tax liabilities, tax planning strategies, and our recent operating results. Judgment is required to determine whether the totality of this evidence suggests that we can recover our deferred tax assets in the future.

Sensitivity of Estimate to Change

As of December 31, 2022, we had $47.6 million of valuation allowances recorded, fully offsetting our net deferred tax asset. This determination may change due to changes in tax law, a revision to our expectation regarding taxable income in the future, taxable income generated in a period in which we had not previously anticipated taxable income, a change in scheduled reversals of deferred tax liabilities, and other changes.

Historically, exclusive of changes in tax law such as that enacted under the Coronavirus Aid, Relief and Economic Security Act, we have not reversed our valuation allowance.

If the weight of available evidence suggests that some or all of this amount is more likely than not to be realized, we will derecognize the valuation allowance as an income tax benefit to the extent that the underlying deferred tax asset is more likely than not to be realized.

Recently Adopted Accounting Pronouncements

See Item 8, Note 2, Significant Accounting Policies, in the Consolidated Financial Statements for recently adopted accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to risks associated with changes in interest rates that could adversely affect our results of operations and financial condition. We do not hedge against interest rate risk.

The interest rate on our Term Loan is determined quarterly based on the 3-month U.S. dollar LIBOR rate, subject to a floor of 1.5%. As of December 31, 2022, the interest rate on our Term Loan was 11.5%. A 100 basis point change in LIBOR, to the extent that such change would not cause LIBOR to be below the 1.5% minimum, would change interest expense by $0.5 million on an annualized basis.

During the year ended December 31, 2022, we incurred $0.4 million in incremental interest expense as a result of increases in LIBOR during the year.

Item 8. Financial Statements and Supplementary Data

Index to Financial Statements

Consolidated Balance Sheets – As of December 31, 2022 and 2021 F- 5

Notes to Consolidated Financial Statements F- 9

Schedule II - Valuation and Qualifying Accounts F- 44

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, 2022 and 2021, the related consolidated statements of operations, stockholders' (deficit) equity, and cash flows, for the years then ended, and the related notes and the schedule listed in the Index at Item 8 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

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, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2023, 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 to 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 product orders 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 extensive audit effort due to the volume of transactions and a degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

F-2

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.

•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 manually accrued as of year end and evaluated whether the transactions were recorded in the correct period.

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

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

/s/ Deloitte & Touche LLP

Atlanta, Georgia

February 28, 2023

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

F-3

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

MiMedx Group, Inc.

Marietta, Georgia

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statement of stockholders’ equity (deficit), operations and cash flows for the year ended December 30, 2020 of MiMedx Group, Inc. (the “Company”) and the related notes and schedule (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ BDO USA, LLP

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

Atlanta, Georgia

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

F-4

MIMEDX GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

December 31,

ASSETS

Current assets:

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

Current liabilities:

Commitments and contingencies (Note 16)

Stockholders’ (deficit) equity:

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

See notes to the consolidated financial statements.

F-5

MIMEDX GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

Year Ended December 31,

Operating expenses:

Impairment of intangible assets — 53 1,027

Other expense, net

Other expense, net (4) (23) (3)

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

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

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

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

See notes to the consolidated financial statements.

F-6

MIMEDX GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share data)

Common Stock AdditionalPaid-in Treasury Stock Accumulated

Shares Amount Capital Shares Amount Deficit Total

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

Share-based compensation expense — — 15,733 — — — 15,733

Restricted stock shares canceled/forfeited — — 3,363 425,388 (3,363) — —

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

Share-based compensation expense — — 14,757 — — — 14,757

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

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

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

See notes to the consolidated financial statements.

