Form 10-KT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period from April 1, 2009 to December 31, 2009
Commission file number 0-52491
MIMEDX GROUP, INC.
(Exact name of registrant as specified in its charter)
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Florida
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26-2792552 |
(State or other jurisdiction of incorporation)
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(I.R.S. Employer Identification Number) |
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811 Livingston Court, Suite B |
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Marietta, GA
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30067 |
(Address of principal executive offices)
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(Zip Code) |
(678) 384-6720
Registrants telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
(Title of class)
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes o No þ
Indicate by check mark whether the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§229,405 of this chapter) during the preceeding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes o
No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of the registrants knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definitions of large accelerated
filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange
Act. (Check one):
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company þ |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes o No þ
The aggregate market value of Common Stock held by non-affiliates on September 30, 2009, based upon
the last sale price of the shares as reported on the OTC Bulletin Board on such date, was
approximately $24,400,000.
There were 51,331,613 shares of Common Stock outstanding as of March 15, 2010.
Documents Incorporated by Reference
Portions of the proxy statement relating to the 2010 annual meeting of shareholders, to be
filed within 120 days after the end of the fiscal year to which this report relates, are
incorporated by reference in Part III of this Report.
PART I
This Form 10-K and certain information incorporated herein by reference contain
forward-looking statements and information within the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and
Section 21E of the Securities Exchange Act of 1934. This information includes assumptions made by,
and information currently available to management, including statements regarding future economic
performance and financial condition, liquidity and capital resources, acceptance of the Companys
products by the market, and managements plans and objectives. In addition, certain statements
included in this and our future filings with the Securities and Exchange Commission (SEC), in
press releases, and in oral and written statements made by us or with our approval, which are not
statements of historical fact, are forward-looking statements. Words such as may, could,
should, would, believe, expect, anticipate, estimate, intend, seeks, plan,
project, continue, predict, will, should, and other words or expressions of similar
meaning are intended by us to identify forward-looking statements, although not all forward-looking
statements contain these identifying words. These forward-looking statements are found at various
places throughout this report and in the documents incorporated herein by reference. These
statements are based on our current expectations about future events or results and information
that is currently available to us, involve assumptions, risks, and uncertainties, and speak only as
of the date on which such statements are made.
Our actual results may differ materially from those expressed or implied in these
forward-looking statements. Factors that may cause such a difference, include, but are not limited
to those discussed in Part I, Item 1A, Risk Factors, below. Except as expressly required by the
federal securities laws, we undertake no obligation to update any such factors, or to publicly
announce the results of, or changes to any of the forward-looking statements contained herein to
reflect future events, developments, changed circumstances, or for any other reason.
As used herein, the terms the Company, we, our and us refer to MiMedx Group, Inc., a
Florida corporation (formerly Alynx, Co.), and its consolidated subsidiaries as a combined entity,
except where it is clear that the terms mean only MiMedx Group, Inc.
Item 1. Business
Overview
MiMedx Group, Inc. (MiMedx Group) is an integrated developer, manufacturer and marketer of
patent protected biomaterial-based products. MiMedx Group is emerging from a development-focused
start-up company into a fully integrated operating company with the expertise to capitalize on its
science and technology and the capacity to generate sales growth and profitability.
Repair, dont replace is the mantra of the MiMedx Group biochemists, engineers, and
designers who are developing todays biomaterial-based solutions for patients and physicians.
Market research shows the first desire of patients ranging from active baby-boomers and weekend
warriors to high-school and professional athletes is to augment repair when possible, rather than
replace traumatized, but otherwise healthy tissues and structures. Clinical research has proven
that biomaterials can be used to achieve augmentation and repair.
Our Strategy
The Companys initial business strategy was to identify and acquire innovative new medical
products and technologies, focused primarily on the musculoskeletal market, as well as novel
medical instrumentation and surgical techniques. We have recently refined our strategy to focus on
our proprietary biomaterial technologies that can be transformed into unique medical devices that
fill an unmet or underserved clinical need. Our HydroFix hydrogel technology and our CollaFix
collagen fiber technology are proprietary platforms that can serve as the basis for medical devices
in various orthopedic and orthobiologic applications, such as spine, sports medicine, and trauma.
We also have identified multiple product opportunities in general surgery, drug delivery, wound
management and cardiac markets, among others.
Our plan is to focus our internal commercialization efforts on orthopedics and orthobiologic
applications for our technologies and to partner with large, established companies in the general
surgery, drug delivery, wound management, cardiac and other markets. Initial conversations with
respect to such external relationships have been initiated, but they will take time to develop.
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We have organized an advisory panel of leading physicians to provide insight into our primary
fields of interest for new products and technology, as well as guidance and advice with respect to
ongoing product development programs.
Under the direction of our new leadership, our core focus is on near-term opportunities for
each of our technologies, advancing them through the regulatory process, establishing reliable and
cost-effective manufacturing, and establishing an effective distribution system.
History of MiMedx Group, Inc.
MiMedx Group, Inc. originally was formed as a Utah corporation on July 30, 1985, under the
name Leibra, Inc. We later changed domicile, through a merger, to Nevada, and subsequently changed
our name to Alynx, Co. We had several additional name changes in connection with various business
acquisitions, all of which were discontinued or rescinded. We were an inactive shell corporation
for 10 years or more, seeking to acquire an interest in a business with long-term growth potential.
On March 6, 2007, Alynx, Co. filed a registration statement with the SEC on Form 10-SB to register
its common stock under the Securities Exchange Act of 1934.
In a merger consummated on February 8, 2008, Alynx, Co. acquired MiMedx, Inc., a
Florida-based, privately-held, development-stage medical device company (MiMedx) founded by Steve
Gorlin. MiMedxs assets included three development units focused on the development of medical
devices based on their respective patented and proprietary technologies. MiMedxs primary
development unit was focused on the development of products for the repair of soft tissue, such as
tendons, ligaments and cartilage, using a collagen fiber-based platform predicated on certain cross
linking technology, which was licensed from Shriners Hospital for Children and University of South
Florida Research Foundation in January 2007. The assets of MiMedx also included 100% of the
membership interests in SpineMedica, LLC (SpineMedica), a development-stage company focused on
Orthopedic-Spine biomaterial technologies using a poly-vinyl alcohol (PVA) based hydrogel that
its predecessor, SpineMedica Corp., licensed from SaluMedica, LLC for applications related to the
spine in August 2005, and for applications related to the hand (excluding the wrist) and rotator
cuff in August 2007. Additionally, MiMedxs assets included certain intellectual property related
to implants for use in fracture fixation in the upper extremities, which we referred to as the
LeveL Orthopedics assets. These assets had been contributed to, or developed on behalf of, MiMedx
pursuant to a consulting agreement it had entered into in September 2007, with Thomas J. Graham,
M.D., a leading hand surgeon.
On March 31, 2008, Alynx, Co. merged into MiMedx Group, Inc., a Florida corporation and
wholly-owned subsidiary that had been formed on February 28, 2008, for purposes of the merger.
MiMedx Group, Inc. was the surviving corporation in the merger. Also on March 31, 2008, MiMedx
entered into a license with SaluMedica, LLC, for the PVA-based hydrogel biomaterial for
applications as a surgical sheet outside of the spine.
To assist the Company in transitioning from a development stage company to an operating
company, effective February 24, 2009, the Companys Board of Directors appointed Parker H. Pete
Petit to serve as the Companys Chairman of the Board, President and Chief Executive Officer. Mr.
Petit has over 30 years experience in the healthcare products and services markets, and a track
record of having successfully nurtured several companies from the development stage to industry
leadership. In September 2009, Mr. Petit recruited another experienced medical device executive,
William C. Taylor, to become the Companys President and Chief Operating Officer. Mr. Taylor has
over 20 years of medical device design, development, and manufacturing experience.
On April 20, 2009, we received clearance from the U.S. Food and Drug Administration (the
FDA) to market our Paradís Vaso Shield device, indicated for use as a cover for vessels
following anterior vertebral surgery. In October 2009, we divested our LeveL Orthopedics assets in
order to focus exclusively on biomaterials, and also relinquished the SaluMedica license for the
hydrogel application in the hand.
Prior to the 4th quarter of 2009, the Company explored business strategies through
our three development units, MiMedx, SpineMedica and LeveL Orthopedics. After the sale of the
LeveL assets and a thorough review of the strategic direction of the Company, management made the
decision in late 2009 to consolidate the organizational structure. Instead of independent
development teams and manufacturing locations, we will have integrated development teams and all
manufacturing will be consolidated into one site. Our Tampa, Florida location will focus on
research and early stage product and process development. Our Marietta, Georgia location will
house our corporate headquarters, our development and sales teams and all manufacturing and
distribution operations.
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In December 2009 we made the decision to simplify our corporate and technology branding in
order to build a stronger brand identity. Our new branding strategy is to focus on MiMedx Group,
Inc. as the corporate brand identity and to brand each of our technologies, rather than each
product embodying our technologies. Our PVA Hydrogel technology is now called HydroFix and our
collagen fiber technology is now called CollaFix. We are currently transitioning the name of our
current product from Paradís Vaso Shield to HydroFix Vaso Shield.
Our Products
CollaFix Products
The CollaFix technology combines an innovative means of creating fibers from soluble collagen
and a unique cross-linking process that utilizes nordihydroguaiaretic acid (NDGA), a naturally
occurring plant compound. Initial laboratory and animal testing shows that collagen cross-linked
with NDGA produces a very strong, biocompatible, and durable fiber that can be transformed into
surgical meshes intended to treat a number of orthopedic soft-tissue trauma and disease disorders.
Furthermore, tests have shown NDGA biocompatibilizes certain materials that may otherwise create a
foreign body response. NDGA is a biological compound, and therefore biomaterials cross-linked with
NDGA are composed entirely of biological components.
Embodiments and benefits of products that we believe, based on preliminary studies, could be
developed using this licensed technology are:
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Initial tests of fibers cross-linked with NDGA appear to demonstrate they are
stronger than existing collagenous tissue, including healthy tendons and ligaments.
These fibers form the fundamental unit from which a variety of devices could be
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Linear and braided arrays for tendon and ligament repair |
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Cross-helical arrays forming tubular structures that also can be cut to form flat patches |
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Woven meshes for general surgical use; |
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NDGA-treated biomaterials have been tested and results preliminarily suggest that
the materials are biocompatible and biodegradable; |
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Biocompatibilization (making a material biocompatible that may otherwise not be)
of in-dwelling medical devices by coating with NDGA polymerized collagen; |
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NDGA treatment of xenograft (animal in origin) and allograft (human in origin)
materials could make them more biocompatible and possibly improve functional lifetime;
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NDGA-treated collagen-based biorivets have the potential to be used for bone
fracture fixation. |
Our core collagen technology is licensed to us and is embodied in two patents. The core
patent covers the polymerization chemistry of NDGA as applied to biological materials,
bioprostheses, or devices created through its application. It covers chemistries and compounds that
have the reactive groups that are responsible for the effectiveness of NDGA, including a variety of
organically synthesized NDGA analogs and natural compounds. Multiple medical products potentially
could be developed and patented that are all tied to the core patented technology.
We are currently pursuing the manufacture and optimization of various collagen constructs and
we are focused on advancing our products through the regulatory process to receive FDA clearance to
introduce our products to the market.
We may license rights to specific aspects of our collagen technology to third parties for use
in applications and indications that we choose not to exploit ourselves.
HydroFix Products
We license rights to a PVA polymer, which is a water-based biomaterial that can be
manufactured with a wide range of mechanical properties, including those that appear to mimic
closely the mechanical and physical properties of natural, healthy human tissue. This hydrogel has
been used in other orthopedic and general surgery device applications, and we believe it has
demonstrated biocompatibility and durability inside the human body. Regulatory agencies both
inside and outside the United States have cleared the hydrogel material for use inside the body for
several applications. For example, in the United States, the FDA has cleared devices using the
hydrogel material for use as a cover for vessels following anterior vertebral surgery as well as
for use next to nerves. In the European Union and Canada, devices using the hydrogel material have
been cleared for use next to nerves, to replace worn-out and lesioned cartilage in the knee, and as
a post-surgical adhesion inhibiting barrier for spine surgeries in specific locations.
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As mentioned above, on April 20, 2009, we received FDA clearance via a 510(k), for our Paradís
Vaso Shield, recently renamed HydroFix Vaso Shield (the Vaso Shield), which is a vessel guard
made of our hydrogel material. Protection of veins and arteries is a common issue associated with
many types of surgeries. Protection of the aorta, vena cava, iliac vessels and other anatomy is
particularly important in anterior spine surgery. The HydroFix Vaso Shield was designed to help
physicians protect vessels following anterior vertebral surgery. The FDA cleared the HydroFix
Vaso Shield as a vessel guard or cover for anterior vertebral surgery, however, the safety and
effectiveness of this device for reducing the incidence, severity and extent of post-operative
adhesion formation has not been established.
We have a similar version of the product for the European market called HydroFix Spine
Shield, which has recently received the CE mark. The device is classified as a post-surgical
adhesion inhibiting barrier and is used in specific spine surgeries. The CE marking, also known as
CE Mark, is a mandatory conformity mark on many products placed on the single market in the
European Economic Area (EEA). The CE marking certifies that a product has met European Union (EU)
consumer safety, health or environmental requirements. The CE marked HydroFix Spine Shield is not
available in the United States.
We are currently in the process of identifying other uses and indications for the HydroFix
technologies, including, but not limited to other areas of the spine as well as healthcare
categories outside the spine, such as general surgery, obstetrics, and gynecology, maxilla-facial,
plastic and cosmetic applications, and others. We filed our second 510(k) application for the
HydroFix sheet material in February 2010 for anticipated use in orthopedic applications.
Market Opportunity
In 2008, the value of the Orthopedic-Biomaterials segment was estimated to be $7.4 billion,
representing over 20% of the total Orthopedic Market. It is estimated that this market segment
will grow at over 13% per year, which is more than double the growth rate for the overall
Orthopedics Market. The Biomaterials market is expected to grow to a value of $9.4 billion by
2011, mainly due to advancements in materials science technology, the incidence of trauma and
disease associated with the baby-boomer population and resource focus and investment (MedMarket
Diligence, Report #M625, Emerging Trends, Technologies and Opportunities in the Markets for
Orthopedic Biomaterials, Worldwide, 2008).
Orthopedics is one of the largest medical sectors utilizing biomaterials. The development of
advanced generation products has prompted many orthopedic companies whose foundations lie in
traditional therapies to focus on biomaterials due to physician and patient demand. We believe that
new biomaterial products will continue to replace existing products.
The main orthopedic biomaterials markets driving growth are connective and soft tissues, such
as tendon and ligament repair (tendons connect muscle to bone and ligaments connect bone to bone),
meniscus repair, bone grafts, resorbable technologies, and cartilage repair.
We believe that the number of procedures that might utilize our products is large. The total
number of procedures of arthroscopy and soft-tissue repair (including shoulders, hands, knees,
ankles, and elbows) in 2003 was estimated at approximately 2.6 million compared to approximately
2.3 million procedures in 2002 according to The Ortho FactBook (2006), published by
Knowledge Enterprises, Inc.
Rotator cuff injuries represent a leading cause of shoulder instability and result in
approximately 300,000 invasive procedures annually, according to MedTech Insight, an industry
marketing research firm.
Also, the NDGA-based biomaterials and related processes under license may prove suitable for
use in general surgical procedures for reinforcement of soft tissue where weakness exists or scar
tissue formation is not desirable.
The market revenues for biomaterials in wound care are expected to rise at an accelerated
compound annual growth rate of 16.5% from 2006-2013. Combination products (biomaterial dressings
that also possess moist dressing, antimicrobials, or alginates) are further driving growth and
gaining market share from other advanced wound dressing segments, according to the Frost and
Sullivan US Interactive Wound Care Markets Report for 2008.
The market for general soft-tissue patches and slings is not heavily populated because few
products have fully satisfied clinical needs and physicians and patients are demanding implants
that resorb over time. In 2005, the general soft-tissue repair market for the products listed above
was valued at over $600 million in the United States and over $500 million in Europe, with an
anticipated growth rate of 14% through 2010, according to a 2006 market research report by
Millennium Research Group.
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Tendon and Ligament Repair Technologies
Advancements in tendon surgery have focused largely on augmenting the standard of care using
synthetic and biomaterials including collagen based devices. Advancements in ligament surgery have
focused largely on new methods of graft fixation using interference screws and anchors, which have
opened new approaches to repair. We believe there is a new wave of development for ligament and
tendon repair, including collagen matrices, allografts and tissue engineered tendons and ligaments
that we believe will change how physicians treat these procedures. Therapeutic modalities we
continue to focus on are related to the treatment and repair of soft tissues during tendon repair
surgery, including reinforcement of the rotator cuff, patellar, Achilles, biceps, quadriceps or
other tendons. Following clinical development of the above, we plan to focus on treatments for
ligaments and joints, such as medial and lateral collateral ligaments of the knee, elbow and ankle
and meniscal repair. Our products potentially could be used in other orthopedic categories as well.
PVA-Based Biomaterials
Our PVA based biomaterial, HydroFix, has been used in several medical device applications and
is cleared by the FDA for use as a cover for vessels following anterior vertebral surgery and for
use as a nerve cuff (SaluMedica, LLC). We have licensed the right to use Salubria®, SaluMedica
LLCs formulation, or similar PVA-based biomaterials for certain applications within the body under
a world-wide license (see Collaborations and License Agreements). The material, as Salubria®, has
been sold in Europe for certain applications for over seven years. The PVA-based hydrogel can be
processed to have mechanical and physical properties similar to that of human tissue. The biostable
hydrogel composition contains water in similar proportions to human tissue, mimicking human
tissues strength and compliance. For certain applications, the PVA-based hydrogel has been
formulated to be wear-resistant and strong. The base organic polymer is known to be biocompatible
and hydrophilic. These properties make it a candidate for use as an implant, and may prove suitable
for development into medical products addressing various applications. The PVA-based hydrogel and
products formed therefrom are MRI compatible (allowing for Magnetic Resonance Imaging of a patient
with no artifacts or special safety precautions necessary). We currently license the PVA-based
hydrogel for use in the spine, rotator cuff and as a surgical sheet.
Spine Anatomy and Disorders
The spine is considered by many orthopedic and neurosurgeons to be the most complex motion
segment of the human body. It provides a balance between structural support and flexibility. It
consists of 26 separate bones called vertebrae that are connected together by connective tissue to
permit a normal range of motion. The spinal cord, the bodys central nerve conduit, is enclosed
within the spinal column. Vertebrae are paired into what are called motion segments that move by
means of three joints: two facet joints and one spinal disc.
The four major categories of spine disorders are degenerative conditions, deformities, trauma
and tumors. The largest market is degenerative conditions of the vertebral discs. These conditions
can result in instability, pressure and impingement on the nerve roots as they exit the spinal
column, causing often severe and debilitating pain in the back, arms and/or legs.
Current Treatments for Spine Disorders
The current prescribed treatment for spine disorders depends on the severity and duration of
the disorder. Initially, physicians typically prescribe non-operative procedures including bed
rest, medication, lifestyle modification, exercise, physical therapy, chiropractic care and steroid
injections. Non-operative treatment options are often effective; however, other patients require
spine surgery. According to Knowledge Enterprises, Inc., the number of spine surgery procedures
grew to over 1.2 million per year in 2005 in the United States. The most common spine surgery
procedures are: discectomy, the removal of all or part of a damaged disc; laminectomy, the removal
of all or part of a lamina, or thin layer of bone, to relieve pinching of the nerve and narrowing
of the spinal canal; and fusion, where two or more adjoining vertebrae are fused together to
provide stability.
Spine Repair and Vessel Protection
MedTech Insight, LLCs March 2007 report on United States Markets for Spinal Motion
Preservation Devices, states that an estimated 50 million people in the United States suffer from
back pain. This report also states that in 2004, more than 1 million spine surgeries were performed
in the United Statesfar more than the number of hip and knee replacements combined. Factors
driving growth of the spine surgery products market include the growing number of people with
degenerative disc disease, which typically is caused by gradual disc damage and often results in
disc herniation and chronic, debilitating lower back pain. It is most common among otherwise
healthy people in their 30s and 40s and affects approximately half of the United States population
age 40 and older.
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A disc herniation, or abnormal bulge or rupture, is often caused by degenerative disc disease
but may also result from trauma and/or injury. As we age, the discs nucleus pulposus, or the
center of a spinal disc, loses its water content and the disc begins to degenerate, becoming drier,
less flexible, and prone to damage or tears. By the time a person reaches age 80, the nucleus
pulposus water content decreases to approximately 74%; during the first year of a persons life,
the water content is approximately 90%. The annulus fibrosus, or the outer rim of a spinal disc,
also may be damaged by general wear and tear or by injury and can cause bulging and impingement on
adjacent nerve roots.
Repair of herniated intervertebral discs or damage as a result of degenerative disc disease
commonly involves surgical intervention such as fusion or total disc replacement (TDR).
Postsurgical adhesions and fibrosis formation are a common consequence of the normal healing
process. The presence of fibrosis may render reoperations or follow-up surgeries risky and have
caused nerve root tethering in some patients.
One approach to protecting vessels following anterior vertebral surgery is to provide a
barrier between the anterior spine and adjacent vessels. Some studies, not performed by us, have
demonstrated that the application of a barrier to protect adjacent vessels may create a dissection
plane for future surgeries in that anatomical area.
The safety and effectiveness of the FDA cleared HydroFix Vaso Shield device for reducing the
incidence, severity and extent of post-operative adhesion formation has not been established.
Another market for which a barrier or plane of dissection-type product is needed is in
gynecological uses where the removal and surgical cutting of fibroids and cysts, hysterectomies,
and other procedures may lead to post-surgical adhesions. Such adhesions may result in infertility
and pelvic pain. Gynecological surgery provides a compelling market because of the high volume of
procedures worldwide, and because gynecological infertility surgery is frequently followed up by a
laparoscopic second-look procedure at the disease site.
There are many other medical categories for which scar-tissue and fibrosis formation are
complicating issues and the Company is researching opportunities for expansion of this product
platform.
Physician Advisory Boards
We have empanelled a number of key physician opinion leaders in relevant fields by asking
these physicians to serve on one of our Physician Advisory Boards (PABs). Each has entered into
a consulting agreement with the Company.
Our PABs include physicians who move medicine forward by scientific endeavor, such as
publishing, teaching and developing new solutions to treat injury and diseases. Several members
chair their respective departments at university medical schools, teaching institutions and
fellowship programs.
The Chairman of our Sports Medicine PAB is James Andrews, M.D., of Birmingham, Alabama, and
Gulf Breeze, Florida. Dr. Andrews is one of the best known and most respected sports-medicine
physicians in the world. He is the physician for several National Football League and Major League
Baseball teams and treats many of the highest-paid professional athletes from numerous teams and
from a multitude of sports, including Drew Brees, the 2010 Superbowl MVP, and is regularly profiled
in newspapers and magazines. Dr. Andrews also runs a sought-after fellowship program.
The Sports Committee is chaired by Lonnie Paulos, M.D. a renowned orthopedic surgeon and
researcher. Dr. Paulos is presently a surgeon at the Andrews-Paulos Institute for Orthopedics &
Sports Medicine in Gulf Breeze, Florida. He is the former physician to the Cincinnati Bengals,
Cincinnati Reds, US Ski team, and the US Gymnastics Federation.
Similarly, we have assembled a group of leading orthopedic spine and neurosurgeons who are
advising on the development of our spinal implants, instruments and surgical procedures
The Chairman of the Spine PAB is Randal Betz, M.D. Dr. Betz holds hospital positions as Chief
of Staff at Shriners Hospitals for Children and Medical Director of Shriners Spinal Cord Injury
Unit, in Philadelphia, PA. Additionally, Dr. Betz is on staff at Temple University Childrens
Medical Center and is a Professor of Orthopaedic Surgery at Temple University School of Medicine.
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Government Regulation
Our products are medical devices subject to extensive regulation by the FDA, under the Federal
Food, Drug, and Cosmetic Act and they are also regulated in the European Union through the Medical
Device Directive. Similar regulations apply in other countries. These regulations govern, among
other things, the following activities:
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product design and development; |
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premarket clearance or approval; |
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advertising and promotion; |
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product sales and distribution; and |
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medical device reporting. |
Each medical device that we distribute commercially in the U.S. likely will require either
510(k) clearance or Premarket Approval (PMA) from the FDA prior to marketing. Devices deemed to
pose relatively less risk are placed in either Class I or II which requires the manufacturer to
submit a premarket notification requesting permission for commercial distribution; this is known as
510(k) clearance, which indicates that the device is substantially equivalent to devices already
legally on the market. Most Class I devices are considered very low risk and are exempted from this
requirement. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining,
life-supporting or implantable devices, or devices deemed not substantially equivalent to a
previously 510(k) cleared device or a pre-amendment Class III device for which PMA applications
have not been required, are placed in Class III, requiring PMA approval.
Some of our products contain biologic materials. We believe that the FDA will regulate our
products as medical devices. However, the FDA may determine that some of our products are
combination products comprised of a biologic and medical device component. For a combination
product, the FDA must determine which center or centers within the FDA will review the products and
under what legal authority the products will be reviewed. While we believe our products would
likely be regulated under the medical device authorities even if they are deemed combination
products, there can be no assurances that the FDA will agree. In addition, the review of
combination products is often more complex and more time consuming than the review of a product
under the jurisdiction of only one center within the FDA.
510(k) Clearance Pathway
To obtain 510(k) clearance for one of our products, we must submit a premarket notification
demonstrating that the proposed device is substantially equivalent in intended use and in safety
and effectiveness to a previously 510(k) cleared device or a device that was in commercial
distribution before May 28, 1976, for which the FDA has not yet called for submission of PMA
applications. The FDAs 510(k) clearance pathway usually takes from four to 12 months, but it can
take significantly longer for submissions that include clinical data.
After a device receives 510(k) clearance, any modification that could significantly affect its
safety or effectiveness, or that would constitute a major change in its intended use, requires a
new 510(k) clearance or could require a PMA approval. The FDA requires each manufacturer to make
this determination in the first instance, but the FDA can review any such decision. If the FDA
disagrees with a manufacturers decision not to seek a new 510(k) clearance, the agency may
retroactively require the manufacturer to seek 510(k) clearance or PMA approval. As part of the
PMA review, the FDA typically will inspect the manufacturers facilities for
compliance with Quality System Regulation, or QSR, requirements, which prescribe elaborate
testing, control, documentation and other quality assurance procedures.
The FDA also can require the manufacturer to cease marketing and/or recall the modified device
until 510(k) clearance or PMA approval is obtained.
9
PMA Approval Pathway
If 510(k) clearance is unavailable for one of our products, the product must follow the PMA
approval pathway, which requires proof of the safety and effectiveness of the device to the FDAs
satisfaction. The PMA approval pathway is much more costly, lengthy and uncertain. It generally
takes from one to three years and can take even longer.
A PMA application must provide extensive preclinical and clinical trial data and also
information about the device and its components regarding, among other things, device design,
manufacturing and labeling. As mentioned above, in conjunction with a PMA review, the FDA typically
will inspect the manufacturers facilities for compliance with QSR requirements, which prescribe
elaborate testing, control, documentation and other quality assurance procedures.
Upon submission, the FDA determines if the PMA application is sufficiently complete to permit
a substantive review, and, if so, the application is accepted for filing. The FDA then commences an
in-depth review of the PMA application, which typically takes one to three years, but may take
longer. The review time is often significantly extended as a result of the FDA asking for more
information or clarification of information already provided. The FDA also may respond with a not
approvable determination based on deficiencies in the application and require additional clinical
trials that are often expensive and time consuming and can delay approval for months or even years.
During the review period, an FDA advisory committee may be convened to review the application and
recommend to the FDA whether, or upon what conditions, the device should be approved. Although the
FDA is not bound by the advisory panel decision, the panels recommendation is important to the
FDAs overall decision making process.
If the FDAs evaluation of the PMA application is favorable, the FDA typically issues an
approvable letter requiring the applicants agreement to specific conditions (e.g., changes in
labeling) or specific additional information (e.g., submission of final labeling) in order to
secure final approval of the PMA application. Once the approvable letter is satisfied, the FDA will
issue a PMA for the approved indications, which can be more limited than those originally sought by
the manufacturer. The PMA can include post approval conditions that the FDA believes necessary to
ensure the safety and effectiveness of the device including, among other things, restrictions on
labeling, promotion, sale and distribution. Failure to comply with the conditions of approval can
result in material adverse enforcement action, including the loss or withdrawal of the approval.
Even after approval of a PMA, a new PMA or PMA supplement is required in the event of a
modification to the device, its labeling or its manufacturing process.
Clinical Trials
A clinical trial is generally required to support a PMA application and is sometimes required
for a premarket notification. Such trials generally require submission of an application for an
Investigational Device Exemption, or IDE. The IDE application must be supported by appropriate
data, such as animal and laboratory testing results, showing that it is safe to test the device in
humans and that the testing protocol is scientifically sound. The IDE must be approved in advance
by the FDA for a specified number of patients (unless the product is deemed a nonsignificant risk
device eligible for more abbreviated IDE requirements). Clinical trials are subject to extensive
monitoring, record keeping and reporting requirements. Clinical trials may begin once the IDE
application is approved by the FDA and the appropriate institutional review boards, or IRBs, at the
clinical trial sites, and must comply with FDA regulations. To conduct a clinical trial, we also
are required to obtain the patients informed consent that complies with both FDA requirements and
state and federal privacy and human subject protection regulations. We, the FDA or the IRB could
suspend a clinical trial at any time for various reasons, including a belief that the risks to
study subjects outweigh the anticipated benefits. Even if a trial is completed, the results of
clinical testing may not adequately demonstrate the safety and efficacy of the device or may
otherwise not be sufficient to obtain FDA approval to market the product in the U.S.
10
Postmarket
After a device is placed on the market, numerous regulatory requirements apply. These include:
the Quality System Regulation, which requires manufacturers to follow elaborate design, testing,
control, documentation and other quality assurance procedures during the manufacturing process;
labeling regulations; the FDAs general prohibition against promoting products for unapproved or
off-label uses; and the Medical Device Reporting regulation, which requires that manufacturers
report to the FDA if their device may have caused or contributed to a death or serious injury or
malfunctioned in a way that would likely cause or contribute to a death or serious injury if it
were to recur. Class II devices also can have special controls such as performance standards,
postmarket surveillance, patient registries, and FDA guidelines that do not apply to Class I
devices.
We are subject to inspection and marketing surveillance by the FDA to determine our compliance
with regulatory requirements. If the FDA finds that we have failed to comply, it can institute a
wide variety of enforcement actions, ranging from a public warning letter to more severe sanctions
such as:
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fines, injunctions, and civil penalties; |
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recall or seizure of our products; |
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operating restrictions, partial suspension or total shutdown of production; |
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refusing our requests for 510(k) clearance or PMA approval of new products; |
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withdrawing 510(k) clearance or PMA approvals already granted; and |
The FDA also has the authority to require repair, replacement or refund of the cost of any
medical device that we have manufactured or distributed.
International
International sales of medical devices are subject to foreign government regulations, which
vary substantially from country to country. The time required to obtain approval by a foreign
country may be longer or shorter than that required for FDA approval, and the requirements may
differ. In addition, the export of certain of our products that have not yet been cleared or
approved for domestic distribution may be subject to FDA export restrictions. There can be no
assurance that we will receive on a timely basis, if at all, any foreign government or United
States export approvals necessary for the marketing of our products abroad.
The primary regulatory environment in Europe is that of the European Union, which consists of
twenty-seven countries, encompassing most of the major countries in Europe. Other countries, such
as Switzerland, have voluntarily adopted laws and regulations that mirror those of the European
Union with respect to medical devices. The European Union has adopted numerous directives and
standards regulating design, manufacture, clinical trials, labeling, and adverse event reporting
for medical devices. Devices that comply with the requirements of a relevant directive will be
entitled to bear a CE Mark and can be commercially distributed throughout Europe. The method of
assessing conformity varies depending on the class of the product, but normally involves a
combination of self-assessment by the manufacturer and a third party assessment by a Notified
Body. This third party assessment may consist of an audit of the manufacturers quality system and
specific testing of the manufacturers product. An assessment by a Notified Body in one country
within the European Union is required in order for a manufacturer to commercially distribute the
product throughout the European Union.
Export of Uncleared or Unapproved Devices
Export of devices eligible for the 510(k) clearance process, but not yet cleared to market, is
permitted without FDA approval, provided that certain requirements are met. Unapproved devices
subject to the PMA process can be exported to any country without FDA approval provided that, among
other things, they are not contrary to the laws of the country to which they are intended for
import, they are manufactured in substantial compliance with the Quality System Regulations, and
they have been granted valid marketing authorization by any member country of the European Union,
Australia, Canada, Israel, Japan, New Zealand, Switzerland
or South Africa. If these conditions are not met, FDA approval must be obtained, among other
things, by demonstrating to the FDA that the product is approved for import into the country to
which it is to be exported and, in some cases, by providing safety data for the device. There can
be no assurance that the FDA will grant export approval when necessary or that countries to which
the device is to be exported will approve the device for import. Our failure to obtain necessary
FDA export authorization and/or import approval could have a material adverse effect on our
business, financial condition and results of operation.
11
Regulatory Status of our Products
On April 20, 2009, the Company received FDA clearance to market the HydroFix Vaso Shield
(formerly called Paradís Vaso Shield) device, indicated for use as a cover for vessels following
anterior vertebral surgery. The proprietary, patented, and PVA based membrane may reduce the risk
of associated injury following anterior vertebral surgeries by providing a vessel cover. We have
products under development that may qualify for 510(k), such as NDGA-polymerized collagen implants
and additional sheet products made from PVA-based hydrogel. In February 2010 we filed two
additional 510 (k) submissions, one for an orthopedic application of our HydroFixTM
Sheet. The second was for our first Collagen product submission for general soft tissue
repair. There can be no assurance of the outcome of these submissions or the timeframe to complete
the process.
ReimbursementProcedures, Profitability and Costs
Our products likely will be purchased by hospitals or ambulatory surgery centers that are
reimbursed by third-party payers. In the U.S., such payers include governmental programs (e.g.,
Medicare and Medicaid), private insurance plans, managed care programs and workers compensation
plans. Governmental payment programs have prescribed reimbursement rates for procedures and medical
products. Similarly, private third-party payers have carefully negotiated payment levels for
procedures and medical products. In addition, in the United States, an increasing percentage of
insured individuals are receiving their medical care through managed care programs, which monitor
and may require pre-approval of the services that a member will receive. Our success depends on
adequate levels of third-party reimbursement for our products.
In those countries outside the U.S. where our products are approved for sale, we expect that
sales volumes and prices of our products will be influenced by the availability of reimbursement
from governments or third-party payers. If adequate levels of reimbursement from governments or
third-party payers outside of the U.S. are not obtained, international sales of our products will
be limited. Outside of the U.S., reimbursement systems vary significantly by country. Many
foreign markets have government-managed health care systems that govern reimbursement for medical
devices and procedures and often require special consideration for reimbursement for a new device.
We are currently working with industry reimbursement consultants to aid in the reimbursement
planning for our products. At this time there can be no assurance that reimbursement policies will
provide an acceptable return on our products.
Competition
CollaFix Products
In the US in 2007, approximately 2,090,000 orthopedic soft tissue repair procedures were
performed. This procedure volume is growing at a rate of 4.5 % supported by the rising number of
sports-related injuries, particularly among the increasingly active aging population. Source: US
Markets for Orthopedic Soft Tissue Solutions 2008, Millennium Research Group
There are currently a large number of devices on the market used to reinforce surgically
repaired soft tissues. These include hardware (screws, pins, disposables) as well as allografts,
synthetic products and xenografts (derived from porcine, bovine and equine tissues).
Leading Competitors in the Orthopedic Soft Tissue Solutions Market, as a % of Total, US, 2007.
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Percent of US total |
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Leading Competitors |
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Soft Tissue Market |
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Arthrex |
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33.8 |
% |
DePuy Mitek |
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17.1 |
% |
Smith and Nephew |
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13.2 |
% |
CONMED Linvatec |
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5.8 |
% |
Genzyme Biosurgery |
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3.4 |
% |
Musculoskeletal Transplant Foundation |
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3.2 |
% |
Biomet Sports Medicine |
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3.1 |
% |
AlloSource |
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2.7 |
% |
ArthroCare |
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2.1 |
% |
LifeNet Health |
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1.9 |
% |
Other |
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13.7 |
% |
Source: US Markets for Orthopedic Soft Tissue Solutions 2008, Millennium Research Group
12
There are several technologies currently on the market or anticipated to enter the market for
ligament and tendon repair and/or replacements. Those technologies include collagen matrices,
cell-seeded polymer scaffolds, cryopreserved allografts, fibroblast-seeded ligament analogs, and
small intestinal submucosa.
Competitors who market collagen based devices currently include:
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Developer |
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Product |
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Cross-linking |
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DePuy
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RESTORE
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None |
Wright Medical Technology
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GraftJacket
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None |
Synovis
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OrthAdapt
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Carbodiimide |
ReGen Biologics
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Collagen matrices
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None |
Biomet/Organogenesis
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CuffPatch
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Carbodiimide |
The above technologies may or may not utilize cross-linking agents, which are FDA-approved and
used in the manufacturing of collagen for soft-tissue repair. The current market leader is the
Restore Orthobiologic Soft Tissue Implant from DePuy. It utilizes small intestinal submucosa of
porcine origin. We believe our collagen fiber-based devices will provide better reinforcement for
tendon and ligament repair because they are made of high strength cross-linked collagen fibers and,
by mimicking the natural fiber orientation in tendons and ligaments, they provide targeted
mechanical properties equivalent to those of tendons and ligaments.
There are a few synthetic products, such as W.L. Gores GoreTex, 3M Kennedy Ligament
Augmentation Device (LAD), and Strykers Meadox Dacron Ligament Augmentation Graft which were
developed for use in Anterior Cruciate Ligament (ACL) reconstruction. These were first and second
generation soft-tissue repair products and generally produce results that we believe are less
satisfactory than those containing soft-tissue constructs, because the materials tend to stretch
and become deformed over time.
HydroFix Products
Spinal Orthopaedic and neurosurgeons actively seek patient treatment alternatives and utilize
various technologies during different stages of the patient care continuum. Until the recent
success of non-fusion technologies, spine implant market manufacturers have focused almost
exclusively on refining and improving spinal fusion techniques. Multiple fusion techniques and
products are available to patients today.
Regardless of the type of surgery, fusion or TDR, physicians commonly deal with venous injury
during anterior spinal revision surgery. Currently, competition for vessel guards for this specific
application is limited. W.L. Gore & Associates, Inc. is the dominant manufacturer in this area.
Collaborations and License Agreements
License Agreement between MiMedx, Shriners Hospitals for Children, and University of South
Florida Research Foundation
We entered into a license agreement with Shriners Hospitals for Children and University of
South Florida Research Foundation (collectively Licensor) in January 2007 for the worldwide,
exclusive rights for all applications using NDGA-polymerized materials, including for
reconstruction of soft tissue. We paid a one-time license fee of $100,000, plus issued to the
Licensor 1,120,000 shares of our Common Stock, and the Licensor will receive future additional
milestone payments and continuing royalties based on sales of all licensed products.
The license is perpetual and terminable by us at any time, in whole or in part. The licensor
has the right to terminate this license in the event that any breach, which they are required to
give us notice, is not cured.
13
License Agreement between SpineMedica and SaluMedica, LLC
In August 2005 we entered into an exclusive, perpetual, worldwide, non-terminable,
royalty-free, transferable license of certain patents and patent application rights held by
SaluMedica, LLC that relate to a PVA-based hydrogel. SpineMedica has the right to manufacture,
market, use and sell medical devices and products incorporating the claimed technology for all
neurological and orthopedic uses related to the human spine, including muscular and skeletal uses.
Some of the licensed patents and patent application rights are owned by SaluMedica, LLC and at
least one of these patent and patent application rights is licensed by SaluMedica, LLC from Georgia
Tech Research Corporation. In connection with this license agreement, SpineMedica also acquired
certain of SaluMedica, LLCs assets, including manufacturing and testing equipment and office
equipment, and obtained a license to use the trademarks SaluMedica and Salubria® biomaterial.
License Agreement between SaluMedica, LLC and Georgia Tech Research Corporation
Some of the patents and patent application rights licensed to SpineMedica by SaluMedica, LLC
are licensed to SaluMedica, LLC from Georgia Tech Research Corporation. SaluMedica, LLC and Georgia
Tech Research Corporation have agreed that in the event the license agreement between them is
terminated for any reason (other than the expiration of the patents), Georgia Tech Research
Corporation will license the technology to SpineMedica for uses related to the human spine on
substantially the same terms as granted to SaluMedica, LLC without further payment.
Hand License with SaluMedica, LLC
MiMedx has a Technology License Agreement, as amended by a First Amendment to Technology
License Agreement, as well as a related Trademark License Agreement, all dated August 3, 2007,
(collectively, the Hand License) that provides MiMedx with the exclusive, fully-paid, worldwide,
royalty-free, irrevocable and non-terminable (except as provided in the Hand License), and
sublicensable rights to develop, use, manufacture, market, and sell Salubria® biomaterial or
similar PVA-based hydrogels for all neurological and orthopedic uses (including muscular and
skeletal uses) related to the rotator cuff and the hand (excluding the wrist), but excluding the
product SaluBridge (which is made from Salubria® biomaterial and is currently cleared for use by
the FDA) (the Licensed Hand IP). SaluMedica, LLCs rights in the Licensed Hand IP derive from and
are subject to one or more licenses from Georgia Tech Research Corporation and, consequently, the
Hand License is subject to those same licenses. This license was amended in October 2009 to
relinquish the license for uses related to the hand but to keep the rotator cuff license.
Surgical Sheet License with SaluMedica, LLC
On March 31, 2008, we entered into an exclusive world-wide license with SaluMedica, LLC for a
PVA-based hydrogel biomaterial for applications as a surgical sheet. The license covers both
internal and external applications. In exchange for the exclusive, worldwide, perpetual license to
develop, manufacture, and sell the surgical sheet technology for application anywhere in the
body, we issued SaluMedica, LLC 400,000 shares of restricted Common Stock. In addition, SaluMedica,
LLC is eligible to receive up to an aggregate additional 600,000 shares of restricted Common Stock
if certain sales and revenue milestones are achieved not later than June 30, 2013. On December 31,
2009, we completed the sale of our first commercial product, the HydroFix Vaso Shield, and met the
first milestone under this agreement. As a result we issued 100,000 shares of Common Stock to the
licensor valued at $71,000.