F-7

MIMEDX GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Years Ended December 31,

Cash flows from operating activities:

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

Bad debt expense 2,820 — —

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

Accretion of asset retirement obligation 92 81 10

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

Impairment of intangible assets — 53 1,027

Loss on extinguishment of debt — — 8,201

Increase (decrease) in cash resulting from changes in:

Cash flows from investing activities:

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

Principal payments from note receivable — 75 —

Proceeds from property and equipment sale 24 — —

Net cash flows used in investing activities (2,660) (3,395) (4,555)

Cash flows from financing activities:

Proceeds from exercise of stock options 651 1,437 411

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

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

Stock issuance costs — — (7,470)

Proceeds from term loans — — 59,500

Deferred financing costs — — (3,235)

Repayment of term loans — — (83,872)

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

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

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 is a pioneer and leader in placental biologics focused on addressing the needs of patients with acute and chronic non-healing wounds. The Company is also advancing a promising late-stage biologics pipeline targeted at decreasing pain and improving function for patients with knee osteoarthritis (“KOA”). To accomplish these goals, the Company operates as two defined, internal business units: Wound & Surgical and Regenerative Medicine. All of our products sold in the United States are regulated by the United States Food and Drug Administration (“FDA”).

The Wound & Surgical business focuses on the Advanced Wound Care and Surgical Recovery markets through sales of the Company’s existing product portfolio and product development to serve these end markets. This business unit is responsible for substantially all sales of the Company’s Advanced Wound Care products, as well as the sale of the Company’s micronized and certain particulate products (collectively, the “Section 351 products”) internationally.

The Regenerative Medicine business focuses on progressing the Company’s placental biologics platform towards registration as a FDA-approved biological drug. Micronized dehydrated human amnion chorion membrane (“mDHACM”) is an injectable placental biologic product candidate in its late-stage pipeline targeted at achieving FDA approval for an indication to help decrease pain and improve function in patients suffering from KOA. Prior to May 31, 2021, this business unit was responsible for domestic sales of the Company’s Section 351 products. Regenerative Medicine does not currently generate revenue.

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

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

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.

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

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. Prior to June 30, 2022, the Company assessed that it operated as one operating and reportable segment. The Company reassesses the existence of operating segments when facts and circumstances suggest that there may have been a change in the way that the Company is managed.

On September 30, 2022, the Company reassessed its operating segments, concluding that the CODM assesses performance and allocates resources between two, distinct reportable segments: Wound & Surgical and Regenerative Medicine. Information regarding the principal operations and results of these segments can be found in Note 13, Segment Information.

F-9

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.

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

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.

Bad debt expense and the allowance for doubtful accounts are based on historical trends and current expectations for credit losses. The Company’s policy to reserve for potential bad debts is based on the aging of the individual receivables as well as customer-specific qualitative factors, such as bankruptcy proceedings. The 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. Write-downs are utilized to account for slow-moving inventory as well as inventory no longer needed due to diminished demand or regulatory action.

Property and Equipment, Net

Property and equipment 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 at the sooner of the imposition of the legal requirement and when an estimate for the cost of retirement can reasonably be made. The Company reviews legal obligations associated with the retirement of long-lived assets that result from contractual obligations or the acquisition, construction, development and/or normal use of the assets. If it is determined that a legal obligation exists, regardless of whether the obligation is conditional on a future event, the fair value of the liability for an asset retirement obligation is recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made. The fair value is calculated as the estimate of the expected cash outflow to satisfy the legal obligation discounted to present value using the Company’s incremental borrowing rate. 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.

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 cash flows, not discounted to present value, 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.

The Company recorded impairment losses on amortizable intangible assets of $0, $0.1 million, and $1.0 million in in 2022, 2021, and 2020, respectively. The Company recorded no impairment losses with respect to any other classes of long-lived assets in those periods.

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.

If the Company concludes that the way in which it is being managed has changed and results in a change to its concluded reporting units, the goodwill assigned to the original reporting unit is allocated to the new reporting units based on the relative fair value of the new reporting units.

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.