Intellectual Property
Our intellectual property includes licensed patents, owned and licensed patent applications
and patents pending, proprietary manufacturing processes and trade secrets, brands, trademarks and
trade names associated with our technology. Furthermore, we require employees, consultants and
advisors to sign Proprietary Information and Inventions Agreements as well as Nondisclosure
Agreements that assign to us and protect the intellectual property existing and generated from
their work and that we may use and own exclusively.
The pending and provisional patent applications may not issue into patents, as is true with
any provisional or patent application.
14
CollaFix Intellectual Property
Our MiMedx intellectual property, includes two licensed and issued patents, eight licensed
patent applications and two licensed provisional patent applications, as well as proprietary
manufacturing processes and trade secrets, related to NDGA coatings, devices, scaffolds,
substrates, or other materials and polymer treated collagen material for medical devices, implants,
prosthesis and constructs. The licensed patents protecting the NDGA Polymer Composite, rather than
being limited to specific products, provide broad process compatibility and protection.
HydroFix Intellectual Property
Our SpineMedica intellectual property includes six licensed and issued patents, thirteen owned
patent applications, two co-owned (with Salumedica, LLC) patent application, and three licensed
patent applications related to products and technology intended for, but not limited to, the
Orthopedic-Spine market.
Improvements to Technology
Any improvements to Salubria® developed by SaluMedica, LLC during the life of the licensed
patents are included as part of the license from SaluMedica, LLC. The Company will own all
improvements to Salubria® that we develop. However, we will license these improvements to
SaluMedica, LLC for no additional consideration, provided that the use of these improvements must
be unrelated to all neurological and orthopedic uses, including muscular and skeletal uses, related
to the human spine.
Trademarks & Trade Names
We also own trademark and trade name registration of the mark Paradís Vaso ShieldTM
and license the SaluMedica and Salubria® trademarks. We also have applied for registration of the
HydroFix, CollaFix and MiMedx trademarks.
Manufacturing
MiMedx Group performs research and early stage product and process development activities and
operates a pilot production facility for its proprietary CollaFix cross-linked collagen products
in its Tampa, Florida, facility. In the future, we may contract with third parties to perform
certain manufacturing or assembly of the products that are developed and enter into strategic
relationships for sales and marketing of products that we develop.
Our Marietta, Georgia, facility is also our corporate headquarters, which houses our general
management, sales, marketing, product development, quality and regulatory functions as well as the
consolidation of our manufacturing operations for HydroFix and CollaFix.
We are subject to the FDAs quality system regulations, state regulations, and regulations
promulgated by the European Union. We are FDA registered, CE marked and ISO certified. Our
facilities are subject to periodic unannounced inspections by regulatory authorities, and may
undergo compliance inspections conducted by the FDA and corresponding state and foreign agencies.
Suppliers
We have identified reliable sources and suppliers of collagen, source materials of NDGA, which
we believe will provide a product in compliance with FDA guidelines. We engage in the manufacture
of our own hydrogel products and accessibility to critical raw materials for the PVA-based
biomaterial products is not inhibited by supply or market constraints.
Marketing and Sales
We plan to utilize our experienced management team to commercialize these medical technologies
by advancing them through the proper regulatory approval processes, developing or arranging for
reliable and cost-effective manufacturing, and to either sell or license the product lines to
others or market and sell the products. For our first U.S. product, HydroFix Vaso Shield, we are
in the process of assembling a network of independent sales representatives to sell our products
domestically. We are assembling a network of stocking distributors for our first European product,
HydroFix Spine Shield.
15
Employees
As of December 31, 2009, we have 40 employees, of whom 37 are full-time and three are
part-time employees. We consider our relationships with our employees to be satisfactory. None of
our employees is covered by a collective bargaining agreement.
Litigation
We are not involved in any litigation, nor are we aware of any threatened litigation.
Research and Development
Our research and development efforts are focused on developing products for various surgical
and orthopedic markets using NDGA biomaterials, and development of other sheet based spine products
and other sheet products using a PVA-based hydrogel. Our research and development staff currently
consists of 19 employees. To support development, we have contracts with outside labs who aid us in
our research and development process. Our research and development group has extensive experience
in developing products related to our field of interest, and works with our Physician Advisory
Boards to design products that are intended to improve patient outcomes, simplify techniques,
shorten procedures, reduce hospitalization and rehabilitation times and, as a result, reduce costs.
From our inception in November 2006 to December 31, 2009, we have spent approximately $8,740,000 on
research and development and $7,177,000 on acquired in-process research and development. See
Managements Discussion and Analysis of Financial Condition and Results of Operations at Item 7
below for information regarding expenditures for research and development in each of the last two
fiscal years.
Surgeon Training and Education
We devote significant resources to working with our Physician Advisory Boards. We believe that
the most effective way to introduce and build market demand for our products will be by partnering
with leading surgeons from around the globe in the use of our products. We have access to
state-of-the-art cadaver operating theaters and other training facilities at some of the nations
leading medical institutions. We intend to continue to focus on working with leading surgeons in
the United States. See Business-Physician Advisory Boards.
Available Information
Our
website address is www.mimedx.com. We make available on this website under Investor
Relations SEC Filings, free of charge, our proxy statements, annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as
soon as reasonably practicable after we electronically file or furnish such materials to the U.S.
Securities and Exchange Commission (SEC). In addition, we post filings of Forms 3, 4, and 5
filed by our directors, executive officers and ten percent or more shareholders. We also make
available on this website under the heading Investor Relations Corporate Governance our Audit
Committee, Compensation Committee and Corporate Governance and Nominating Committee Charters as
well as our Code of Business Conduct and Ethics.
Item 1A. Risk Factors
Risks Related to Our Business and Industry
We are a high-risk startup venture.
With the commercialization of our first product, we are transitioning from being a development
company to an operating company. Nonetheless, most of our products are still in the development
stage and we have no significant operating history. We do not currently have any material assets,
other than cash, certain laboratory equipment, and certain intellectual property rights. Our
business and prospects must be evaluated in light of the expenses, delays, uncertainties and
complications typically encountered by businesses in our stage of development, many of which may be
beyond our control. These include, but are not limited to, lack of sufficient capital,
unanticipated problems, delays or expenses relating to product development, governmental approvals,
and licensing and marketing activities, competition, technological changes and uncertain market
acceptance. In addition, if we are unable to manage growth effectively, our operating results could
be materially and adversely affected. We must overcome these and other business risks to be
successful. Our efforts may not be successful. We may never be profitable. Therefore, investors
could lose their entire investment.
16
Most of our planned products are in the early stage of product development.
We have only had one product cleared by the FDA for market and two additional products for
which we have submitted 510(k) premarket notifications to the FDA. Many of the possible products
we have rights to have had only limited research in the fields of use we currently intend to
commercialize. Our product candidates will require testing and regulatory clearances or approvals.
Accordingly, most of the products we are developing are not yet ready for sale and may never be
ready for sale. The successful development of any products is subject to the risks of failure
inherent in product development. These risks include the possibilities that any or all of these
proposed products or procedures are found to be ineffective or toxic, or otherwise fail to receive
necessary regulatory clearances or approvals; that the proposed products or procedures are
uneconomical to market or do not achieve broad market acceptance; that third parties hold
proprietary rights that preclude us from marketing them; or third parties market a superior or
equivalent product. We are unable to predict whether our research and development activities will
result in any additional commercially viable products or procedures. Furthermore, due to the
extended testing and regulatory review process required before marketing clearances or approvals
can be obtained, the time frames for commercialization of any products or procedures are long and
uncertain.
Our financial condition raises substantial doubt about our ability to continue as a going
concern.
As of December 31, 2009, we had approximately $2,654,000 of cash or cash equivalents on hand.
In January 2010, the Company received final proceeds totaling $785,000 from a private placement of
common stock and warrants. Assuming it receives no additional funds, the Company estimates that it
has sufficient funds to operate until June 2010. If we fail to obtain additional capital in the
immediate future, we will have to terminate our planned business operations, in which case the
investors will lose all or part of their investment. In addition, as of December 31, 2009, the
Company had outstanding debt of approximately $3,542,000 related to principal and interest under
its 3% Convertible Senior Secured Promissory Notes (the Notes). If we default on our Notes, the
holders could foreclose on our property and investors could lose all or part of their investment.
Continuing disruptions in the overall economy and the credit and financial markets may
adversely impact our ability to raise necessary additional capital.
The capital and credit markets continue to be very volatile as a result of adverse conditions
that have caused the failure and near failure of a number of large financial services companies.
If the capital and credit markets continue to experience volatility and the availability of funds
remains limited, it is possible that our ability to access the capital and credit markets may be
limited or nonexistent because of these or other factors, and we require additional capital in the
near future in order to continue operations.
We will need additional financing to meet our future capital requirements.
We will require significant additional funds, either through additional equity or debt
financings or collaborative agreements or from other sources to engage in research and development
activities with respect to our potential product candidates and to establish the personnel
necessary to successfully manage us. We believe that our current cash and cash equivalents will be
sufficient to meet our projected operating requirements until June 2010. However, obtaining the
required regulatory approvals and clearances and the planned expansion of our business will be
expensive and time-consuming and we will in the future seek funds from public and private stock or
debt offerings, borrowings under lines of credit or other sources. Our capital requirements will
depend on many factors, including:
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the revenues generated by sales of our products; |
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the costs associated with expanding our sales and marketing efforts, including
efforts to hire independent agents and sales representatives; |
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the expenses we incur in developing and commercializing our products, including the
cost of obtaining and maintaining FDA or other regulatory clearances and approvals; and |
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unanticipated general and administrative expenses. |
17
As a result of these factors, we must raise additional funds now and in the future and such
funds may not be available on favorable terms, or at all. Furthermore, if we issue equity or debt
securities to raise additional funds, our existing shareholders may experience dilution and the new
equity or debt securities we issue may have rights, preferences and privileges senior to those of
our existing shareholders. In addition, if we raise additional funds through collaboration,
licensing or other similar arrangements, it may be necessary to relinquish valuable rights to our
products or proprietary technologies, or grant licenses on terms that are not favorable to us. If
we cannot raise funds on acceptable terms, we may not be able to develop or enhance our products,
obtain the required regulatory clearances or approvals, execute our business plan, take advantage
of future opportunities, or respond to competitive pressures or unanticipated customer
requirements. Any of these events could adversely affect our ability to achieve our development and
commercialization goals, which could have a material and adverse effect on our business, results of
operations and financial condition.
We have a limited operating history, and, to date, we have generated insignificant revenues
from our products. Further, we have incurred losses since inception. We expect to continue to incur
losses through 2010. The actual extent of our future losses and the timing of profitability are
highly uncertain, and we may never achieve profitable operations. The principal causes of our
losses are likely to be primarily attributable to personnel costs, working capital costs, research
and development costs, brand development costs and marketing and promotion costs. We may never
achieve profitability.
We are in a highly competitive industry and face competition from large, well-established
medical device manufacturers as well as new market entrants.
Competition from other medical device companies and from research and academic institutions is
intense, expected to increase, subject to rapid change, and significantly affected by new product
introductions and other market activities of industry participants. In addition to competing with
universities and other research institutions in the development of products, technologies and
processes, we compete with other companies in acquiring rights to products or technologies from
those institutions. There can be no assurance that we can develop products that are more effective
or achieve greater market acceptance than competitive products, or that our competitors will not
succeed in developing or acquiring products and technologies that are more effective than those
being developed by us, that would render our products and technologies less competitive or
obsolete.
Our competitors enjoy several competitive advantages over us, including some or all of the
following:
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products which have been approved by regulatory authorities for use in the United
States and/or Europe and which are supported by long-term clinical data; |
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significantly greater name recognition; |
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established relations with surgeons, hospitals, other healthcare providers and third
party payors; |
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large and established distribution networks in the United States and/or in
international markets; |
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greater experience in obtaining and maintaining regulatory approvals and/or
clearances from the United States Food and Drug Administration and other regulatory
agencies; |
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more expansive portfolios of intellectual property rights; and |
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greater financial, managerial and other resources for products research and
development, sales and marketing efforts and protecting and enforcing intellectual
property rights. |
Our competitors products will compete directly with our products if and when ours can be
marketed. In addition, our competitors as well as new market entrants may develop or acquire new
treatments, products or procedures that will compete directly or indirectly with our products. The
presence of this competition in our market may lead to pricing pressure which would make it
more difficult to sell our products at a price that will make us profitable or prevent us from
selling our products at all. Our failure to compete effectively would have a material and adverse
effect on our business, results of operations and financial condition.
Our ability to protect our intellectual property and proprietary technology through patents
and other means is uncertain and may be inadequate, which would have a material and adverse
effect on us.
Our success depends significantly on our ability to protect our proprietary rights to the
technologies used in our products. We rely on patent protection, as well as a combination of
copyright, trade secret and trademark laws and nondisclosure, confidentiality and other contractual
restrictions to protect our proprietary technology, including our licensed technology. These legal
means afford only limited protection and may not adequately protect our rights or permit us to gain
or keep any competitive advantage. For example, our pending United States and foreign patent
applications (and those we have or will have licenses to) may not issue as patents in a form that
will be advantageous to us or may issue and be subsequently successfully challenged by others and
invalidated. In addition, our pending patent applications include claims to material aspects of our
products and procedures that are not currently protected by issued patents. Both the patent
application process and the process of managing patent disputes can be time consuming and
expensive. Competitors may be able to design around our patents or develop products that provide
outcomes that are comparable or even superior to ours. Although we have taken steps to protect our
intellectual property and proprietary technology, including entering into confidentiality
agreements and intellectual property assignment agreements with some of our officers, employees,
consultants and advisors, such agreements may not be enforceable or may not provide meaningful
protection for our trade secrets or other proprietary information in the event of unauthorized use
or disclosure or other breaches of the agreements. Furthermore, the laws of foreign countries may
not protect our intellectual property rights to the same extent as do the laws of the United
States.
18
In the event a competitor infringes upon our licensed or pending patent or other intellectual
property rights, enforcing those rights may be costly, uncertain, difficult and time consuming.
Even if successful, litigation to enforce our intellectual property rights or to defend our patents
against challenge could be expensive and time consuming and could divert our managements
attention. We may not have sufficient resources to enforce our intellectual property rights or to
defend our patents rights against a challenge. The failure to obtain patents and/or protect our
intellectual property rights could have a material and adverse effect on our business, results of
operations, and financial condition.
We may become subject to claims of infringement or misappropriation of the intellectual
property rights of others, which could prohibit us from developing our products, require us
to obtain licenses from third parties or to develop non-infringing alternatives, and subject
us to substantial monetary damages.
Third parties could, in the future, assert infringement or misappropriation claims against us
with respect to products we develop. Whether a product infringes a patent or misappropriates other
intellectual property involves complex legal and factual issues, the determination of which is
often uncertain. Therefore, we cannot be certain that we have not infringed the intellectual
property rights of others. Our potential competitors may assert that some aspect of our product
infringes their patents. Because patent applications may take years to issue, there also may be
applications now pending of which we are unaware that may later result in issued patents that our
products infringe. There also may be existing patents or pending patent applications of which we
are unaware that our products may inadvertently infringe.
Any infringement or misappropriation claim could cause us to incur significant costs, place
significant strain on our financial resources, divert managements attention from our business and
harm our reputation. If the relevant patents in such claim were upheld as valid and enforceable and
we were found to infringe, we could be prohibited from selling any product that is found to
infringe unless we could obtain licenses to use the technology covered by the patent or are able to
design around the patent. We may be unable to obtain such a license on terms acceptable to us, if
at all, and we may not be able to redesign our products to avoid infringement. A court could also
order us to pay compensatory damages for such infringement, plus prejudgment interest and could, in
addition, treble the compensatory damages and award attorney fees. These damages could be
substantial and could harm our reputation, business, financial condition and operating results. A
court also could enter orders that temporarily, preliminarily or permanently enjoin us and our
customers from making, using, or selling products, and could enter an order mandating that we
undertake certain remedial activities. Depending on the nature of the relief ordered by the court,
we could become liable for additional damages to third parties.
Our patents and licenses may be subject to challenge on validity grounds, and our patent
applications may be rejected.
We rely on our patents, patent applications, licenses and other intellectual property rights
to give us a competitive advantage. Whether a patent is valid, or whether a patent application
should be granted, is a complex matter of science and law, and therefore we cannot be certain that,
if challenged, our patents, patent applications and/or other intellectual property rights would be
upheld. If one
or more of those patents, patent applications, licenses and other intellectual property rights
are invalidated, rejected or found unenforceable, that could reduce or eliminate any competitive
advantage we might otherwise have had.
The prosecution and enforcement of patents licensed to us by third parties are not within our
control, and without these technologies, our product may not be successful and our business
would be harmed if the patents were infringed or misappropriated without action by such third
parties.
We have obtained licenses from third parties for patents and patent application rights related
to the products we are developing, allowing us to use intellectual property rights owned by or
licensed to these third parties. We do not control the maintenance, prosecution, enforcement or
strategy for many of these patents or patent application rights and as such are dependent in part
on the owners of the intellectual property rights to maintain their viability. Without access to
these technologies or suitable design-around or alternative technology options, our ability to
conduct our business could be impaired significantly.
19
Our NDGA License Agreement could be terminated.
Under our license agreement with Shriners Hospitals for Children and University of South
Florida Research Foundation dated January 29, 2007, it is possible for the licensor to terminate
the agreement if we breach the license agreement and all of our cure rights are exhausted. If our
license agreement were to be terminated, it would have a negative impact on our business.
We may be subject to damages resulting from claims that we, our employees, or our independent
contractors have wrongfully used or disclosed alleged trade secrets of others.
Some of our employees were previously employed at other medical device companies. We may also
hire additional employees who are currently employed at other medical device companies, including
our competitors. Additionally, consultants or other independent agents with which we may contract
may be or have been in a contractual arrangement with one or more of our competitors. Although no
claims against us are currently pending, we may be subject to claims that these employees or
independent contractors have used or disclosed any partys trade secrets or other proprietary
information. Litigation may be necessary to defend against these claims. Even if we are successful
in defending against these claims, litigation could result in substantial costs and be a
distraction to management. If we fail to defend such claims, in addition to paying monetary
damages, we may lose valuable intellectual property rights or personnel. A loss of key personnel or
their work product could hamper or prevent our ability to market existing or new products, which
could severely harm our business.
SaluMedica, LLC may license the PVA-based hydrogel, the material used to make SpineMedicas
products and other products we are developing, and its trademark to third parties for use in
applications unrelated to the spine, rotator cuff, or surgical sheet applications. This may
expose us to adverse publicity if these uses are not proven safe and effective.
Our licenses with SaluMedica, LLC allows us to use technology and/or know-how related to the
material used to manufacture applications related to the spine, rotator cuff and surgical sheet,
and allows us to use the Salubria® biomaterial trademark. SaluMedica, LLC may license the PVA-based
hydrogel and rights related to the Salubria® biomaterial trademark to third parties for
applications not related to the spine, rotator cuff, or surgical sheet. If the use of Salubria®
biomaterial or the PVA-based hydrogel by these third parties results in product liability claims or
has other adverse effects in patients, surgeons and patients may associate these claims and effects
with our products, even if our products are nevertheless proven safe and effective. If Salubria®
biomaterial experiences adverse publicity or is not proven safe and effective in other
applications, sales of our products could be adversely affected.
We depend on key personnel.
We currently have 37 full-time and 3 part-time employees. Our success will depend, in part,
upon our ability to attract and retain additional skilled personnel, which will require substantial
additional funds. There can be no assurance that we will be able to find and attract additional
qualified employees or retain any such personnel. Our inability to hire qualified personnel, the
loss of services of our key personnel, or the loss of services of executive officers or key
employees that that may be hired in the future may have a material and adverse effect on our
business.
Our operating results may fluctuate significantly as a result of a variety of factors, many
of which are outside of our control.
We are subject to the following factors, among others, that may negatively affect our
operating results:
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the announcement or introduction of new products by our competitors; |
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our ability to upgrade and develop our systems and infrastructure to accommodate
growth; |
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our ability to attract and retain key personnel in a timely and cost effective
manner; |
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technical difficulties; |
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the amount and timing of operating costs and capital expenditures relating to the
expansion of our business, operations and infrastructure; |
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regulation by federal, state or local governments; and |
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general economic conditions as well as economic conditions specific to the
healthcare industry. |
20
As a result of our limited operating history, limited resources, and the nature of the markets
in which we compete, it is extremely difficult for us to forecast accurately. We have based our
current and future expense levels largely on our investment plans and estimates of future events
although certain of our expense levels are, to a large extent, fixed. Assuming our products reach
the market, we may be unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall in revenues relative to our planned
expenditures would have an immediate adverse effect on our business, results of operations and
financial condition. Further, as a strategic response to changes in the competitive environment,
the Company may from time to time make certain pricing, service or marketing decisions that could
have a material and adverse effect on our business, results of operations and financial condition.
Due to the foregoing factors, our revenues and operating results are and will remain difficult to
forecast.
The failure of government health administrators and private health insurers to reimburse
patients for costs of services incorporating our potential products would materially and
adversely affect our business.
Our success depends, in part, on the extent to which reimbursement for the costs of products
to users will be available from government health administration authorities, private health
insurers and other organizations. Significant uncertainty usually exists as to the reimbursement
status of newly approved healthcare products. Adequate third party insurance coverage may be
unavailable for us, our sublicensees or partners to establish and maintain price levels sufficient
for realization of an appropriate return on investment. Government and other third-party payers
attempt to contain healthcare costs by limiting both coverage and the level of reimbursement of new
products. Therefore, we cannot be certain that our products or the procedures performed with them
will be covered or adequately reimbursed and thus we may be unable to sell our products profitably
if third-party payors deny coverage or reduce their levels of payment below that which we project,
or if our production costs increase at a greater rate than payment levels. If government and other
third party payers do not provide adequate coverage and reimbursement for uses of the products
incorporating our technology, the markets acceptance of our products could be adversely affected.
Disruption of our manufacturing could adversely affect our business, financial condition and
results of operations.
Our results of operations are dependent upon the continued operation of our manufacturing
facilities. The operation of biomedical manufacturing plants involves many risks. Such risks
include the risks of breakdown, failure or substandard performance of equipment, the occurrence of
natural and other disasters, and the need to comply with the requirements of directives from
government agencies, including the FDA. The occurrence of material operational problems could have
a material adverse effect on our business, financial condition, and results of operations during
the period of such operational difficulties.
We currently have only one product cleared by the FDA for marketing, and may never develop or
launch, any commercialized products.
We currently have only one commercialized product in the United States and, to date, have had
only limited sales. We have invested substantial time and resources in developing various
additional products. Commercialization of these products, including NDGA and PVA-based hydrogel
products, will require additional development, clinical evaluation, regulatory clearance or
approval,
significant marketing efforts and substantial additional investment before they can provide us
with any revenue. Despite our efforts, our products may not become commercially successful products
for a number of reasons, including:
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we may not be able to obtain regulatory clearance or approvals for our products, or
the approved indication may be narrower than we seek; |
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our products may not prove to be safe and effective in clinical trials; |
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physicians may not receive any reimbursement from third party payors, or the level
of reimbursement may be insufficient to support widespread adoption of our products; |
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we may experience delays in our development program; |
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any products that are approved may not be accepted in the marketplace by physicians
or patients; |
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we may not be able to manufacture any of our products in commercial quantities or at
an acceptable cost; and |
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rapid technological change may make our products obsolete. |
21
We face the risk of product liability claims or recalls and may not be able to obtain or
maintain adequate product liability insurance.
Our business exposes us to the risk of product liability claims that are inherent in the
testing, manufacturing and marketing of medical devices, including those that may arise from the
misuse or malfunction of, or design flaws in, our products. We may be subject to such claims if our
products cause, or appear to have caused, an injury. Claims may be made by patients, healthcare
providers or others selling our products. Defending a lawsuit, regardless of merit, could be
costly, divert management attention and result in adverse publicity, which could result in the
withdrawal of, or reduced acceptance of, our products in the market.
Although we have product liability insurance that we believe is adequate, this insurance is
subject to deductibles and coverage limitations and we may not be able to maintain this insurance.
If we are unable to maintain product liability insurance at an acceptable cost or on acceptable
terms with adequate coverage or otherwise protect ourselves against potential product liability
claims, we could be exposed to significant liabilities, which may harm our business. A product
liability claim or other claim with respect to uninsured liabilities or for amounts in excess of
insured liabilities could result in significant costs and significant harm to our business.
If we are unable to establish sales, marketing and distribution capabilities or enter into
and maintain arrangements with third parties to sell, market and distribute our products, our
business may be harmed.
To achieve commercial success for our products, we must develop a sales and marketing force,
or enter into arrangements with others to market and sell our products. In addition to being
expensive, developing such a sales force is time consuming, and could delay or limit the success of
any product launch. We may not be able to develop this capacity on a timely basis or at all.
Qualified direct sales personnel with experience in the medical device market are in high demand,
and there is no assurance that we will be able to hire or retain an effective direct sales team.
Similarly, qualified independent medical device representatives both within and outside the United
States are in high demand, and we may not be able to build an effective network for the
distribution of our product through such representatives. We have no assurance that we will be able
to enter into contracts with representatives on terms acceptable to us, or if we do, we may be
subject to a number of risks, including:
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We may be required to relinquish important rights to our products; |
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We may not be able to control the amount and timing of resources that
our distributors may devote to the commercialization of our products; |
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Our distributors may experience financial difficulties; and |
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Business combinations or significant changes in a distributors
business strategy may also adversely affect a distributors willingness
or ability to complete its obligations under any arrangement. |
Failure to market and distribute products to our customers in a timely and cost effective
manner would cause our potential future sales to decrease and our margins to fall.
Off-label promotion of our products could result in substantial penalties.
We are only permitted to promote our products for the uses indicated on the respective label
as cleared by the FDA. The U.S. Attorneys offices and other regulators, in addition to the FDA,
have recently focused substantial attention on off-label promotional activities and have initiated
civil and criminal investigations related to such practices. If it is determined by these or other
regulators that we have promoted our products for off-label use, we could be subject to fines,
legal proceedings, injunctions or other penalties.
To be commercially successful, we must convince surgeons that our products are safe and
effective alternatives to existing surgical treatments and that our products should be used
in their procedures.
We believe surgeons may not widely adopt our products unless they determine, based on
experience, clinical data and published peer reviewed journal articles, that the use of our
products in a particular procedure is a favorable alternative to conventional methods. Surgeons may
be slow to change their medical treatment practices for the following reasons, among others:
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their lack of experience with prior procedures in the field using our products; |
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lack of evidence supporting additional patient benefits and our products over
conventional methods; |
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perceived liability risks generally associated with the use of new products and
procedures; |
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limited availability of reimbursement from third party payors; and |
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the time that must be dedicated to training. |
22
In addition, we believe recommendations for and support of our products by influential
surgeons are essential for market acceptance and adoption. If we do not receive this support or if
we are unable to demonstrate favorable long-term clinical data, surgeons and hospitals may not use
our products which would significantly reduce our ability to achieve expected revenues and would
prevent us from becoming profitable.
Any failure in our efforts to train surgeons could significantly reduce the market acceptance
of our products.
There will be a learning process involved for surgeons to become proficient in the use of our
products. It will be critical to the success of our commercialization efforts to train a sufficient
number of surgeons and to provide them with adequate instruction in the use of our products. This
training process may take longer than expected and may therefore affect our ability to generate
sales. Convincing surgeons to dedicate the time and energy necessary for adequate training is
challenging and we may not be successful in these efforts. If surgeons are not properly trained,
they may misuse or ineffectively use our products. This may result in unsatisfactory patient
outcomes, patient injury, negative publicity, or lawsuits against us, any of which could have an
adverse effect on our business.
We depend on a single or a limited number of third-party suppliers, and the loss of these
third-party suppliers or their inability to supply us with adequate raw materials could
adversely affect our business.
We rely on a limited number of third-party suppliers for the raw materials required for the
production of our implant products. Furthermore, in some cases we rely on a single supplier. Our
dependence on a limited number of third-party suppliers or on a single supplier, and the challenges
we may face in obtaining adequate supplies of raw materials, involve several risks, including
limited control over pricing, availability, quality, and delivery schedules. We cannot be certain
that our current suppliers will continue to provide us with the quantities of these raw materials
that we require or satisfy our anticipated specifications and quality requirements. Any supply
interruption in limited or sole sourced raw materials could materially harm our ability to
manufacture our products until a new source of supply, if any, could be identified and qualified.
Although we believe there are other suppliers of these raw materials, we may be unable to find a
sufficient alternative supply channel in a reasonable time or on commercially reasonable terms. Any
performance failure on the part of our suppliers could delay the development and commercialization
of our products,
including limiting supplies necessary for clinical trials and regulatory approvals, or
interrupt production of the existing products that are already marketed, which would have a
material adverse effect on our business.
We also use collagen, a protein obtained from animal source tissue, as another significant
material required to produce our products. We may not be able to obtain adequate supplies of animal
source tissue, or to obtain this tissue from animal herds that we believe do not involve pathogen
contamination risks, to meet our future needs or on a cost-effective basis. Any significant supply
interruption could adversely affect the production of our products and delay our product
development or clinical trial programs. These delays would have an adverse effect on our business.
We will need to increase the size of our organization, and we may be unable to manage rapid
growth effectively.
Our failure to manage growth effectively could have a material and adverse effect on our
business, results of operations and financial condition. We anticipate that a period of significant
expansion will be required to address possible other acquisitions of business, products, or rights,
and potential internal growth to handle licensing and research activities. This expansion will
place a significant strain on management, operational and financial resources. To manage the
expected growth of our operations and personnel, we must both modify our existing operational and
financial systems, procedures and controls and implement new systems, procedures and controls. We
must also expand our finance, administrative, and operations staff. Our current personnel, systems,
procedures and controls may not adequately support our future operations. Management may be unable
to hire, train, retain, motivate and manage necessary personnel or to identify, manage and exploit
existing and potential strategic relationships and market opportunities.
23
Our business could be materially and adversely impacted by risks inherent in international
markets.
We expect a significant percentage of our revenues to be from sales to customers outside the
U.S. International sales subject us to inherent risks related to changes in the economic,
political, legal and business environments in the foreign countries in which we do business,
including the following:
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Fluctuations in currency exchange rates; |
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Regulatory, product approval and reimbursement requirements; |
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Tariffs and other trade barriers; |
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Greater difficulty in accounts receivable collection and longer collection
periods; |
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Difficulties and costs of managing foreign distributors; |
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Reduced protection for intellectual property rights in some countries; |
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Burdens of complying with a wide variety of foreign laws; |
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The impact of recessions in economics outside the U.S.; and |
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Political and economic instability |
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U.S. Export regulatory restrictions |
If we fail to successfully market and sell our products in international markets, our
business, financial condition, results of operations and cash flows could be materially and
adversely affected.
Risks Related to Regulatory Approval of Our Products and Other Government Regulations
Government regulation of our business is extensive and obtaining and maintaining the
necessary regulatory approvals is uncertain, expensive and time-consuming.
The process of obtaining regulatory clearances or approvals to market a medical device from
the FDA, or similar regulatory authorities outside of the United States is costly and time
consuming, and there can be no assurance that such clearances or approvals will be granted on a
timely basis, or at all. The FDAs 510(k) clearance process generally takes 30 days to 6 months
from submission, depending on whether a Special or traditional 510(k) premarket notification has
been submitted, but can take significantly longer. An application for premarket approval, or PMA,
must be submitted to the FDA if the device cannot be cleared through the 510(k) clearance process
and is not exempt from premarket review by the FDA. The PMA process almost always requires one or
more
clinical trials and can take one to three years from the date of filing, or longer. In some
cases, the FDA has indicated that it will require clinical data as part of the 510(k) process.
There is no certainty that any of our products will be cleared by the FDA by means of either a
510(k) notice or a PMA application. Even if the FDA permits us to use the 510(k) clearance process,
we cannot assure you that the FDA will not require either supporting data from laboratory tests or
studies that we have not conducted, or substantial supporting clinical data. If we are unable to
use the 510(k) clearance process for any of our products, are required to provide clinical data or
laboratory data that we do not possess to support our 510(k) premarket notifications for any of
these products, or otherwise experience delays in obtaining or fail to obtain regulatory
clearances, the commercialization of such product will be delayed or prevented, which will
adversely affect our ability to generate revenues. It also may result in the loss of potential
competitive advantages that we might otherwise attain by bringing our products to market earlier
than our competitors. Any of these contingencies could adversely affect our business.
Even if regulatory clearance is obtained, a marketed product is subject to continual review,
and later discovery of previously unidentified problems or failure to comply with the applicable
regulatory requirements may result in restrictions on a products marketing, recalls, or withdrawal
of the product from the market as well as possible civil or criminal sanctions.
We expect to be required to conduct clinical trials for some of our products. We have no
experience conducting clinical trials, they may proceed more slowly than anticipated, and we
cannot be certain that our products will be shown to be safe and effective for human use.
In order to commercialize some of our products, we may be required to submit a PMA, which will
require us to conduct clinical trials. Even if we seek FDA clearance of one our products through
the 510(k) process, the FDA may require us to conduct a clinical trial in support of our 510(k). We
will receive approval from the FDA to commercialize products requiring a clinical trial only if we
can demonstrate to the satisfaction of the FDA, in well-designed and properly conducted clinical
trials, that our product candidates are safe and effective and otherwise meet the appropriate
standards required for approval for specified indications. Clinical trials are complex, expensive,
time consuming, uncertain and subject to substantial and unanticipated delays. Before we may begin
clinical trials that present a significant risk to subjects, we must submit and obtain FDA approval
of an investigational device exemption, or IDE, that describes, among other things, the manufacture
of, and controls for, the device and a complete investigational plan. Clinical trials may involve a
substantial number of patients in a multi-year study. We may encounter problems with our clinical
trials and any of those problems could cause us or the FDA to suspend those trials, or delay the
analysis of the data derived from them.
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A number of events or factors, including any of the following, could delay or prevent the
completion of our clinical trials in the future and negatively impact or even foreclose our ability
to obtain FDA approval for, and to introduce a particular product:
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failure to obtain approval from the FDA or any foreign regulatory authority to
commence an investigational study; |
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conditions imposed on us by the FDA or any foreign regulatory authority regarding the
scope or design of our clinical trials; |
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delays in obtaining or in our maintaining required approvals from institutional
review boards or other reviewing entities at clinical sites selected for participation
in our clinical trials; |
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insufficient supply of our products or other materials necessary to conduct our
clinical trials; |
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difficulties in enrolling patients in our clinical trials; |
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negative or inconclusive results from clinical trials, or results that are
inconsistent with earlier results, that necessitate additional clinical studies; |
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serious or unexpected side effects experienced by patients in whom our products are
implanted; or |
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failure by any of our third-party contractors or investigators to comply with
regulatory requirements or meet other contractual obligations in a timely manner. |
Our clinical trials may not begin as planned, may need to be redesigned, and may not be
completed on schedule, if at all. Delays in our clinical trials may result in increased development
costs for our product candidates, which could cause our stock price to decline and limit our
ability to obtain additional financing. In addition, if one or more of our clinical trials are
delayed, competitors may be able to bring products to market before we do, and the commercial
viability of our product candidates could be significantly reduced.
There may be unexpected findings, particularly those that may only become evident from larger
scale clinical trials, as compared with the smaller scale tests we intend to do initially. The
occurrence of unexpected findings in connection with our clinical trials or any subsequent clinical
trial required by our regulators may prevent or delay obtaining regulatory approval, and may
adversely affect coverage or reimbursement determinations. Our regulators may also determine that
additional clinical trials are necessary, in which case approval may be delayed for several months
or even years while these trials are conducted. The clinical trials may not show that our products
based on NDGA, PVA-based hydrogel, or any other products we develop are safe and effective. If we
are unable to complete the clinical trials necessary to successfully support our regulatory
applications, our ability to commercialize our products, business, financial condition, and results
of operations would be materially adversely affected.
Our products contain biologic materials, and so may face additional obstacles to FDA
clearance or approval.
To complete successful clinical trials, a product must meet the criteria for clinical
approval, or endpoints, established in the clinical study. These endpoints are established in
consultation with the FDA, following any applicable clinical trial design guidelines, to establish
the safety and effectiveness for approval of devices subject to PMA approval, or to demonstrate the
substantial equivalence of devices subject to 510(k) clearance. However, in the case of products
which are novel or which target parts of the human body for which there are no FDA approved
products, the scientific literature may not be as complete and there may not be established
guidelines for the design of studies to demonstrate the effectiveness of such products. As a
result, clinical trials considering such products may take longer than average and obtaining
approval may be more difficult. Additionally, the endpoints established for such a clinical trial
might be inadequate to demonstrate the safety and efficacy or substantial equivalence required for
regulatory clearance because they do not adequately measure the clinical benefit of the product
being tested. In certain cases additional data collected in the clinical trial or further clinical
trials may be required by the FDA. Any delays in regulatory approval will delay commercialization
of our products, which may have an adverse effect on our business.
The FDA regulates human therapeutic products in one of three broad categories: drugs,
biologics or medical devices. The FDAs scrutiny of products containing biologic materials may be
heightened. Although we anticipate that our products will be regulated in the U.S. as medical
devices, we will use biological materials in the production of several devices. FDA may conclude
that some of our products are combinations of devices and biologicals, or may conclude that some of
our products are biologics rather than devices, potentially requiring a different and more time
consuming premarket clearance mechanism. Use of this biological material in our products may result
in heightened scrutiny of such product which may result in further delays in, or obstacles to,
obtaining FDA clearance or approval.
25
Subsequent modifications to our products may require new regulatory approvals, or may require
us to cease marketing or recall the modified products until approvals are obtained.
Once our products receive FDA approval or clearance, subsequent modification to our products
may require new regulatory approvals or clearances, including 510(k) clearances or premarket
approvals, or require us to recall or cease marketing the modified devices until these clearances
or approvals are obtained. The FDA requires device manufacturers to initially make and document a
determination of whether or not a modification requires a new approval, supplement or clearance. A
manufacturer may determine that a modification does not require a new clearance or approval.
However, the FDA can review a manufacturers decision and may disagree. The FDA may also on its
own initiative determine that a new clearance or approval is required. We may make modifications
that we believe do not or will not require additional clearances or approvals. If the FDA
disagrees and requires new clearances or approvals for the modifications, we may be required to
recall and to stop marketing our products as modified, which could require us to redesign our
products and harm our operating results. In these circumstances, we may be subject to significant
enforcement actions.
If a manufacturer determines that a modification to a FDA-cleared device requires premarket
clearance, then the manufacturer must file for a new 510(k) clearance or possibly a premarket
approval application supplement. Where we determine that modifications to our products require a
new 510(k) clearance or premarket approval application, we may not be able to obtain those
additional clearances or approvals for the modifications or additional indications in a timely
manner, or at all. Obtaining clearances
and approvals can be a time consuming process, and delays in obtaining required future
clearances or approvals would adversely affect our ability to introduce new or enhanced products in
a timely manner, which in turn would harm our future growth.
If we or our suppliers fail to comply with the FDAs quality system regulations, the
manufacture of our products could be delayed.
We and our suppliers are required to comply with the FDAs quality system regulations, which
cover the methods and documentation of the design, testing, production, control, quality assurance,
labeling, packaging, storage and shipping of our products. The FDA enforces the quality system
regulation through inspections. If we or our supplier fail a quality system regulations inspection
or if any corrective action plan is not sufficient, FDA could take enforcement action, including
any of the following sanctions and the manufacture of our products could be delayed or terminated:
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untitled letters, warning letters, fines, injunctions, consent decrees and civil
penalties; |
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customer notifications for repair, replacement, refunds; |
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recall, detention or seizure of our products; |
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operating restrictions or partial suspension or total shutdown of production; |
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refusing or delaying our requests for 510(k) clearance or premarket approval of new
products or modified products; |
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withdrawing 510(k) clearances on PMA approvals that have already been granted; |
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refusal to grant export approval for our products; or |
We and our sales personnel, whether employed by us or by others, must comply with various
federal and state anti-kickback, self referral, false claims and similar laws, any breach of
which could cause a material adverse effect on our business, financial condition and results
of operations.
Our relationships with surgeons, hospitals and the marketers of our products are subject to
scrutiny under various federal anti-kickback, self-referral, false claims and similar laws, often
referred to collectively as healthcare fraud and abuse laws. Healthcare fraud and abuse laws are
complex, and even minor, inadvertent violations can give rise to claims that the relevant law has
been violated. Possible sanctions for violation of these fraud and abuse laws include monetary
fines, civil and criminal penalties, exclusion from federal and state healthcare programs,
including Medicare, Medicaid, Veterans Administration health programs, workers compensation
programs and TRICARE (the healthcare system administered by or on behalf of the U.S. Department of
Defense for uniformed services beneficiaries, including active duty and their dependents, retirees
and their dependents), and forfeiture of amounts collected in violation of such prohibitions.
Certain states in which we intend to market our products have similar fraud and abuse laws,
imposing substantial penalties for violations. Any government investigation or a finding of a
violation of these laws would likely result in a material adverse effect on the market price of our
common stock, as well as our business, financial condition and results of operations.
26
Anti-kickback laws and regulations prohibit any knowing and willful offer, payment,
solicitation or receipt of any form of remuneration in return for the referral of an individual or
the ordering or recommending of the use of a product or service for which payment may be made by
Medicare, Medicaid or other government-sponsored healthcare programs. We have formed Physician
Advisory Boards consisting of an aggregate of over 25 physicians to assist us with scientific
research and development and to help us evaluate technologies. We have also entered into consulting
agreements and product development agreements with surgeons, including some who may make referrals
to us or order our products after our products are introduced to market. In addition, some of these
physicians own our stock, which they purchased in arms length transactions on terms identical to
those offered to non-surgeons, or received stock options from us as consideration for consulting
services performed by them. We also may engage additional physicians on a consulting basis. While
these transactions were structured with the intention of complying with all applicable laws,
including the federal ban on physician self referrals, commonly known as the Stark Law, state
anti-referral laws and other applicable anti-kickback laws, it is possible that regulatory or
enforcement agencies or courts may in the future view these transactions as prohibited arrangements
that must be restructured or for which we would be subject to other significant civil or criminal
penalties, or prohibit us from accepting referrals from these surgeons. Because our strategy relies
on the involvement of physicians who consult with us on the design of our product candidates, we
could be materially impacted if regulatory or enforcement agencies or courts interpret our
financial relationships with our physician advisors who refer or order our products to be in
violation of applicable laws and determine that we would be unable to achieve compliance with such
applicable laws. This could harm our reputation and the reputations of our physician advisors. In
addition, the cost of noncompliance with these laws could be substantial since we could be
subject to monetary fines and civil or criminal penalties, and we could also be excluded from
federally funded healthcare programs, including Medicare and Medicaid, for non-compliance.