As indicated above, on September 30, 2022, the Company changed its operating segments, determining that it operates as two reportable segments. In concert with this re-evaluation, the Company concluded that it has two reporting units for goodwill impairment testing purposes. Management performed a goodwill impairment test as of September 30, 2022 on its previous reporting unit, concluding that goodwill was not impaired as of that date. Management subsequently allocated the goodwill assigned to its previous reporting unit to its new reporting units. Refer to Note 7, Goodwill and Intangible Assets, Net, for information regarding the reallocation of goodwill to the reporting units.

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

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

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

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or an alternative future use is available to the Company. The Company capitalized $0.2 million, $0.3 million, and $0.3 million of patent costs for the years ended December 31, 2022, 2021, and 2020, 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. Options to renew or terminate a lease are included in the lease term to the extent that such provisions are reasonably certain to be exercised. This determination is reassessed as new information arises and is accounted for prospectively. 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.

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 as part of 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

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.

Contingencies

The Company is or has been subject to various patent challenges, product liability claims, government investigations, former employee matters, and other legal proceedings, see Note 16, Commitments and Contingencies. Legal fees and other expenses related to litigation are expensed as incurred and included in selling, general and administrative expenses in the consolidated statements of operations. The Company 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

Current Policy

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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.

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.

Remaining Contracts

Prior to 2020, the Company’s control environment was such that it created uncertainty surrounding all of its customer arrangements, which required consideration related to the proper revenue recognition under the applicable literature. The control environment allowed for the existence of extra-contractual or undocumented terms or arrangement initiated by or agreed to by the company and former members of Company management at the outset of the transactions (side agreements). Concessions were also agreed to subsequent to the initial sale (e.g. sales above established customer credit limits extended and unusually long payment terms, return or exchange rights, and contingent payment obligations) that precluded the Company from recognizing revenue at the time that product was shipped to a customer.

Because of the prevalence of these arrangements, the Company’s sales arrangements did not qualify as contracts under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, until consideration was collected from customers. This determination precluded the recognition of revenue at the time of shipment. Instead, recognition of revenue was deferred until: (1) the customer returned the product prior to payment; or (2) the Company received payment from the customer. Cost of sales associated with product shipped was deferred until collection was received.

The Company implemented changes and remediated weaknesses, which gave rise to the above conclusion beginning in mid-2018. Management concluded that these efforts had been sufficiently implemented such that customers were aware of the Company’s sales policies and procedures and that a contract existed prior to the transfer of title or the implantation of product for ship-and-bill and consignment sales, respectively, by the third quarter of 2019. Accordingly, the Company changed its pattern of revenue recognition effective October 1, 2019 to the policy described under the section titled “Current Policy” above.

The Company also reassessed whether the revenue recognition criteria had been met for all shipments of products where payment had not been received as of September 30, 2019. While the measures summarized above provided significant evidence necessary to understand the terms of the Company’s contractual arrangements with its customers, certain of these customers continued to exhibit behaviors that resulted in extended periods until cash collection. Such delays in collection suggested that uncertainty regarding extra-contractual arrangements may continue, particularly as it relates to payment terms. As a result, the Company concluded the following for any existing arrangements, which remained unpaid at September 30, 2019:

•For customer arrangements where collection was considered probable within 90 days from the date of original shipment or implantation of the products, the Company concluded the revenue recognition criteria were met. The revenue associated with this event was recognized prior to 2020.

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

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contract would exist and the performance obligations for the Company to deliver product and the customer to pay for the product would be satisfied. The Company continued to reassess the Remaining Contracts for settlement of the revenue recognition criteria prior to payment, concluding that the revenue recognition criteria continued to not be met due to the same circumstances described above.

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

Year Ended December 31,

Group Purchasing Organization Fees

The Company sells to GPO members who transact directly with the Company at GPO-agreed pricing. Group Purchasing Organizations are funded by administrative fees that are paid by the Company. These fees are set as a percentage of the purchase volume, which is typically 3% of sales made to the GPO members. Fees paid to GPOs are presented as a reduction to net sales.