The scope and enforcement of all of these laws is uncertain and subject to rapid change,
especially in light of the lack of applicable precedent and regulations. There can be no assurance
that federal or state regulatory or enforcement authorities will not investigate or challenge our
current or future activities under these laws. Any investigation or challenge could have a material
adverse effect on our business, financial condition and results of operations. Any state or federal
regulatory or enforcement review of us, regardless of the outcome, would be costly and time
consuming. Additionally, we cannot predict the impact of any changes in these laws, whether these
changes are retroactive or will have effect on a going-forward basis only.
We face significant uncertainty in the industry due to government healthcare reform.
Political, economic and regulatory influences are subjecting the healthcare industry to
fundamental changes. Reforms under consideration in the United States include mandated basic
healthcare benefits, controls on healthcare spending, increases in insurance premiums and increased
out-of-pocket requirements for patients, the creation of large group purchasing organizations that
aim to reduce the costs of products that their member hospitals consume, and significant
modifications to the healthcare delivery system. We anticipate that the U.S. Congress and state
legislatures will continue to review and assess alternative healthcare delivery systems and payment
methods. Due to uncertainties regarding the ultimate features of reform initiatives and the timing
of their enactment and implementation, we cannot predict which, if any, of such reform proposals
will be adopted, when they may be adopted or what impact reform initiatives may have on us.
Risks Related to the Securities Markets and Ownership of Our Common Stock
The price of our Common Stock has been, and will likely continue to be, volatile.
The market price of our Common Stock, like that of the securities of many other companies that
are in, or are just emerging from, the development stage, has fluctuated over a wide range and it
is likely that the price of our Common Stock will fluctuate in the future. Over the past two fiscal
years, the closing price of our Common Stock, as reported by the OTC Bulletin Board, has fluctuated
from a low of $.40 to a high of $6.35. The market price of our Common Stock could be impacted by a
variety of factors, including:
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Fluctuations in stock market prices and trading volumes of similar companies or of
the markets generally; |
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Our ability to successfully launch, market and earn significant revenue from our
products; |
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Our ability to obtain additional financing to support our continuing operations; |
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Disclosure of the details and results of regulatory applications and proceedings; |
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Changes in government regulation; |
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Additions or departures of key personnel; |
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Our investments in research and development or other corporate resources; |
27
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Announcements of technological innovations or new commercial products or services by
us or our competitors; |
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Developments in the patents or other proprietary rights owned or licensed by us or
our competitors; |
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The timing of new product introductions; |
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Actual or anticipated fluctuations in our operating results, including any
restatements of previously reported results; |
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Our ability to effectively and consistently manufacture our products and avoid costs
associated with the recall of defective or potentially defective products; |
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Our ability and the ability of our distribution partners to market and sell our
products; |
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Changes in distribution channels; and |
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The ability of our vendors to effectively and timely deliver necessary materials and
product components. |
Further, due to the relatively fixed nature of most of our costs, which primarily include
personnel costs as well as facilities costs, any unanticipated shortfall in revenue in any fiscal
quarter would have an adverse effect on our results of operations in that quarter. Accordingly, our
operating results for any particular quarter may not be indicative of results for future periods
and should not be relied upon as an indication of our future performance. These fluctuations could
cause the trading price of our stock to be negatively affected. Our quarterly operating results
have varied substantially in the past and may vary substantially in the future. In addition, the
stock market has been very volatile, particularly on the OTC Bulletin Board where our stock is
quoted. This volatility is often not related to the operating performance of companies listed
thereon and will probably continue in the foreseeable future.
The concentrated Common Stock ownership by certain of our executive officers and directors
will limit your ability to influence corporate matters.
As of December 31, 2009, our directors and executive officers together beneficially owned
approximately 30% of our outstanding Common Stock. This group has significant influence over our
management and affairs and overall matters requiring shareholder approval, including the election
of directors and significant corporate transactions, such as a merger or sale of our company or our
assets, for the foreseeable future. This concentrated control will limit the ability of other
shareholders to influence corporate matters and, as a result, we may take actions that some of its
shareholders do not view as beneficial. In addition, such concentrated control could discourage
others from initiating changes of control. As a result, the market price of our shares could be
adversely affected.
The exercise of warrants or options or conversion of notes may depress our stock price and
may result in dilution to our common stockholders.
There are a significant number of outstanding warrants and options to purchase our stock and
there are a certain number of outstanding notes that are convertible into our Common Stock. If the
market price of our Common Stock rises above the exercise price of outstanding warrants and options
or the conversion price of the outstanding notes, holders of those securities may be likely to
exercise their warrants and options or convert their notes and sell the Common Stock acquired upon
exercise or conversion of such securities, as applicable, in the open market. Sales of a
substantial number of shares of our Common Stock in the public market by holders of warrants,
options, or notes may depress the prevailing market price for our Common Stock and could impair our
ability to raise capital through the future sale of our equity securities. Additionally, if the
holders of outstanding options, warrants, or notes exercise those options or warrants or convert
those notes, as applicable, our common stockholders will incur dilution in their relative
percentage ownership.
As of December 31, 2009, warrants to purchase 6,991,371 shares of our common stock at a
weighted average exercise price of $1.17 per share were outstanding and exercisable; options to
purchase 6,182,500 shares of common stock were outstanding, of which 3,662,082 were exercisable at
a weighted average exercise price of $1.35 per share; and notes convertible into 6,944,000 shares
of common stock at a conversion price of $.50 per share were outstanding.
28
Our Common Stock is and likely will remain subject to the SECs Penny Stock rules, which
may make its shares more difficult to sell.
Because the price of our Common Stock is currently and may remain less than $5.00 per share,
it is expected to be classified as a penny stock. The SEC rules regarding penny stocks may have
the effect of reducing trading activity in our shares, making it more difficult for investors to
sell. Under these rules, broker-dealers who recommend such securities to persons other than
institutional accredited investors must:
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make a special written suitability determination for the purchaser; |
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receive the purchasers written agreement to a transaction prior to sale; |
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provide the purchaser with risk disclosure documents which identify certain risks
associated with investing in penny stocks and which describe the market for these
penny stocks as well as a purchasers legal remedies; |
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obtain a signed and dated acknowledgment from the purchaser demonstrating that
the purchaser has received the required risk disclosure document before a transaction in
a penny stock can be completed; and |
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give bid and offer quotations and broker and salesperson compensation information
to the customer orally or in writing before or with the confirmation. |
These rules make it more difficult for broker-dealers to effectuate customer transactions and
trading activity in our securities and may result in a lower trading volume of our common stock and
lower trading prices.
Our Common Stock may be thinly traded.
There is a minimal public market for our Common Stock. We cannot be certain more of a public
market for our Common Stock will develop, or if developed, that it will be sustained. Our Common
Stock will likely be thinly traded compared to larger more widely known companies. We cannot
predict the extent to which an active public market for our Common Stock will develop or be
sustained at any time in the future. If we are unable to develop or sustain a market for our Common
Stock, investors may be unable to sell the Common Stock they own, and may lose the entire value of
their investment.
Securities analysts may elect not to report on our Common Stock or may issue negative reports
that adversely affect the stock price.
At this time, no securities analysts provide research coverage of our Common Stock, and
securities analysts may elect not to provide such coverage in the future. Rules mandated by the
Sarbanes-Oxley Act and a global settlement reached in 2003 among the SEC, other regulatory
agencies, and a number of investment banks led to a number of fundamental changes in how analysts
are reviewed and compensated. In particular, many investment banking firms are required to contract
with independent financial analysts for their stock research. It may remain difficult for a company
such as ours, with a smaller market capitalization, to attract independent financial analysts that
will cover our Common Stock. If securities analysts do not cover our Common Stock, the lack of
research coverage may adversely affect its actual and potential market price. The trading market
for our Common Stock may be affected in part by the research and reports that industry or financial
analysts publish about its business. If one or more analysts elect to cover us and then downgrade
the stock, the stock price would likely decline rapidly. If one or more of these analysts cease
coverage of us, we could lose visibility in the market, which in turn could cause its stock price
to decline. This could have a negative effect on the market price of our shares.
We do not intend to pay cash dividends.
We have never declared or paid cash dividends on our capital stock. We currently expect to use
available funds and any future earnings in the development, operation and expansion of our business
and do not anticipate paying any cash dividends in the foreseeable future. In addition, the terms
of any future debt or credit facility we may obtain may preclude us from paying any dividends. As a
result, capital appreciation, if any, of our Common Stock will be an investors only source of
potential gain from our Common Stock for the foreseeable future.
Shareholders may experience significant dilution if future equity offerings are used to fund
operations or acquire complementary businesses.
If future operations or acquisitions are financed through the issuance of equity securities,
shareholders could experience significant dilution. In addition, securities issued in connection
with future financing activities or potential acquisitions may have rights and preferences senior
to the rights and preferences of our Common Stock. The issuance of shares of our Common Stock upon
the exercise of options may result in dilution to our shareholders.
29
We may become involved in securities class action litigation that could divert managements
attention and harm its business.
The stock market in general and the stocks of medical device companies in particular have
experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or
disproportionate to the operating performance of the companies involved. If these fluctuations
occur in the future, the market price of our shares could fall regardless of its operating
performance. In the past, following periods of volatility in the market price of a particular
companys securities, securities class action litigation has been brought against that company. If
the market price or volume of our shares suffers extreme fluctuations, then we may become involved
in this type of litigation which would be expensive and divert managements attention and resources
from managing the business.
Anti-takeover provisions in our organizational documents may discourage or prevent a change
of control, even if an acquisition would be beneficial to shareholders, which could affect
our share price adversely and prevent attempts by shareholders to replace or remove current
management
Our Articles of Incorporation and Bylaws contain provisions that could delay or prevent a
change of control of our company or its Board of Directors that shareholders might consider
favorable. Some of these provisions include:
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authorizing the issuance of preferred stock which can be created and issued by the
Board of Directors without prior common stock shareholder approval, with rights senior
to those of the common stock; |
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restricting persons who may call shareholder meetings; and |
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allowing the Board to fill vacancies and to fix the number of directors. |
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
Our corporate headquarters are located in Marietta, Georgia where we lease approximately
12,200 square feet of office, laboratory and manufacturing space. We lease approximately 5,000
square feet in Tampa, Florida, which primarily consists of laboratory (2,000 feet) and
manufacturing (3,000 feet) space. We believe these facilities are adequate for our current
activities but expect to lease additional space in conjunction with executing our business plan.
Item 3. Legal Proceedings
None
Item 4. (Removed and Reserved)
30
PART II
Item 5. Market for Registrants Common Equity, Related Shareholder Matters and Issuer
Purchases of Equity Securities
Our Common Stock was approved for quotation on the OTC Bulletin Board on July 19, 2007. Only a
limited number of shares were traded after the approval of the quotation in July 2007. The Common
Stock was traded with the trading symbol of AYXC.
Our common stock began trading under the symbol MDXG on April 2, 2008. The following table
sets forth the high and low bid prices on the OTC Bulletin Board for our common stock, based on
information provided from OTC Bulletin Board. These quotations reflect inter-dealer prices,
without retail mark-up, mark-down, or commission and may not necessarily represent actual
transactions.
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High* |
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Low* |
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Nine Months Ended December 31, 2009 |
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First Quarter |
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$ |
.75 |
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$ |
.40 |
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Second Quarter |
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.75 |
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.41 |
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Third Quarter |
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.90 |
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.60 |
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Year Ended March 31, 2009 |
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First Quarter |
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$ |
6.35 |
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$ |
4.05 |
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Second Quarter |
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5.10 |
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4.50 |
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Third Quarter |
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4.75 |
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2.60 |
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Fourth Quarter |
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4.40 |
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0.40 |
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* |
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Adjusted to reflect the reverse stock split effective on April 2, 2008. |
Based upon information supplied from our transfer agent, there were approximately 780
shareholders of record of our Common Stock as of March 15, 2010.
We have not paid any cash dividends on our common stock since our formation and do not intend
to do so in the future.
To facilitate trading in the Companys shares, the Board is considering applying for a listing
on a national exchange. If the Board does determine to pursue listing on a national exchange, the
Company may consider implementing a reverse split of its Common Stock.
Unregistered Sales of Equity Securities and Use of Proceeds
As reported in Note 8 Common Stock Placements in our consolidated financial statements as of
and for the nine months ended December 31, 2009, from January 1, 2010, through January 21, 2010,
the Company sold an additional 1,308,332 shares of common stock and issued an additional 654,163
warrants and received proceeds of $785,000. These sales were made in conjunction with the
Companys most recent private placement which commenced in October 2009, the October 2009 Private
Placement, which we closed on January 21, 2010.
The Company relied on Section 4(2) of the Securities Act of 1933 (the Securities Act) and
Rule 506 of Regulation D under the Securities Act, as amended, to issue the securities described
above because they were offered to accredited investors and a limited number of unaccredited
investors who purchased for investment in transactions that did not involve a general solicitation.
Form 10-Q for the six months ended September 30, 2009 filed November 16, 2009 and Form 8-K
dated December 31, 2009, also provide information related to unrestricted sales of equity
securities during the nine months ended December 31, 2009.
We did not repurchase any shares during the last three months of 2009 and currently have no
share repurchase plans or programs.
31
Item 6. Selected Financial Data
Not applicable.
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of financial condition and results of
operations, together with the financial statements and the related notes appearing at the end of
this report. Some of the information contained in this discussion and analysis or set forth
elsewhere in this report, including information with respect to our plans and related financing,
includes forward-looking statements that involve risks and uncertainties. You should read the Risk
Factors section of this report for a discussion of important factors that could cause actual
results to differ materially from the results described in or implied by the forward-looking
statements contained in the following discussion and analysis.
The discussion and analysis of our financial conditions and results of operations are based on
the Companys financial statements, which have been prepared in accordance with U.S. generally
accepted accounting principles. The preparation of these financial statements requires making
estimates and assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial statements, as well as
the reported revenues, if any, and expenses during the reporting periods. On an ongoing basis, we
evaluate such estimates and judgments, including those described in greater detail below. We base
our estimates on historical experience and on various other factors that we believe are reasonable
under the circumstances, the results of which form the basis for making judgments about the
carrying value of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions.
Overview
We are a development stage enterprise headquartered in Marietta, Georgia. The Company has
generated insignificant revenue and has a history of losses since its inception in November 2006.
MiMedx Group, Inc. (MiMedx Group) is an integrated developer, manufacturer and marketer of
patent-protected biomaterial-based products. We operate in one business segment, Biomaterials.
MiMedx Group is emerging from a development-focused start-up company into a fully integrated
operating company with the expertise to capitalize on its science and technology and the capacity
to generate sales growth and profitability.
Prior to the 4th quarter of 2009, the Company explored business strategies through
our three development units, MiMedx, SpineMedica and LeveL Orthopedics. After the sale of the
LeveL assets and a thorough review of the strategic direction of the Company, management made the
decision in late 2009 to consolidate the organizational structure. Instead of independent
development teams and manufacturing locations, we will have integrated development teams and all
manufacturing will be consolidated into one site. Our Tampa, Florida location will focus on
research and early stage product and process development. Our Marietta, Georgia location, will
house our corporate headquarters and our development and sales teams, as well as all manufacturing
and distribution operations.
The Company incurred a net loss of approximately $8,296,000 in the nine months ended
December 31, 2009, or approximately $(0.20) per share. Since our inception in November 2006, we
have incurred a net loss of approximately $38,237,000.
From inception through December 31, 2009, we funded our start-up costs, operating costs and
capital expenditures through issuances of stock and convertible debt and will require additional
funds to, execute our business plan, support our research and development activities, obtain
clearances and approvals by regulatory authorities, including the FDA, for the sale of developed
products until we are able to generate revenues sufficient to cover all costs. We currently have no
material commitments for capital expenditures.
Our initial business strategy was to identify and acquire innovative new medical products and
technologies, focused initially on the musculoskeletal market, as well as novel medical
instrumentation and surgical techniques. We have recently refined our strategy to specialize in
proprietary biomaterial technologies that can be transformed into unique medical devices that fill
an unmet or underserved clinical need. Our HydroFix hydrogel technology and our CollaFix
collagen fiber technology are proprietary platforms that can serve as the basis for medical devices
in various orthopedic and orthobiologic applications, such as spine, sports medicine, and trauma.
We also have identified multiple product opportunities in general surgery, drug delivery, wound
management and cardiac markets among others.
32
Our plan is to focus our internal commercialization efforts on orthopedics and orthobiologic
applications for our technologies and to partner with large, established companies in the general
surgery, drug delivery, wound management, cardiac and other markets. Initial conversations with
such external relationships have been initiated, but they will take time to develop.
We have organized an advisory panel of leading physicians to provide insight into our primary
fields of interest for new products and technology, as well as guidance and advice with respect to
ongoing product development programs. Under the direction of our new leadership, our core focus is
on near-term opportunities for each of our technologies, advancing them through the regulatory
process, establishing reliable and cost-effective manufacturing, and establishing an effective
distribution system.
To implement our business plan and generate revenue from other sources, we must develop
products and obtain regulatory clearances or approvals for those products in many jurisdictions.
Other than the clearance for the HydroFix Vaso Shield, we may not receive any such regulatory
clearances or approvals. Due to this and a variety of other factors, many of which are discussed in
this report under Risk Factors, we may be unable to generate significant revenues or margins,
control operating expenses, or achieve or sustain profitability in future years.
Critical Accounting Policies
We believe that of our significant accounting policies, which are described in Note 2 to our
financial statements appearing elsewhere in this report, the following accounting policies involve
a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the
most critical to aid in fully understanding and evaluating our consolidated financial condition and
results of operations.
Goodwill and intangible assets:
Intangible assets include licensing rights and are accounted for based on FASB Accounting
Standards Codification 350, Intangibles Goodwill and Other (ASC 350), previously referred to as
Financial Accounting Standard Statement No. 142 Goodwill and Other Intangible Assets (FAS 142).
In that regard, goodwill is not amortized but is tested at least annually for impairment, or more
frequently if events or changes in circumstances indicate that the asset might be impaired.
Intangible assets with finite useful lives are amortized using the straight-line method over a
period of ten years, the remaining term of the patents underlying the licensing rights (considered
to be the remaining useful life of the license).
Impairment of long-lived assets:
We evaluate the recoverability of our long-lived assets (finite lived intangible asset and
property and equipment) whenever adverse events or changes in business climate indicate that the
expected undiscounted future cash flows from the related assets may be less than previously
anticipated. If the net book value of the related assets exceeds the expected undiscounted future
cash flows of the assets, the carrying amount will be reduced to the present value of their
expected future cash flows and an impairment loss would be recognized.
Share-based compensation:
We follow the provisions of FASB Accounting Standards Codification 718, Compensation Stock
Compensation (ASC 718), previously referred to as Statement of Financial Accounting Standards
No. 123R Share-based Payments (FAS123R) which requires the use of the fair-value based method
to determine compensation for all arrangements under which employees and others receive shares of
stock or equity instruments (options and warrants).
Research and development costs:
Research and development costs consist of direct and indirect costs associated with the
development of our technologies. These costs are expensed as incurred.
33
Recent Accounting Pronouncements
In June 2009, the FASB issued Accounting Standards Update No. 2009-01 (ASU 2009-01), which
establishes the FASB Accounting Standards Codification as the source of authoritative U.S. GAAP
recognized by the FASB to be applied by
nongovernmental entities. The Company adopted ASU 2009-01 during the three months ended
September 30, 2009, and its adoption did not have any impact on the Companys consolidated
financial statements.
In August 2009, the FASB issued Accounting Standards Update No. 2009-05 (ASU 2009-05), which
clarified how to measure the fair value of liabilities in circumstances when a quoted price in an
active market for the identical liability is not available. ASU 2009-05 is effective for the first
reporting period beginning after the issuance of this standard. The Company adopted ASU 2009-05,
and its adoption did not have an impact on its consolidated financial statements.
In October 2009, the FASB issued Accounting Standards Update No. 2009-13 (ASU 2009-13),
which addresses the accounting for multiple-deliverable arrangements to enable vendors to account
for products or services (deliverables) separately rather than as a combined unit. ASU 2009-13 is
effective prospectively for revenue arrangements entered into or materially modified beginning in
fiscal years on or after June 15, 2010. Early adoption is permitted. The Company does not expect
the adoption of this standard to have any effect on its financial statements until or unless it
enters into agreements covered by this standard.
Results of Operations for the nine months ended December 31, 2009 compared to the year ended March
31, 2009
The Company changed its fiscal year end to December 31, 2009 and in conjunction with this
transition report we are comparing the nine months ended December 31, 2009 to the year ended March
31, 2009, which inherently is a shorter operating period and is a primary factor in decreases in
costs when comparing the two periods.
Research and Development Expenses
Research and development expenses during the nine months ended December 31, 2009 decreased
approximately $1,433,000 to $2,590,000 compared to $4,023,000 for the year ended March 31, 2009.
The decline in our research and development costs reflect our focus on reducing costs and
stream-lining our critical path to market. Our research and development expenses consist primarily
of internal personnel costs, fees paid to external consultants, and supplies and instruments used
in our laboratories. As of December 31, 2009, we employed 28 employees devoted to research and
development, validation of our manufacturing processes, and the manufacturing of prototype devices.
As of March 31, 2009, we had 25 employees devoted to these efforts. Internal personnel costs
represent approximately 55.5% of total research and development expenses during the nine months
ended December 31, 2009 as compared to 47% for the year ended March 31, 2009. Fees paid to
external consultants and supplies and instruments used in our laboratories represent approximately
32.8% and 11.7%, respectively, of research and development expenses during the nine months ended
December 31, 2009 as compared to 42.8% and 10.2% for the year ended March 31, 2009. We anticipate
our spending in the area of research and development in the foreseeable future to continue at
comparable current levels as we progress our technologies thru additional testing and validation in
order to obtain clearance or approval from the FDA to market our technologies.
General and Administrative Expenses
General and administrative expenses for the nine months ended December 31, 2009, decreased
approximately $4,488,000 to $3,463,000 compared to $7,951,000 for the year ended March 31, 2009.
Included in our general and administrative expenses for the nine months ended December 31, 2009, is
a $585,000 gain on settlement of payables, primarily related to legal fees incurred prior to March
31, 2009. Excluding the gain on settlement of payables, our general and administrative expenses
decreased approximately $3,903,000 compared to the year ended March 31, 2009. The decline in our
general and administrative expenses reflects our focus on reducing costs and stream-lining our
critical path to market.
General and administrative expenses consist of personnel costs, professional fees, facilities
costs and other administrative costs. During the nine months ended December 31, 2009, salaries and
benefits, excluding stock-based compensation, totaled $1,325,000 compared to $2,978,000 for the
year ended March 31, 2009. This significant decrease primarily relates to the departure of certain
executives at the end of fiscal year end March 31, 2009 for which those positions were either
eliminated in the nine months ended December 31, 2009 or filled near the end of the nine month
period ended December 31, 2009. As of December 31, 2009, we employed 12 personnel (5 of which were
hired in the last quarter of 2009) not related to research and development functions as compared to
9 as of March 31, 2009.
Professional fees, excluding stock-based compensation and gain on settlement of payables,
which consist of legal and accounting fees, business consulting and directors fees decreased
$479,000, during the nine months ended December 31, 2009, to $657,000 compared to $1,136,000 during
the year ended March 31, 2009. The decrease in professional fees is primarily attributed to
$400,000 of costs incurred for merger and acquisition activity in the same period in 2008 that
were not incurred in the nine months ended December 31, 2009.
34
Facilities and other administrative costs decreased $591,000 to $750,000 during the nine
months ended December 31, 2009, compared to the year ended March 31, 2009, and $364,000 compared to
the nine months ended December 31, 2008, reflecting our focus on reducing costs and controlling all
discretionary costs.
During the nine months ended December 31, 2009, we recorded approximately $338,000 in
depreciation expense and approximately $497,000 in amortization expense as compared to amounts
approximating $425,000 and $667,000, respectively, for the year ended March 31, 2009, and $313,000
and $500,000, respectively for the nine months ended December 31, 2008. We depreciate our assets
on a straight-line basis, principally over five to seven years and amortize our intangible assets
over a period of ten years, which we believe represents the remaining useful lives of the patents
underlying the licensing rights and intellectual property. We do not amortize goodwill but at
least annually we test goodwill for impairment and periodically evaluate other intangibles for
impairment based on events or changes in circumstances as they occur.
Gain on Sale of Assets
During the last three months of 2009, we sold our upper extremities technology, which we
referred to as our Level Orthopedics development unit, in two separate transactions. In total we
received cash proceeds of $360,000 and a $100,000 secured promissory note for these assets, and
recognized a gain of approximately $281,000. Additionally, we may receive up to $630,000 in future
royalty payments in conjunction with one of the transactions, but due to the contingent nature of
the royalty payments we did not recognize these potential payments in calculating our gain on sale.
We anticipate spending in the area of general and administrative expenses in the foreseeable
future to continue at comparable current levels.
Net Interest Income
We recorded net interest expense of approximately $243,000 during the nine months ended
December 31, 2009 compared to net interest income of approximately $60,000 during the year ended
March 31, 2009. The net interest expense during the nine months ended December 31, 2009, reflects
interest costs and financing costs primarily related to our long term convertible debt offering
that we completed in June 2009.
Share-Based Compensation
We follow the provisions of FASB Accounting Standards Codification 718, Compensation Stock
Compensation (ASC 718), previously referred to as Statement of Financial Accounting Standards
No. 123R Share-based Payments (FAS123R) which requires the use of the fair-value based method
to determine compensation for all arrangements under which employees and others receive shares of
stock or equity instruments (options and warrants). The total share based compensation recognized
during the nine months ended December 31, 2009 approximated $481,000 as compared to $1,409,000
recognized during the year ended March 31, 2009.
Contractual Commitments
The table below sets forth our known contractual obligations as of December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period |
|
|
|
|
|
|
|
Less than 1 |
|
|
|
|
|
|
|
|
|
|
Contractual Obligations |
|
Total |
|
|
year |
|
|
2 3 years |
|
|
4 5 years |
|
|
After 5 years |
|
Consulting Agreements |
|
$ |
18,750 |
|
|
$ |
18,750 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Employment Agreements |
|
|
166,000 |
|
|
|
166,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Lease Obligations |
|
|
601,000 |
|
|
|
284,000 |
|
|
|
317,000 |
|
|
|
|
|
|
|
|
|
Royalty Obligations |
|
|
155,000 |
|
|
|
25,000 |
|
|
|
80,000 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
940,750 |
|
|
$ |
493,750 |
|
|
$ |
397,000 |
|
|
$ |
50,000 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Liquidity and Capital Resources
Since inception, we have funded our development, operating costs and capital expenditures
through issuances of stock or convertible debt. As of December 31, 2009, the Company has not
emerged from the development stage. We had approximately $2,654,000 of cash and cash equivalents
on hand as of December 31, 2009. From January 1, 2010 through January 21, 2010, prior to closing
our October 2009 Private Placement, we received an additional $785,000 of proceeds related to the
sale of our common stock and warrants. We estimate, assuming we receive no additional funds, that
we have sufficient funds to operate until June 2010.
In order to fund on-going operating cash requirements beyond that point or to further
accelerate and execute our business plan, we will need to raise significant additional funds. In
view of these matters, the ability of the Company to continue as a going concern is dependent upon
the our ability to secure additional financing sufficient to support our research and development
activities, approval of developed products for sale by regulatory authorities, including the FDA,
and ultimately to generate revenues sufficient to cover all costs. Since inception, the Company has
financed its activities principally from the sale of equity securities and convertible debt. While
the Company has been successful in the past in obtaining the necessary capital to support its
operations, there is no assurance that the Company will be able to obtain additional equity capital
or other financing under commercially reasonable terms and conditions, or at all. Furthermore, if
the Company issues equity or debt securities to raise additional funds, existing shareholders may
experience dilution and the new equity or debt securities it issues may have rights, preferences
and privileges senior to those of existing shareholders. In addition, if the Company raises
additional funds through collaboration, licensing or other similar arrangements, it may be
necessary to relinquish valuable rights to products or proprietary technologies, or grant licenses
on terms that are not favorable.
Currently, the Board is considering how most effectively to raise the required additional
capital. Among the alternatives being considered is a private placement of Common Stock to certain
existing shareholders and potential investors we have identified who are accredited investors with
whom the Company has a pre-existing relationship with and offering a temporary reduction in the
warrant exercise price on certain outstanding warrants as an incentive to the warrant holders to
exercise their warrants for cash.
In the past our Chairman and CEO has provided bridge financing pending completion of our
offerings. The Chairman and CEO has indicated that he is willing to provide similar financing if
the need arises subject to mutually agreeable terms.
If the Company cannot raise funds on acceptable terms, the Company will not be able to
continue as a going concern, develop or enhance products, obtain the required regulatory clearances
or approvals, execute the Companys business plan, take advantage of future opportunities, or
respond to competitive pressure or unanticipated customer requirements. Any of these events would
adversely affect the Companys ability to achieve the Companys development and commercialization
goals, which could have a material adverse effect on the Companys business, results of operations
and financial condition.
Inflation
We do not believe that the rate of inflation has had a material effect on our operating
results. However, inflation could adversely affect our future operating results.
36
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
In the normal course of doing business we currently are not exposed to the risks associated
with foreign currency exchange rates and changes in interest rates. We do not engage in trading
market risk sensitive instruments or purchasing hedging instruments or other than trading
instruments that are likely to expose us to significant market risk, whether interest rate, foreign
currency exchange, commodity price or equity price risk.
Our exposure to market risk relates to our cash and investments.
The primary objective of our investment activities is to preserve principal while at the same
time maximizing yields without significantly increasing risk. To achieve this objective, we invest
our excess cash in debt instruments of the U.S. Government and its agencies, bank obligations,
repurchase agreements and high-quality corporate issuers, and, by policy, restrict our exposure to
any single corporate issuer by imposing concentration limits. To minimize the exposure due to
adverse shifts in interest rates, we maintain investments at an average maturity of generally less
than three months.
Item 8. Financial Statements and Supplementary Data
37
Report of Independent Registered Public Accounting Firm
Board of Directors
MiMedx Group, Inc.
We have audited the accompanying consolidated balance sheets of MiMedx Group, Inc. and
subsidiaries as of December 31, 2009, and March 31, 2009 and the related consolidated statements of
operations, stockholders equity and cash flows for the nine months ended December 31, 2009 and the
year ended March 31, 2009 and the period from inception (November 22, 2006) through December 31,
2009. These financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting
Oversight Board (United States of America). The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purposes of expressing an
opinion on the effectiveness of the Companys internal control over financial reporting.
Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above, present fairly, in all material
respects, the consolidated financial position of MiMedx Group, Inc. and subsidiaries as of December
31, 2009 and March 31, 2009 and the consolidated results of their operations and their cash flows
for the nine months ended December 31, 2009 and the year ended March 31, 2009 and the period from
inception (November 22, 2006) through December 31, 2009, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company will continue as
a going concern. As discussed in Note 3 to the financial statements, the Company has incurred net
losses and negative operating cash flows since inception and will require additional financing to
fund the continued development of products subject to its licensed technologies. The availability
of such financing cannot be assured. These conditions raise substantial doubt about the Companys
ability to continue as a going concern. Managements plans in regard to these matters are
described in Note 3. The financial statements do not include any adjustments with respect to the
possible future effects on the recoverability and classification of assets or the amounts and
classification of liabilities that might result from the outcome of these uncertainties.
|
|
|
/s/ Cherry, Bekaert & Holland, L.L.P.
Cherry, Bekaert & Holland, L.L.P.
|
|
|
Tampa, Florida
March 30, 2010
38
MIMEDX GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
March 31, |
|
|
|
2009 |
|
|
2009 |
|
ASSETS
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,653,537 |
|
|
$ |
34,828 |
|
Inventory |
|
|
30,920 |
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
121,277 |
|
|
|
82,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
2,805,734 |
|
|
|
117,781 |
|
|
|
|
|
|
|
|
|
|
Property and equipment,
net of accumulated depreciation |
|
|
1,049,597 |
|
|
|
1,375,896 |
|
Goodwill |
|
|
857,597 |
|
|
|
857,597 |
|
Intangible assets, net |
|
|
4,597,326 |
|
|
|
5,116,337 |
|
Deferred financing costs |
|
|
192,627 |
|
|
|
|
|
Deposits and other assets |
|
|
189,202 |
|
|
|
149,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
9,692,083 |
|
|
$ |
7,616,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
629,349 |
|
|
$ |
1,699,337 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
629,349 |
|
|
|
1,699,337 |
|
|
|
|
|
|
|
|
|
|
Long term convertible debt, face value $3,472,000 less unamortized
discount of $550,478 and including accrued interest of $69,604 |
|
|
2,990,856 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
3,620,205 |
|
|
|
1,699,337 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingency (Notes 6 and 15) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock with registration rights, 1,905,000 shares issued
and outstanding (March) |
|
|
|
|
|
|
3,761,250 |
|
|
|
|
|
|
|
|
Stockholders equity: |
|
|
|
|
|
|
|
|
Preferred stock; $.001 par value; 5,000,000
shares authorized and no (December and March) shares
issued and outstanding |
|
|
|
|
|
|
|
|
Common stock; $.001 par value;
100,000,000 shares authorized and 50,002,887
(December) and 37,339,628 (March) shares issued and
outstanding |
|
|
50,003 |
|
|
|
37,340 |
|
Additional paid-in capital |
|
|
46,454,482 |
|
|
|
34,230,824 |
|
Treasury stock (50,000 shares at cost) |
|
|
(25,000 |
) |
|
|
|
|
Deficit accumulated during the development stage |
|
|
(40,407,607 |
) |
|
|
(32,111,938 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
6,071,878 |
|
|
|
2,156,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
9,692,083 |
|
|
$ |
7,616,813 |
|
|
|
|
|
|
|
|
See
notes to consolidated financial statements.
39
MIMEDX GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from |
|
|
|
|
|
|
|
|
|
|
|
Inception |
|
|
|
Nine Months |
|
|
Year |
|
|
(November 22, 2006) |
|
|
|
Ended |
|
|
Ended |
|
|
through |
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
|
December 31, 2009 |
|
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
$ |
800 |
|
|
$ |
|
|
|
$ |
800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING COSTS AND EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of products sold |
|
|
240 |
|
|
|
|
|
|
|
240 |
|
Research and development expenses |
|
|
2,590,227 |
|
|
|
4,022,709 |
|
|
|
8,739,835 |
|
Acquired in-process research and development (Note 4) |
|
|
|
|
|
|
|
|
|
|
7,177,000 |
|
General and administrative expenses |
|
|
3,463,303 |
|
|
|
7,950,673 |
|
|
|
20,644,007 |
|
(Gain)/loss on sale of assets |
|
|
(280,868 |
) |
|
|
5,440 |
|
|
|
(275,428 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(5,772,102 |
) |
|
|
(11,978,822 |
) |
|
|
(36,284,854 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing expense associated with issuance of common
stock for registration rights waivers |
|
|
(1,305,100 |
) |
|
|
|
|
|
|
(1,305,100 |
) |
Financing expense associated with warrants issued
in connection with convertible promissory note |
|
|
(975,833 |
) |
|
|
|
|
|
|
(975,833 |
) |
Net interest (expense) income, net |
|
|
(242,634 |
) |
|
|
59,551 |
|
|
|
370,370 |
|
Change in fair value of investment,
related party |
|
|
|
|
|
|
|
|
|
|
(41,775 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAX |
|
|
(8,295,669 |
) |
|
|
(11,919,271 |
) |
|
|
(38,237,192 |
) |
Income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
|
(8,295,669 |
) |
|
|
(11,919,271 |
) |
|
|
(38,237,192 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion of redeemable common stock and
common stock with registration rights
to fair value |
|
|
|
|
|
|
(2,158,823 |
) |
|
|
(2,158,823 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss attributable to common shareholders |
|
$ |
(8,295,669 |
) |
|
$ |
(14,078,094 |
) |
|
$ |
(40,396,015 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.20 |
) |
|
$ |
(0.37 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in computing net loss per common share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
41,365,513 |
|
|
|
37,735,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to consolidated financial statements.
40
MIMEDX
GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
PERIOD FROM INCEPTION (NOVEMBER 22, 2006) THROUGH DECEMBER 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Convertible |
|
|
Convertible |
|
|
Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Stock |
|
|
Note |
|
|
During the |
|
|
|
|
|
|
Series A |
|
|
Series B |
|
|
Series C |
|
|
Common Stock |
|
|
Paid-in |
|
|
Treasury |
|
|
Subscriptions |
|
|
Receivable, |
|
|
Development |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stock |
|
|
Receivable |
|
|
Related party |
|
|
Stage |
|
|
Total |
|
|
Balances, November 22, 2006 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Issuance of common stock at inception |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,880,000 |
|
|
|
12,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,592 |
) |
|
|
1,288 |
|
Employee share-based compensation
expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,409 |
|
Other share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,980 |
|
Common stock issued in connection
with purchase of license agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,120,000 |
|
|
|
1,120 |
|
|
|
894,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
896,000 |
|
Issuance of note receivable, related
party |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,000,000 |
) |
|
|
|
|
|
|
(2,000,000 |
) |
Sale of Series A Preferred stock |
|
|
11,212,800 |
|
|
|
14,016,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(918,806 |
) |
|
|
|
|
|
|
(1,233,750 |
) |
|
|
|
|
|
|
|
|
|
|
11,863,444 |
|
Accrued interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,644 |
) |
|
|
|
|
|
|
(7,644 |
) |
Net loss for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(650,777 |
) |
|
|
(650,777 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2007 |
|
|
11,212,800 |
|
|
|
14,016,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000,000 |
|
|
|
14,000 |
|
|
|
7,463 |
|
|
|
|
|
|
|
(1,233,750 |
) |
|
|
(2,007,644 |
) |
|
|
(662,369 |
) |
|
|
10,133,700 |
|
Employee share-based compensation
expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
649,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
649,783 |
|
Other share-based compensation
expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
158,247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
158,247 |
|
Collection of stock subscription
receivable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,233,750 |
|
|
|
|
|
|
|
|
|
|
|
1,233,750 |
|
Accrued interest income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(41,250 |
) |
|
|
|
|
|
|
(41,250 |
) |
SpineMedica Corp. acquisition |
|
|
|
|
|
|
|
|
|
|
5,922,397 |
|
|
|
7,402,996 |
|
|
|
|
|
|
|
|
|
|
|
2,911,117 |
|
|
|
2,911 |
|
|
|
2,316,908 |
|
|
|
|
|
|
|
|
|
|
|
2,048,894 |
|
|
|
|
|
|
|
11,771,709 |
|
Sale of Series C Preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,285,001 |
|
|
|
3,855,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,855,000 |
|
Stock options issued in connection
with purchase of intellectual property |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116,000 |
|
Exercise of stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,200 |
|
|
|
1 |
|
|
|
2,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,160 |
|
Alynx Merger Recapitalization |
|
|
7,207,398 |
|
|
|
11,257,996 |
|
|
|
(5,922,397 |
) |
|
|
(7,402,996 |
) |
|
|
(1,285,001 |
) |
|
|
(3,855,000 |
) |
|
|
926,168 |
|
|
|
926 |
|
|
|
(926 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alynx Merger Transaction Costs (expensed) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
205,851 |
|
|
|
206 |
|
|
|
1,126,173 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,126,379 |
|
Conversion of Preferred stock |
|
|
(18,420,198 |
) |
|
|
(25,273,996 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,420,198 |
|
|
|
18,420 |
|
|
|
25,255,576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued in connection
with purchase of license agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
400,000 |
|
|
|
400 |
|
|
|
2,595,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,596,000 |
|
Net loss for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,371,475 |
) |
|
|
(17,371,475 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,864,534 |
|
|
|
36,864 |
|
|
|
32,226,983 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,033,844 |
) |
|
|
14,230,003 |
|
See
notes to consolidated financial statements.
41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit |
|
|
|
|
|
|
Convertible |
|
|
Convertible |
|
|
Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Stock |
|
|
Note |
|
|
During the |
|
|
|
|
|
|
Series A |
|
|
Series B |
|
|
Series C |
|
|
Common Stock |
|
|
Paid-in |
|
|
Treasury |
|
|
Subscriptions |
|
|
Receivable, |
|
|
Development |
|
|
|
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Stock |
|
|
Receivable |
|
|
Related party |
|
|
Stage |
|
|
Total |
|
|
Employee share-based compensation
expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
945,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
945,062 |
|
Other share-based compensation
expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,076 |
|
Cashless exercise of stock warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
417,594 |
|
|
|
418 |
|
|
|
(418 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of warrants in connection with private
placement of redeemable common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
595,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
595,073 |
|
Exercise of stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,500 |
|
|
|
58 |
|
|
|
(52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
Accretion of redeemable common stock and
common stock with registration rights to
fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,158,823 |
) |
|
|
(2,158,823 |
) |
Warrants issued in connection
with the amendment
of private placement of common stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
334,100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
334,100 |
|
Net loss for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,919,271 |
) |
|
|
(11,919,271 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,339,628 |
|
|
|
37,340 |
|
|
|
34,230,824 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,111,938 |
) |
|
|
2,156,226 |
|
Employee share-based compensation
expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
363,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
363,457 |
|
Other share-based compensation
expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,689 |
|
Beneficial conversion feature recognized
on convertible debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
676,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
676,500 |
|
Warrants issued to placement agents in
conjunction with convertible debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98,574 |
|
Exercise of Stock Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000 |
|
|
|
20 |
|
|
|
(18 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
Common stock issued for waivers
of registration rights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,490,000 |
|
|
|
2,490 |
|
|
|
1,302,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,305,100 |
|
Reclassification of common stock with
registration rights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,905,000 |
|
|
|
1,905 |
|
|
|
3,759,345 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,761,250 |
|
Common stock issued for accrued directors
fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162,750 |
|
|
|
163 |
|
|
|
81,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
81,375 |
|
Common stock issued for accrued executive
compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
187,644 |
|
|
|
187 |
|
|
|
93,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,822 |
|
Common Stock issued in connection with
purchase of license agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100 |
|
|
|
70,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,000 |
|
Sale of Common Stock and Warrants
(net of $42,000 of offering costs) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,697,865 |
|
|
|
7,698 |
|
|
|
4,569,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,576,719 |
|
Common stock issued for services in
conjunction with private placement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000 |
|
|
|
100 |
|
|
|
41,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,000 |
|
Warrants issued in conjunction with
convertible promissory note |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
975,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
975,833 |
|
Modification of stock options and
purchase of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,000 |
|
|
|
(25,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,000 |
|
Net loss for the period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,295,669 |
) |
|
|
(8,295,669 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2009 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
50,002,887 |
|
|
$ |
50,003 |
|
|
$ |
46,454,482 |
|
|
$ |
(25,000 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
(40,407,607 |
) |
|
$ |
6,071,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to consolidated financial statements.