Cost of Sales

Cost of sales includes all costs directly related to bringing the Company’s products to their final selling destination. 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, 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. 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, 2022, 2021, and 2020 was $0.2 million, $0.1 million, and $0.1 million respectively.

Income Taxes

Income tax provision (expense) benefit, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. 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. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance.

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

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pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require significant judgment and are consistent with the plans and estimates the Company uses to manage the underlying businesses. In evaluating the objective evidence that historical results provide, management considers three years of cumulative income (loss). 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. ASC Topic 740, Income Taxes, states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. The Company (1) records unrecognized tax benefits as liabilities in accordance with ASC Topic 740 included within other liabilities on the consolidated balance sheets, and (2) adjusts these liabilities when management’s judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from management’s current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to the deferred tax asset or income tax expense in the period in which new information is available.

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

The Company 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 related deferred tax liability 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 amount of expense to be recognized is determined by the fair value of the award using inputs available as of the grant date. The fair value of equity incentive awards that are not subject to a market condition is the value of common stock on the grant date. For equity incentive awards that are subject to a market condition, the fair value of common stock on the grant date is adjusted to reflect the value of the market condition, generally using a path-dependent pricing model, such as a Monte Carlo simulation.

For awards with service-based vesting conditions only, the Company recognizes share-based compensation expense on a straight-line basis through the vesting date of the last tranche of the award. For awards with service- and performance-based vesting conditions, the Company recognizes stock-based compensation expense using the graded-vesting method, treating each tranche as if it were a separately-granted award and recognizing expense through the vesting date of each individual tranche. In each scenario, the Company recognizes share-based compensation expense based upon the probability that the award will ultimately vest. The Company recognizes the cumulative effect of changes in the probability outcomes in the period in which the changes occur.

For awards subject to a market condition, the resolution of the 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 Loss per Common Share

Basic net loss per common share is calculated as net loss available to common stockholders divided by weighted average common shares outstanding for the applicable period. Net loss available to common stockholders is calculated by adjusting net loss for periodic preferred accrued or deemed dividends. These amounts include (i) dividends accumulated on the Company’s Series B Convertible Preferred Stock (“Series B Preferred Stock”) during the period, (ii) periodic amortization of the beneficial conversion feature, and (iii) periodic accretion of the increasing-rate dividend feature.

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This amount is divided by the weighted average common shares outstanding during the period. Weighted average common shares outstanding is calculated as shares of the Company outstanding adjusted for the portion of the period for which they are outstanding. Unvested restricted stock awards are excluded from the calculation of weighted average common shares outstanding until they have vested.

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

The Company uses the if-converted method to calculate the dilutive effect of the Series B Preferred Stock and other convertible securities to the extent they are outstanding. The if-converted method assumes that convertible securities are converted at the later of the issuance date or the beginning of the period. If the hypothetical conversion of convertible securities, and the consequential avoidance of any deemed or accumulated preferred dividends, would decrease basic net loss per common share, these effects are incorporated in the calculation of diluted net loss per common share, adjusted for the proportion of the period the securities were outstanding.

The Company uses the treasury stock method to calculate the dilutive effect of outstanding options, restricted stock awards, and other share-based payments. The treasury stock method assumes that the proceeds from exercise are used to repurchase common shares at the weighted average market price during the period, increasing the denominator for the net effect of shares issued upon exercise less hypothetical shares repurchased.

If the dilutive effects noted above would cause diluted net loss per common share to exceed basic net loss per common share, such effects are not incorporated into the calculation, as they are deemed antidilutive. For all periods with a net loss available to common stockholders, any adjustment for potential common shares would be naturally anti-dilutive. Therefore, the weighted average shares outstanding used to calculate both basic and diluted net loss per common share are the same for periods with a net loss.