42
MIMEDX GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from |
|
|
|
|
|
|
|
|
|
|
|
Inception |
|
|
|
Nine |
|
|
Year |
|
|
(November 22, 2006) |
|
|
|
Months Ended |
|
|
Ended |
|
|
through |
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
|
December 31, 2009 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(8,295,669 |
) |
|
$ |
(11,919,271 |
) |
|
$ |
(38,237,192 |
) |
Adjustments to reconcile net loss to net cash flows from
operating activities, net of effects of acquisition: |
|
|
|
|
|
|
|
|
|
|
|
|
Gain on settlement of payables |
|
|
(584,969 |
) |
|
|
|
|
|
|
(584,969 |
) |
(Gain)/loss on sales of assets |
|
|
(280,868 |
) |
|
|
5,440 |
|
|
|
(275,428 |
) |
Acquired in-process research and development |
|
|
|
|
|
|
|
|
|
|
7,177,000 |
|
Depreciation |
|
|
337,909 |
|
|
|
425,013 |
|
|
|
955,077 |
|
Amortization of intangible assets |
|
|
497,211 |
|
|
|
666,816 |
|
|
|
1,487,874 |
|
Amortization of debt discount and deferred financing costs |
|
|
169,739 |
|
|
|
|
|
|
|
169,739 |
|
Employee share-based compensation expense |
|
|
363,457 |
|
|
|
945,062 |
|
|
|
1,971,711 |
|
Other share-based compensation expense |
|
|
117,689 |
|
|
|
464,176 |
|
|
|
758,092 |
|
Financing expense associated with issuance
of common stock for waivers of registration rights |
|
|
1,305,100 |
|
|
|
|
|
|
|
1,305,100 |
|
Financing expense associated with warrants issued
in connection with convertible promissory note |
|
|
975,833 |
|
|
|
|
|
|
|
975,833 |
|
Modifications of options and purchase of treasury stock |
|
|
48,000 |
|
|
|
|
|
|
|
48,000 |
|
Issuance of common stock for transaction fees |
|
|
|
|
|
|
|
|
|
|
1,126,379 |
|
Accrued interest on notes receivable, related party |
|
|
|
|
|
|
|
|
|
|
(48,894 |
) |
Change in fair value of investment, related party |
|
|
|
|
|
|
|
|
|
|
41,775 |
|
(Decrease)/increase in cash resulting from changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
Inventory |
|
|
(30,920 |
) |
|
|
|
|
|
|
(30,920 |
) |
Prepaid expenses and other current assets |
|
|
21,676 |
|
|
|
106,300 |
|
|
|
(42,199 |
) |
Accounts payable and accrued expenses |
|
|
(240,468 |
) |
|
|
750,859 |
|
|
|
560,755 |
|
Deferred interest income |
|
|
|
|
|
|
|
|
|
|
(43,200 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from operating activities |
|
|
(5,596,280 |
) |
|
|
(8,555,605 |
) |
|
|
(22,685,467 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Payments for purchase of equipment |
|
|
(11,610 |
) |
|
|
(360,493 |
) |
|
|
(1,552,905 |
) |
Proceeds from sale of assets |
|
|
360,250 |
|
|
|
6,580 |
|
|
|
366,830 |
|
Costs paid in conjunction with sales of assets |
|
|
(86,332 |
) |
|
|
|
|
|
|
(86,332 |
) |
Cash paid for intangible asset |
|
|
|
|
|
|
|
|
|
|
(100,000 |
) |
Cash paid for security deposits |
|
|
|
|
|
|
(2,769 |
) |
|
|
(115,400 |
) |
Cash received in acquisition of SpineMedica Corp. |
|
|
|
|
|
|
|
|
|
|
1,957,405 |
|
Cash paid for acquisition costs of SpineMedica Corp. |
|
|
|
|
|
|
|
|
|
|
(227,901 |
) |
Payments from (advances to) related party |
|
|
|
|
|
|
|
|
|
|
(2,008,522 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from investing activities |
|
|
262,308 |
|
|
|
(356,682 |
) |
|
|
(1,766,825 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from convertible debt offering |
|
|
3,472,000 |
|
|
|
|
|
|
|
3,472,000 |
|
Proceeds from convertible promissory note |
|
|
500,000 |
|
|
|
|
|
|
|
500,000 |
|
Repayment of convertible promissory note |
|
|
(500,000 |
) |
|
|
|
|
|
|
(500,000 |
) |
Proceeds from Series A preferred stock |
|
|
|
|
|
|
|
|
|
|
14,016,000 |
|
Proceeds from Series C preferred stock |
|
|
|
|
|
|
|
|
|
|
3,855,000 |
|
Proceeds from sale of common stock and warrants |
|
|
4,618,719 |
|
|
|
2,197,500 |
|
|
|
6,817,507 |
|
Proceeds from exercise of stock options |
|
|
2 |
|
|
|
6 |
|
|
|
2,168 |
|
Offering costs paid in connection with convertible debt offering |
|
|
(138,040 |
) |
|
|
|
|
|
|
(138,040 |
) |
Offering costs paid in connection with Series A preferred
stock offering |
|
|
|
|
|
|
|
|
|
|
(918,806 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from financing activities |
|
|
7,952,681 |
|
|
|
2,197,506 |
|
|
|
27,105,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents |
|
|
2,618,709 |
|
|
|
(6,714,781 |
) |
|
|
2,653,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period |
|
|
34,828 |
|
|
|
6,749,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
. |
|
|
|
|
|
|
|
|
|
Cash, end of period |
|
$ |
2,653,537 |
|
|
$ |
34,828 |
|
|
$ |
2,653,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
4,745 |
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
See
notes to consolidated financial statements.
43
MIMEDX GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
During the year ended March 31, 2009, common stock and common stock with registration rights
(classified outside of stockholders equity) was accreted to fair value by $2,158,823 through
a charge to accumulated deficit.
During the nine months ended December 31, 2009, the Company issued 315,520 warrants
to purchase common stock, valued at $98,574 and recognized a beneficial conversion
feature of $676,500 in conjunction with a convertible debt offering.
During the nine months ended December 31, 2009, the Company issued common stock valued
at $42,000 for costs associated with its private placement sale of common stock and warrants,
$81,375 for accrued directors fees, and $93,822 for accrued executive compensation.
During the nine months ended December 31, 2009, the Company reclassified $3,761,250 of
common stock with registration rights to equity as the result of the termination of such
rights
(Note 8).
During the nine months ended December 31, 2009, the Company issued 100,000 shares of
common stock valued at $71,000 for intellectual property upon achieving certain milestones
(Note 6).
During the nine months ended December 31, 2009, the Company received a $100,000 3%
Secured Promissory Note in conjunction with its sale of intellectual property (Note 6).
See
notes to consolidated financial statements.
44
MIMEDX GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED DECEMBER 31, 2009 AND THE YEAR ENDED MARCH 31, 2009
AND FROM INCEPTION (NOVEMBER 22, 2006) THROUGH DECEMBER 31, 2009
1. |
|
Formation and nature of business: |
|
|
MiMedx, Inc. (MiMedx) was incorporated in Florida in 2006. MiMedx entered into and
consummated an Agreement and Plan of Merger (Merger Agreement) with a publicly-traded Nevada
Corporation, Alynx, Co. (Alynx), a public shell company, on February 8, 2008. As a result
of this transaction, MiMedx shareholders owned approximately 97% of the outstanding shares,
thus giving MiMedx substantial control. |
|
|
Under U.S. generally accepted accounting principles (GAAP), MiMedx was deemed to be the
accounting acquirer since the shareholders of MiMedx own a substantial majority of the issued
and outstanding shares, and thus this reverse merger was accounted for as a capital
transaction. The historical financial statements are a continuation of financial statements
of the accounting acquirer and the capital structure of the consolidated enterprise is now
different from that appearing in the historical financial statements of the accounting
acquirer in earlier periods due to the recapitalization. |
|
|
On March 31, 2008, MiMedx Group, Inc., a Florida Corporation, and Alynx merged. As a result
of this transaction, MiMedx Group, Inc. became the surviving corporation. The Company
refers to MiMedx Group, Inc., a development stage company, as well as its two operating
subsidiaries: MiMedx and SpineMedica, LLC. |
|
|
MiMedx acquired a license for the use, adoption and development of certain core technologies
developed at the Shriners Hospital for Children and the University of South Florida Research
Foundation. This technology focuses on biomaterials for soft tissue repair, such as tendons,
ligaments and cartilage, as well as other biomaterial-based products for numerous other
medical applications. The development of the licensed technologies requires continued
research and development and, ultimately, the approval of the U.S. Food and Drug
Administration (FDA) and/or foreign regulatory authorities in order for the Company to be
able to generate revenues from the sale of its products. This process is expected to take at
least six months to one year, and there can be no assurance that the Company will be
successful in its efforts to commercialize the licensed technology. |
|
|
On July 23, 2007, MiMedx acquired SpineMedica Corp. through its wholly-owned subsidiary,
SpineMedica, LLC (SpineMedica). SpineMedica Corp. was incorporated in the State of Florida
on June 9, 2005 and its successor SpineMedica, LLC was incorporated in the State of Florida on
June 27, 2007. SpineMedica has licensed the right to use Salubria®, or similar poly-vinyl
alcohol (PVA) -based biomaterials for certain applications within the body. SpineMedica
also owns certain assets (equipment) for the production of products based on a PVA-based
hydrogel, which is a water-based biomaterial that can be manufactured with a wide range of
mechanical properties, including those that appear to closely mimic the mechanical and
physical properties of natural, healthy human tissue. |
|
|
The Company operates in one business segment, Biomaterials, which includes the design,
manufacture, and marketing of products for the Orthopedics and Spine market categories. The
MiMedx divisions products are assembled from a strong, collagen-fiber based technology that
potentially could be used to augment the repair of soft-tissue and connective tissue injuries.
The SpineMedica division is developing a line of products constructed of a durable hydrogel,
the first of which is the Paradis Vaso Shield indicated as a cover for vessels following
anterior vertebral surgery. SpineMedica completed the development of the Paradis Vaso Shield
surgical sheet products with a FDA 510(k) marketing clearance, received on April 20, 2009 and
completed the sale of its first commercial product in December 2009. SpineMedica is
investigating expansion of this product line to other areas of the body in and outside the
orthopedic and spine category. |
|
|
The Company is a development stage enterprise and will remain as such until significant
revenues are generated, if ever. |
45
2. |
|
Significant accounting policies: |
|
|
On December 15, 2009, the Board of Directors of the Company authorized a change in the
Companys fiscal year end to December 31, from March 31, effective for the current fiscal
year. The result of this change is that our reporting period for the current fiscal year is
the nine months ended December 31, 2009. The comparable amounts for the nine months ended
December 31, 2009 and 2008 (unaudited), respectively, are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
Nine Months Ended |
|
|
December 31, 2008 |
|
|
|
December 31, 2009 |
|
|
(unaudited) |
|
Revenues |
|
$ |
800 |
|
|
$ |
|
|
Loss from operations |
|
|
(5,772,102 |
) |
|
|
(9,106,144 |
) |
Loss before income tax |
|
|
(8,295,669 |
) |
|
|
(9,047,287 |
) |
Income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(8,295,669 |
) |
|
|
(9,047,287 |
) |
|
|
|
|
|
|
|
Accretion of redeemable common stock
and common stock with registration
rights to fair value |
|
|
|
|
|
|
(2,158,823 |
) |
Loss attributable to common shareholders |
|
$ |
(8,295,669 |
) |
|
$ |
(11,206,110 |
) |
|
|
|
|
|
|
|
Net loss per common share |
|
$ |
(.20 |
) |
|
$ |
(.30 |
) |
|
|
|
|
|
|
|
|
|
Use of estimates: |
|
|
|
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America 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 financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates. |
|
|
Principles of consolidation: |
|
|
The financial statements include the accounts of MiMedx Group, Inc. and its wholly-owned
subsidiaries MiMedx and, SpineMedica. All significant inter-company balances and transactions
have been eliminated. |
|
|
Concentrations of credit risk: |
|
|
The Company places its cash and cash equivalents on deposit with financial institutions in the
United States. In October and November 2008 the Federal Deposit Insurance Corporation (FDIC)
temporarily increased coverage to $250,000 for substantially all depository accounts and
temporarily provides unlimited coverage for certain qualifying and participating non-interest
bearing transaction accounts. The increased coverage is scheduled to expire on December 31,
2013, at which time it is anticipated amounts insured by the FDIC will return to $100,000.
During the year, the Company from time to time may have had amounts on deposit in excess of
the insured limits. As of December 31, 2009, the Company had cash and cash equivalents of
approximately $2,400,000 which exceeds these insured amounts. |
|
|
Cash and cash equivalents: |
|
|
Cash and cash equivalents include all highly liquid investments with an original maturity of
three months or less. |
|
|
Inventories, which consist primarily of raw materials at December 31, 2009, are valued at the
lower of actual cost or market, using the first-in, first-out (FIFO) method. Work in process
is calculated by estimating the number of units that will be successfully converted to
finished goods, based upon a build-up in the stage of completion using estimated labor inputs
for each stage and historical yields reduced by estimated usage for quality control testing.
Abnormal amounts of overhead expense incurred during production ramp up are recognized as a
current period charge.
|
46
|
|
Goodwill and intangible assets: |
|
|
Goodwill is tested at least annually for impairment, or more frequently if events or changes
in circumstances indicate that the asset might be impaired. Intangible assets with finite
useful lives are amortized using the straight-line method over a period of 10 years, the
remaining term of the patents underlying the licensing rights and intellectual property
(considered to be the remaining useful life of the assets). |
|
|
Property and equipment are recorded at cost and depreciated on a straight-line basis over
their estimated useful lives, principally five to seven years. Leasehold improvements are
depreciated on a straight-line basis over the lesser of the estimated useful lives or the life
of the lease. |
|
|
Impairment of long-lived assets: |
|
|
The Company evaluates the recoverability of its long-lived assets (finite lived intangible
assets and property and equipment) whenever adverse events or changes in business climate
indicate that the expected undiscounted future cash flows from the related assets may be less
than previously anticipated. If the net book value of the related assets exceeds the expected
undiscounted future cash flows of the assets, the carrying amount would be reduced to the
present value of their expected future cash flows and an impairment loss would be recognized.
There have been no impairment losses in the periods presented. |
|
|
Research and development costs: |
|
|
Research and development costs consist of direct and indirect costs associated with the
development of the Companys technologies. These costs are expensed as incurred. |
|
|
Acquired in-process research and development: |
|
|
In connection with the acquisition of SpineMedica, the Company determined that approximately
$7.2 million of the fair value of the acquisition price qualified as in-process research and
development, and as such, this amount was expensed as research and development expense on the
acquisition date (see Note 4). |
|
|
Deferred tax assets and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective income tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in the
period that included the enactment date. Valuation allowances are recorded for deferred tax
assets when the recoverability of such assets is not deemed more likely than not. |
|
|
Share-based compensation: |
|
|
The Company follows the provisions of ASC topic 718 Compensation Stock compensation which
requires the use of the fair-value based method to determine compensation for all arrangements
under which employees and others receive shares of stock or equity instruments (options and
warrants). |
|
|
Fair value of financial instruments: |
|
|
The carrying value of accounts payable and accrued expenses approximate their fair value due
to the short-term nature of these liabilities. The fair value of our long term convertible
debt approximates $3,542,000 which represents the face value and accrued but unpaid interest
at December 31, 2009, primarily due to the minimal trading volume of our common stock.
|
47
|
|
Fair value determination of privately-held securities: |
|
|
Prior to February 8, 2008, the fair values of the common stock as well as the common stock
underlying options and warrants granted as part of asset purchase prices or as compensation
were estimated by management with input from an unrelated valuation specialist. Determining
the fair value of stock requires making complex and subjective judgments. The Company used
the market approach to estimate the value of the enterprise at each date on which securities
were issued or granted. The
enterprise value was then allocated to preferred and common shares taking into account the
enterprise value available to all stockholders and allocating that value among the various
classes of stock based on the rights, privileges and preferences of the respective classes.
There is inherent uncertainty in these estimates. |
|
|
Net loss per share / Reverse stock split |
|
|
Basic net loss per common share is computed using the weighted-average number of common shares
outstanding during the period. |
|
|
For all periods presented, diluted net loss per share is the same as basic net loss per share,
as the inclusion of equivalent shares from outstanding common stock options, warrants,
convertible debt and preferred stock would be anti-dilutive. |
|
|
The following table sets forth the computation of basic and diluted net loss per share for the
nine months ended December 31, 2009 and the fiscal year ended March 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
Year Ended |
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(8,295,669 |
) |
|
$ |
(11,919,271 |
) |
|
|
|
|
|
|
|
|
|
Accretion of redeemable common stock and common stock with
registration rights to fair value |
|
|
|
|
|
|
(2,158,823 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss attributable to common shareholders |
|
$ |
(8,295,669 |
) |
|
$ |
(14,078,094 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share-weighted average shares |
|
|
41,365,513 |
|
|
|
37,735,563 |
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: Stock options, warrants and convertible
debt outstanding (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per share weighted average
shares adjusted for dilutive securities |
|
|
41,365,513 |
|
|
|
37,735,563 |
|
|
|
|
|
|
|
|
|
|
Loss per common share attributable to common shareholders
basic and diluted |
|
$ |
(.20 |
) |
|
$ |
(0.37 |
) |
|
|
|
(a) |
|
Securities outstanding that were excluded from the computation, prior to the use of
the treasury stock method, because they would have been anti-dilutive are as follows: |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
6,182,500 |
|
|
|
4,301,250 |
|
|
|
|
|
|
|
|
|
|
Warrants |
|
|
6,991,371 |
|
|
|
1,160,251 |
|
|
|
|
|
|
|
|
|
|
Convertible Debt |
|
|
6,944,000 |
|
|
|
|
|
48
|
|
Recently issued accounting pronouncements: |
|
|
In June 2009, the FASB issued Accounting Standards Update No. 2009-01 (ASU 2009-01), which
establishes the FASB Accounting Standards Codification as the source of authoritative U.S.
GAAP recognized by the FASB to be applied by nongovernmental entities. The Company adopted ASU
2009-01 during the three months ended September 30, 2009, and its adoption did not have any
impact on the Companys consolidated financial statements. |
|
|
In August 2009, the FASB issued Accounting Standards Update No. 2009-05 (ASU 2009-05), which
clarified how to measure the fair value of liabilities in circumstances when a quoted price in
an active market for the identical liability is not available. ASU 2009-05 is effective for
the first reporting period beginning after the issuance of this standard. The Company adopted
ASU 2009-05, and its adoption did not have an impact on its consolidated financial statements. |
|
|
In October 2009, the FASB issued Accounting Standards Update No. 2009-13 (ASU 2009-13),
which addresses the accounting for multiple-deliverable arrangements to enable vendors to
account for products or services (deliverables) separately
rather than as a combined unit. ASU 2009-13 is effective prospectively for revenue
arrangements entered into or materially modified beginning in fiscal years on or after June
15, 2010. Early adoption is permitted. The Company does not expect the adoption of this
standard to have any effect on its financial statements until or unless it enters into
agreements covered by this standard. |
3. |
|
Liquidity and managements plans: |
|
|
The accompanying financial statements have been prepared assuming the Company will continue as
a going concern. For the period from inception (November 22, 2006) through December 31, 2009
the Company experienced net losses of $38,237,192 and cash used in operations of $22,685,467.