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

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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 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 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-10, “Government Assistance (Topic 832)”, which provides disclosure requirements regarding government grants and contributions. The ASU requires disclosure of the nature of transactions and related accounting policies used to account for transactions, the effect, including amounts, of government assistance on individual line items on the financial statements, and significant terms and conditions of the transactions, including commitments and contingencies. This ASU is effective for fiscal years beginning after December 15, 2021. The Company adopted the provisions of this ASU effective January 1, 2022. There was no impact upon adoption. Refer to Note 20, Government Assistance, for the disclosures required by this ASU.

Recently Issued Accounting Pronouncements Not Yet Adopted

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)”, which provides temporary, optional expedients and exceptions to accounting guidance for certain contract modifications and hedging arrangements to ease financial reporting burdens as a result of market transitions from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates. The guidance is available for prospective application and can generally be applied to contract modifications and hedging relationships entered into beginning March 12, 2020 through December 31, 2022. In December 2022, following the issuance of ASU 2022-06, “Reference Rate Reform (Topic 848) — Deferral of the Sunset Date of Topic 848”, the end date was extended to December 31, 2024.

As of December 31, 2022, the Company has long-term debt outstanding which carries an interest rate tied to LIBOR, the agreement for which contemplates an interest rate alternative in the event that LIBOR is unavailable. The LIBOR tenor which underlies the Company’s term loan is expected to sunset effective June 30, 2023.

The Company is evaluating the possibility of adoption and the related impact on its financial statements. If adopted, the Company does not expect the provisions of this ASU to have a material impact on its consolidated financial statements.

All other ASUs issued and not yet effective as of December 31, 2022, and through the date of this report, were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s current or future financial position or results of operations.

3. Accounts Receivable, Net

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

December 31,

Allowance for doubtful accounts (3,783) (1,187)

Activity related to the Company’s allowance for doubtful accounts during the year ended December 31, 2022 was as follows (in thousands):

Allowance for Doubtful Accounts

Bad debt expense 2,820

Write-offs (224)

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

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4. Inventory

Inventory consists of the following (in thousands):

December 31,

As a result of the conclusion of the FDA’s period of enforcement discretion on May 31, 2021, the Company wrote down $1.0 million of its Section 351 product inventory and $0.7 million related to discontinued product during the year ended December 31, 2021. There were no significant, unusual write-downs of inventory during the year ended December 31, 2022.

Consignment inventory, included as a component of finished goods in the table above, was $3.4 million and $2.6 million as of December 31, 2022 and 2021, respectively.

5. Property and Equipment, Net

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

December 31,

Less: accumulated depreciation and amortization (35,927) (32,878)

Depreciation expense for each of the years ended December 31, 2022, 2021, and 2020 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,

Selling, general, and administrative expense 1,243 2,278 3,416

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6. Leases

The Company has leases for corporate offices, manufacturing facilities, vehicles, and certain equipment. Such leases do not 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,

Assets

Right of use asset $ 3,400 $ 4,696 $ — $ —

Property and equipment, net — — 98 145

Liabilities

Weighted-average remaining lease term (years) 2.8 4.0 2.1 3.1

Weighted-average discount rate 8.3 % 8.4 % 8.3 % 8.3 %

Information related to lease costs are as follows (amounts in thousands):

Year Ended December 31,

Amortization of finance lease ROU assets 47 43 —

Interest expense on finance lease liabilities 10 13 —

Maturities of lease liabilities are as follows (amounts in thousands):

Year Ending December 31, Operating Leases Finance Leases Total

Thereafter — — —

Less: imputed interest (444) (9) (453)

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

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

Sublease

The Company subleases one of its leased industrial warehouse spaces. The sublease income from the facility offsets the lease expense associated with the facility. Sublease income for the facility was $0.1 million for each of the years ended December 31, 2022, 2021, and 2020, respectively, and is presented as a reduction to selling, general, and administrative expense on the consolidated statements of operations in those periods.

7. Goodwill and Intangible Assets, Net

Goodwill

Historically, the Company had concluded that it operated as a single operating segment and single reporting unit. For the year ended December 31, 2022, as a result of changes in the management of the Company’s business, management concluded that the Company operates as three operating segments, including two distinct reportable segments: Wound & Surgical and Regenerative Medicine. See Note 13, Segment Information, for a description of the Company’s operating segments. Management further concluded that these two reportable segments reflected its reporting units for goodwill impairment testing purposes.

The Company allocated $20.0 million of consolidated goodwill, which was entirely allocated to its previous reporting unit, to each of its Wound & Surgical and Regenerative Medicine segments based on their relative fair values from a market participant standpoint. The result was $19.4 million and $0.5 million allocated to Wound & Surgical and Regenerative Medicine, respectively. A third reporting unit associated with the Company’s third operating segment was deemed immaterial and no goodwill was assigned to it.

The Company performed goodwill impairment tests using the Company’s single reporting unit and the new reporting units on September 30, 2022. In all cases, the Company concluded that the estimated fair values of each reporting unit exceeded its respective carrying values. Therefore, the Company did not record impairment for goodwill on September 30, 2022.

For the annual impairment test performed October 1, 2022, the Company performed a quantitative assessment to determine the existence of impairment. The quantitative assessment concluded that it was more likely than not that goodwill was not impaired. No impairment was recorded for the year ended December 31, 2022.

For the annual impairment test performed on October 1, 2021, the Company performed a qualitative assessment to determine the existence of impairment. The qualitative assessment concluded that it was more likely than not that goodwill was not impaired. The Company did not proceed to the quantitative assessment, and no impairment was recorded for the year ended December 31, 2021.

The following table indicates the changes in the carrying amount of goodwill for 2022 and 2021 (in thousands):

Previous Reporting Unit Wound & Surgical Regenerative Medicine Total Company

Activity — — — —

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Intangible Assets, Net

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

Amortized intangible assets

Unamortized intangible assets

Amortization expense and impairment expense for the years ended December 31, 2022, 2021, and 2020, is summarized in the table below (amounts in thousands):

Year ended December 31,

Amortization of intangible assets $ 701 $ 820 $ 1,073

Impairment of intangible assets — 53 1,027

Impairment of intangible assets in 2021 related to supplier relationship assets that were determined to be unrecoverable due to attrition. Impairment of intangible assets in 2020 related to customer relationship assets that were determined to be unrecoverable due to lower than expected margins.

Expected future amortization of intangible assets as of December 31, 2022, is as follows (in thousands):

Estimated

Amortization

Year Ending December 31, Expense

Total amortization expense $ 3,813

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8. Accrued Expenses

Accrued expenses consist of the following (in thousands):

December 31,

Accrued clinical trials 90 694

9. Long Term Debt

Hayfin Loan Agreement

On June 30, 2020, the Company entered into a Loan Agreement with, among others, Hayfin Services, LLP, (“Hayfin”) an affiliate of Hayfin Capital Management LLP (the “Hayfin Loan Agreement”), which was funded on July 2, 2020 and provided the Company with a senior secured term loan in an aggregate amount of $50.0 million (the “Term Loan”). The Term Loan matures on June 30, 2025 (the “Maturity Date”). Interest is payable quarterly on the Term Loan for the principal balance outstanding through the Maturity Date. No principal payments are due and payable until the Maturity Date.

The Hayfin Loan Agreement also provided the Company with an option to draw on an additional delayed draw term loan (the “DD TL”, collectively with the Term Loan, the “Credit Facilities”) in the form of a committed but undrawn $25.0 million facility until June 30, 2021. The Company did not exercise the option.

On February 28, 2022, the Company executed an Amendment to the Hayfin Loan Agreement (as amended, the “Amended Hayfin Loan Agreement”). The amendment was accounted for as a modification. No gain or loss was recognized nor was there a change to the carrying amount of the debt as a result of the amendment.

Interest on any borrowings under the Amended Hayfin Loan Agreement is equal to the London Interbank Offered Rate (“LIBOR”) (subject to a floor of 1.5%) plus a margin of 6.75% per annum. If LIBOR is unavailable, the Term Loan will carry interest at the 6.75% margin plus the greatest of the Prime Rate, the Federal Funds Rate plus 0.5% per annum, and 2.5%.

An additional 3.0% margin is applied to the interest rate in the event of default as defined by the Amended Hayfin Loan Agreement. The Term Loan carried an interest rate of 8.3% at issuance and 11.5% as of December 31, 2022.

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

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

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

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

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The Amended Hayfin Loan Agreement also includes certain negative covenants and events of default customary for facilities of this type, and upon the occurrence of such events of default, subject to customary cure rights, the Term Loan may be accelerated or the lenders’ commitments terminated. Mandatory prepayments are also required in the event of a change in control, incurring other indebtedness, certain proceeds from disposal of assets and insured casualty event (as defined in the Amended Hayfin Loan Agreement). Annually, beginning with the fiscal year ended December 31, 2021, the Company is required to prepay the outstanding loans based on a percentage of Excess Cash Flow (as defined in the Amended Hayfin Loan Agreement), if such is generated. No such prepayments have been required as of December 31, 2022.

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

•On or before July 2, 2023: 2% of the principal balance repaid.

•After July 2, 2023, but on or before July 2, 2024: 1% of the principal balance repaid.

•After July 2, 2024: no premium.

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

A breach of a financial covenant in the Amended Hayfin Loan Agreement, if uncured or unable to be cured, would likely result in an event of default that could trigger the lender’s remedies, including acceleration of the entire principal balance of the loan as well as any applicable prepayment premiums. Future compliance with the financial covenants, as amended, requires continuing growth in net sales consistent with the Company’s business strategy and plans. The Company is subject to inherent uncertainties that could impact the Company’s net sales growth, including, but not limited to, the regulatory pathway of the Company’s EPICORD® and AMNIOCORD®. If the FDA were to determine that these products do not meet the requirements for regulation solely under Section 361, the Company would be required to obtain the appropriate FDA clearance or approval to continue marketing these products. The loss of the Company’s ability to market and sell its umbilical cord-derived products would have an adverse effect on the Company’s revenue, business, financial condition, and results of operations, including its ability to comply with the financial covenants set forth pursuant to the Amended Hayfin Loan Agreement. Refer to Note 12, Revenue, for net sales derived from the Company’s cord products.

Original issue discount and deferred financing costs were allocated between the sale of the Series B Preferred Stock (which occurred simultaneously with the funding of the Hayfin Loan Agreement, collectively the “Financing Transactions”) and the Term Loan on the basis of the relative fair values of the transactions. The costs allocated to the Hayfin Loan Agreement were further allocated between the Term Loan and the DD TL on the basis of the maximum potential principal outstanding between the Credit Facilities. The allocation of the deferred financing costs and original issue discount between Term Loan and the DD TL on July 2, 2020 was as follows (amounts in thousands):

Term Loan DD TL Total

Deferred financing costs and original issue discount allocated to the Term Loan are amortized using the effective interest method through the Maturity Date. The amortization of such amounts is presented as part of interest expense, net on the consolidated statement of operations for the years ended December 31, 2022, 2021, and 2020.

Deferred financing costs and original issue discount associated with the DD TL were amortized using the straight-line method through the expiration of the DD TL commitment term on June 30, 2021. Amortization of these amounts are presented as part of interest expense, net on the consolidated statements of operations for the years ended December 31, 2021 and 2020.

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

F-23

December 31,

Original issue discount (187) (249)

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

Year Ended December 31,

Amortization of deferred financing costs 405 372 173

Accretion of original issue discount 62 58 26

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

Year Ended December 31,

Amortization of deferred financing costs — 542 542

Accretion of original issue discount — 83 83

Interest expense $ — $ 751 $ 753

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

Year ending December 31, Principal

MDXG US Equity

MDXG · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

MDXG US Equity☆

MDXG · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data

MDXG US Equity