As of December 31, 2009, the Company has not emerged from the development stage and had
approximately $2,654,000 of cash and cash equivalents. In January 2010, prior to closing its
October 2009 Private Placement, the Company received an additional $785,000 of proceeds
related to sales of its common stock and warrants. The Company estimates, assuming it
receives no additional funds, that is has sufficient funds to operate until June 2010. |
|
|
In order to fund on-going operating cash requirements beyond that point or to accelerate and
execute its business plan, the Company will need to raise significant additional funds. In
view of these matters, the ability of the Company to continue as a going concern is dependent
upon the Companys ability to secure additional financing sufficient to support its research
and development activities, approval of developed products for sale by regulatory authorities,
including the FDA, and ultimately to generate revenues sufficient to cover all costs. Since
inception, the Company has financed its activities principally from the sale of equity
securities and convertible debt. While the Company has been successful in the past in
obtaining the necessary capital to support its operations, there is no assurance that the
Company will be able to obtain additional equity capital or other financing under commercially
reasonable terms and conditions, or at all. Furthermore, if the Company issues equity or debt
securities to raise additional funds, existing shareholders may experience dilution and the
new equity or debt securities it issues may have rights, preferences and privileges senior to
those of existing shareholders. In addition, if the Company raises additional funds through
collaboration, licensing or other similar arrangements, it may be necessary to relinquish
valuable rights to products or proprietary technologies, or grant licenses on terms that are
not favorable. If the Company cannot raise funds on acceptable terms, the Company will not be
able to continue as a going concern, develop or enhance products, obtain the required
regulatory clearances or approvals, execute the Companys business plan, take advantage of
future opportunities, or respond to competitive pressure or unanticipated customer
requirements. Any of these events would adversely affect the Companys ability to achieve the
Companys development and commercialization goals, which could have a material adverse effect
on the Companys business, results of operations and financial condition. The Companys
financial statements do not include any adjustments relating to the recoverability or
classification of assets or the amounts of liabilities that might result from the outcome of
these uncertainties. |
4. |
|
SpineMedica Corp. acquisition: |
|
|
On July 23, 2007, MiMedx purchased 100% of the capital stock of SpineMedica Corp. through a
newly formed subsidiary, SpineMedica, LLC. SpineMedicas results of operations and cash flows
are included in the accompanying financial statements from July 23, 2007 and thereafter.
|
49
|
|
The acquisition was accounted for as a purchase and was accomplished through the issuance of
2,911,117 Common Shares of MiMedx (for the acquisition of the SpineMedica Corp.s Common
Shares) and the issuance of 5,922,397 Series B Convertible Preferred Shares of MiMedx and
5,922,398 Common Stock Warrants (for the acquisition of SpineMedica Corp. Preferred Stock). |
|
|
The Series B preferred stockholders had voting rights identical to those of common
stockholders, were entitled to dividends only when, or if, declared by the Board of Directors
and had preference over the common stockholders in the event of the Companys liquidation. |
|
|
The Series B Preferred Stock was convertible into Common Stock of MiMedx at the option of the
holder at any time on a one share for one share basis, subject to adjustment for stock splits,
stock dividends, recapitalizations and the like. All preferred stock automatically was to
convert to common stock upon the Company becoming a publicly traded company, an upstream
merger or consolidation, a sale of substantially all the Companys assets or the consent of
holders of the majority of the then
outstanding shares of Series B Preferred Stock. As a result of the Alynx merger transaction,
discussed in Note 9, all Series B Preferred Stock was exchanged for New Series A Preferred
Stock. |
|
|
The Common Stock Warrants were exercisable at $.01 per share from January 2009 through January
2010 and were automatically cancelled under any of the following conditions: |
|
|
|
Preferred Stock sales for at least $3.00 per share |
|
|
|
|
Sale of a controlling interest in the Company of at least $3.00 per share |
|
|
|
|
Issuance of securities by the Company with $2,000,000 minimum proceeds at a minimum
price of $3.00 per share |
|
|
|
|
Trading of the Series B Preferred Stock on a national or regional exchange,
quotation system, or the OTCBB at a closing price of at least $3.00 per share for 15
out of 20 days on a rolling basis. |
|
|
These Common Stock Warrants were cancelled on September 30, 2007 as the result of the Series C
Convertible Preferred Stock sale (Note 9). |
|
|
In addition, the Company assumed 1,333,750 common stock options and 175,251 common stock
warrants to the holders of an equal number of SpineMedica Corp. options and warrants in
connection with the acquisition. Terms of those options and warrants are summarized as
follows: |
|
|
|
|
|
Stock options: |
|
|
|
|
Exercise price |
|
$ |
1.80 |
|
Range of expiration dates |
|
April 2011 April 2017 |
|
|
|
|
|
|
Warrants: |
|
|
|
|
Exercise price |
|
$ |
1.80 |
|
Expiration date |
|
October 2010 |
|
|
|
Finally, the Companys note receivable, related party, deferred interest income related
thereto and common stock warrant in SpineMedica (recorded as investment, related party) were
cancelled pursuant to this transaction.
|
50
|
|
The SpineMedica acquisition was accounted for as a purchase and is summarized as follows (in
thousands $): |
|
|
|
|
|
Purchase price components: |
|
|
|
|
Common stock issued |
|
$ |
2,300 |
|
Preferred stock issued |
|
|
7,403 |
|
Common stock warrants issued |
|
|
20 |
|
Expenses incurred on acquisition |
|
|
238 |
|
Cancellation of note receivable from and
warrants in SpineMedica |
|
|
2,049 |
|
|
|
|
|
Total consideration |
|
$ |
12,010 |
|
|
|
|
|
Allocation of purchase price: |
|
|
|
|
|
|
|
|
|
Cash (acquired at closing) |
|
$ |
1,957 |
|
Prepaid expenses and other current assets |
|
|
19 |
|
Property and equipment |
|
|
464 |
|
Intangible assets (licenses 10 year amortization period) |
|
|
2,399 |
|
Deposits |
|
|
34 |
|
Current liabilities |
|
|
(898 |
) |
|
|
|
|
Net assets received |
|
|
3,975 |
|
Goodwill |
|
|
858 |
|
In-process research and development (1) |
|
|
7,177 |
|
|
|
|
|
|
|
$ |
12,010 |
|
|
|
|
|
|
|
|
(1) |
|
The in-process research and development (IPR&D) acquired was related to
two products, a cervical total disc replacement device and a posterior lumbar
interbody fusion device. |
|
|
Significant assumptions used in connection with the determination of the value of the IPR&D
were as follows: |
|
|
|
Material cash inflows from the products were anticipated to commence in the near
future. |
|
|
|
|
Material anticipated changes from historical pricing and margins were not
considered as there was no history for the products. There were projected increases
in expenditures associated with the products development over the historical levels
in order to advance the products through any regulatory agencies. |
|
|
|
|
The risk adjusted discount rate applied to the estimated future cash flows was
43%. |
|
|
The following pro-forma information presents a summary of the Companys consolidated results
of operations as if the SpineMedica acquisition had occurred at inception (November 22, 2006): |
|
|
|
|
|
|
|
Period from |
|
|
|
Inception |
|
|
|
(November 22, 2006) |
|
|
|
through |
|
|
|
December 31, 2009 |
|
|
|
|
|
|
Loss from operations |
|
$ |
(40,029,000 |
) |
|
|
|
|
|
Net loss |
|
$ |
(41,187,000 |
) |
|
|
|
|
|
5. |
|
Property and equipment: |
|
|
Property and equipment consist of the following at: |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
|
|
|
|
|
|
|
|
|
Leasehold improvements |
|
$ |
793,899 |
|
|
$ |
793,899 |
|
Furniture and equipment |
|
|
1,204,143 |
|
|
|
1,192,533 |
|
|
|
|
|
|
|
|
|
|
|
1,998,042 |
|
|
|
1,986,432 |
|
Less accumulated depreciation |
|
|
(948,445 |
) |
|
|
(610,536 |
) |
|
|
|
|
|
|
|
|
|
$ |
1,049,597 |
|
|
$ |
1,375,896 |
|
|
|
|
|
|
|
|
51
6. |
|
Intangible assets and royalty agreement: |
|
|
Intangible assets activity is summarized as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License |
|
|
License |
|
|
License |
|
|
Intellectual |
|
|
|
|
|
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
Property (d) |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2008 |
|
$ |
881,466 |
|
|
|
2,195,487 |
|
|
|
2,596,000 |
|
|
|
110,200 |
|
|
$ |
5,783,153 |
|
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization |
|
|
(99,600 |
) |
|
|
(296,016 |
) |
|
|
(259,600 |
) |
|
|
(11,600 |
) |
|
|
(666,816 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2009 |
|
|
781,866 |
|
|
|
1,899,471 |
|
|
|
2,336,400 |
|
|
|
98,600 |
|
|
|
5,116,337 |
|
Additions |
|
|
|
|
|
|
|
|
|
|
71,000 |
|
|
|
|
|
|
|
71,000 |
|
Sale of assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(92,800 |
) |
|
|
(92,800 |
) |
Amortization |
|
|
(74,700 |
) |
|
|
(222,011 |
) |
|
|
(194,700 |
) |
|
|
(5,800 |
) |
|
|
(497,211 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
$ |
707,166 |
|
|
|
1,677,460 |
|
|
|
2,212,700 |
|
|
|
|
|
|
$ |
4,597,326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
On January 29, 2007, the Company acquired a license from Shriners Hospitals for
Children and University of South Florida Research Foundation, Inc. which is further
discussed in Note 1. The acquisition price of this license was a one-time fee of $100,000
and 1,120,000 shares of common stock valued at $896,000 (based upon the estimated fair
value of the common stock on the transaction date). Within thirty days after the receipt
by the Company of approval by the FDA allowing the sale of the first licensed product, the
Company is required to pay an additional $200,000 to the licensor. This amount is not
recorded as a liability as of December 31, 2009 based on its contingent nature. The
Company will also be required to pay a royalty of 3% on all commercial sales revenues of
the licensed products. |
|
(b) |
|
License from SaluMedica, LLC (SaluMedica) for the use of certain developed technologies
related to spine repair. This license was acquired through the acquisition of SpineMedica
Corp. (see Note 4). |
|
(c) |
|
On March 31, 2008, the Company entered into a license agreement for the use of certain
developed technologies related to surgical sheets made of polyvinyl alcohol cryogel. The
acquisition price of the asset was 400,000 shares of common stock valued at $2,596,000
(based upon the closing price of the common stock on the transaction date). The agreement
also provides for the issuance of an additional 600,000 shares upon the Company meeting
certain milestones related to future sales. On December 31, 2009 the Company completed the
sale of its first commercial product and met its first milestone under this agreement. As
a result the Company issued 100,000 shares of common stock to the licensor valued at
$71,000. At December 31, 2009, there are no additional amounts accrued for this obligation
due to its contingent nature. |
|
(d) |
|
During the year ended March 31, 2008, the Company issued 200,000 stock options valued
at $116,000 for certain technologies relating to medical device designs for products used
in hand surgery. On October 19, 2009 the Company sold this intellectual property for
$300,000 cash, a $100,000 3% promissory note due in monthly installments thru August 2011
and up to $630,000 in royalty payments for a total sales price of up to $1,030,000. As a
result of this transaction the Company recognized a net gain of approximately $220,000
representing the cash received and promissory note less the carrying value of the
intellectual property and transaction costs. Due to the contingent nature of the
royalties, no amounts were included in the calculation of the net gain. The current
portion and the long term portion of the note receivable are included in other current
assets and other assets, respectively, in the consolidated balance sheet at December 31,
2009. |
|
|
Expected future amortization of intangible assets is as follows: |
|
|
|
|
|
Year ending December 31, |
|
|
|
|
|
2010 |
|
$ |
663,800 |
|
2011 |
|
|
663,800 |
|
2012 |
|
|
663,800 |
|
2013 |
|
|
663,800 |
|
2014 |
|
|
663,800 |
|
Thereafter |
|
|
1,278,326 |
|
|
|
|
|
|
|
$ |
4,597,326 |
|
|
|
|
|
52
|
|
In April 2009, the Company commenced a private placement to sell 3% Convertible Senior Secured
Promissory Notes (the Senior Notes) to accredited investors. The Company completed the
offering on June 17, 2009, and received aggregate proceeds of $3,472,000, representing the
face value of the Senior Notes. The aggregate proceeds include $250,000 of Senior Notes sold
to the Chairman of the Board, President and CEO, and $150,000 of Senior Notes sold to one
other director. |
|
|
In total, the Senior Notes are convertible into up to 6,944,000 shares of the Companys common
stock at $.50 per share (a) at any time upon the election of the holder of the Senior Notes;
(b) automatically immediately prior to the closing of the sale of all or substantially all of
the assets or more than 50% of the equity securities of the Company by way of a merger
transaction or otherwise which would yield a price per share of not less than $.50; or (c) at
the election of the Company, at such time as the closing price per share of the Companys
common stock (as reported by the OTCBB or on any national securities exchange on which the
Companys shares may be listed) is not less than $1.50 for at least 20 consecutive trading
days in any period prior to the maturity date. If converted, the common stock will be
available to be sold following satisfaction of the applicable conditions set forth in Rule
144. The Senior Notes mature in three years and earn interest at 3% per annum on the
outstanding principal amount payable in cash on the maturity date or convertible into shares
of common stock of the Company as provided for above. The Senior Notes are secured by a
first priority lien on all of the assets, including intellectual property, of MiMedx, Inc.,
excluding, however, the membership interests in SpineMedica, LLC. The Senior Notes are junior
in payment and lien priority to any bank debt of the Company in an amount not to exceed
$5,000,000 subsequently incurred by the Company. |
|
|
The Company has evaluated the Senior Notes for accounting purposes under Generally Accepted
Accounting Principles (GAAP) and has determined that the conversion feature meets the
conventional-convertible exemption and, accordingly, bifurcation and fair-value measurement of
the conversion feature is not required. We are required to re-evaluate this conclusion upon
each financial statement closing date while the Senior Notes are outstanding. Notwithstanding,
the Senior Notes were issued with a beneficial conversion feature, having an intrinsic value
of approximately $676,500. The intrinsic value of the beneficial conversion feature was
determined by comparing the contracted conversion price to the fair value of the common stock
on the date of the respective Senior Notes. A beneficial conversion feature only exists when
the embedded conversion feature is in-the-money at the commitment date. |
|
|
As a result of the beneficial conversion feature, the Senior Notes were recorded net of a
discount of $676,500 related to the beneficial conversion feature, which is recorded in
paid-in capital, and the discount will be amortized through periodic charges to interest
expense over the term of the Senior Notes using the effective interest method. |
|
|
In conjunction with the offering, the Company incurred a placement fee of $138,040 and issued
315,520 common stock warrants to the placement agents at an exercise price of $.50 per share.
The warrants expire in five years. The fair value of the warrants was determined to be
$98,574 using the Black-Scholes-Merton valuation technique. The total direct costs of
$236,614 are recorded as deferred financing costs and are being amortized over the term of the
Senior Notes using the effective interest method. Further, the placement agent warrants are
classified in stockholders equity because they achieved all of the requisite conditions for
equity classification in accordance with GAAP. |
8. |
|
Common Stock Placements: |
|
|
September 2008 Private Placement |
|
|
On September 25, 2008, the Company commenced a private placement of up to 13,333,333 units (at
$3.00 per unit) wherein each unit consists of one share of common stock and a warrant to
purchase one share of common stock for $3.50 over a five year term (the September 2008
Private Placement). The Company sold 487,500 units for total proceeds of $1,462,500 under
the September 2008 Private Placement. |
|
|
In connection with the September 2008 Private Placement, the Company entered into a
Registration Rights Agreement related solely to the common stock that requires the Company to
among other things, (i) file a Registration Statement within 90 days from the closing of the
September 2008 Private Placement; and (ii) make required filings under the Securities Act of
1933 and the Securities and Exchange Act of 1934. It also provides for (i) achieving and
maintaining effectiveness; and (ii) listing the shares on any exchange on which the Companys shares are then listed and maintain the listing; each on a best-efforts basis. The Registration Rights Agreement does not provide for an alternative or contain a penalty in the
event the Company is unable to fulfill its requirements. In addition, the terms of the sale of
common stock provide that the investor has an option, for a period of six months following the
purchase, to exchange the common shares for other financial instruments (including those that
may require classification outside of stockholders equity) that may be issued at a price, or
effective price in the case of convertible instruments, lower than the original purchase
price. As a result of the registration rights obligation to file within a specified period,
which is presumed not to be within the Companys control, and the contingent redemption
feature (which lapsed as of March 31, 2009), the Company is required to classify the common
stock outside of stockholders equity as common stock with registration rights. Further, given
the nature of the contingent redemption provision and the registration rights requirement,
GAAP required the Company to initially record the common stock at its fair value, which was
accomplished with a charge to retained earnings of $1,423,823.
|
53
|
|
The warrants included in the unit offering are indexed to 487,500 shares of the Companys
common stock. These warrants are not subject to the Registration Rights Agreement referred to
above, and they otherwise meet the conditions for equity classification provided under GAAP.
Accordingly, these warrants are recorded in stockholders equity. The Company is required to
reevaluate that classification on each reporting date. |
|
|
The total basis in the financing was allocated to the redeemable common stock and warrants
based upon their relative fair values. The fair value of the redeemable common stock
represents the value of the number of shares at the trading market price. The warrants were
valued using the Black-Scholes-Merton technique, and the Company estimated (i) the expected
term as equal to the five-year warrant term, (ii) the volatility, based upon a reasonable peer
group, at 75.33% and (iii) the risk free rate as the published rate for zero coupon government
securities with terms consistent with the expected term, or 3.09%. The following table
illustrates the allocation: |
|
|
|
|
|
|
|
|
|
|
|
Fair |
|
|
Relative Fair |
|
Financial Instrument |
|
Values |
|
|
Values |
|
|
|
|
|
|
|
|
|
|
Redeemable Common Stock |
|
$ |
2,291,250 |
|
|
$ |
867,427 |
|
Warrants |
|
|
1,571,846 |
|
|
|
595,073 |
|
|
|
|
|
|
|
|
|
|
$ |
3,863,096 |
|
|
$ |
1,462,500 |
|
|
|
|
|
|
|
|
|
|
On February 19, 2009 the investors exercised their right to restructure their investment (the
new transaction) as a result of the February 2009 Private Placement described below. The
investors were granted an additional 682,500 shares of common stock
which increased the aggregate total of common shares issued in conjunction with the September
Private Placement to 1,170,000. The re-set provision in the original transaction was removed
and the investors were granted registration rights, with respect to the new shares, identical
to those related to the September transaction. |
|
|
Additionally, the new transaction provided for the cancellation of the original 487,500
warrants and the Company issued new warrants to purchase 975,000 shares of common stock for
$.73 per share. The Company recorded the $334,100 excess of the fair value of the new
warrants over that of the cancelled warrants on the date of the transaction as compensation
expense during the year ended March 31, 2009. The warrants met all the requirements for
equity classification as noted above under GAAP and are recorded in stockholders equity. |
|
|
November 2008 Private Placement |
|
|
On November 21, 2008, the Company commenced a private placement of up to 30,000,000 shares of
common stock at $1.00 per share (the November 2008 Private Placement). The Company sold
210,000 shares for total proceeds of $210,000. |
|
|
In connection with the November 2008 Private Placement, the Company entered into a
Registration Rights Agreement related to the common stock that requires the Company to among
other things, (i) file a Registration Statement within 90 days from the closing of the
November 2008 Private Placement; and (ii) make required filings under the Securities Act of
1933 and the Securities and Exchange Act of 1934. It also provides for (i) achieving and
maintaining effectiveness of the registration statement; and (ii) listing the shares on any
exchange on which the Companys shares are then listed and maintain the listing; each on a
best-efforts basis. The Registration Rights Agreement does not provide for an alternative or
contain a penalty in the event the Company is unable to fulfill its requirements. As a result
of the registration rights obligation to file within a specified period, which is presumed not
to be within the Companys control, the Company was required to classify the common stock
outside of stockholders equity as common stock with registration rights. Further, the Company
was required to record the stock at its fair value, which was accomplished with a charge to
retained earnings of $735,000.
|
54
|
|
February 2009 Private Placement |
|
|
In February 2009, the November 2008 Private Placement was extended under identical terms
except the number of common shares offered was reduced to 15,000,000. In February and March
2009 the Company sold 525,000 shares of common stock for total proceeds of $525,000. |
|
|
The Company entered into a Registration Rights Agreement with respect to the new shares, with
terms identical to those of the November 2008 Private Placement discussed above. As a result
of the obligation to file a Registration Statement within a specified period, which is
presumed not to be within the Companys control, the Company was required to classify the
common stock outside of stockholders equity as common stock with registration rights. The
Company recorded the stock at its per share selling price, which exceeded the then per share
trading price of the Companys common stock. |
|
|
On June 4, 2009, the Companys Board of Directors agreed to issue additional shares of its
common stock to investors who had purchased shares of its common stock in conjunction with the
September 2008 Private Placement, the November 2008 Private Placement and the February 2009
Private Placement in order to bring the cost of the acquired shares to $.50 per share. The
Board approved the issuance of the additional shares to be fair to the investors who had
invested in the Company when it was most in need of funding and to enable the Companys future
fundraising efforts. The issuance was approved by all of the disinterested members of the
Board of Directors. As a condition to the receipt of the additional shares, the investors
were required to waive registration rights otherwise available with respect to the shares
issued in the private placements. The Company issued 2,490,000 additional shares as a result
of this action and recorded additional expense of $1,305,100, based on the fair value of the
Companys stock price on the date each respective waiver was executed. As a result of the
waiver of registration rights, the common stock with registration rights was reclassified into
stockholders equity during the nine months ended December 31, 2009. |
|
|
October 2009 Private Placement |
|
|
In October 2009, the Company commenced a private placement to sell common stock and warrants.
From October 30, 2009, through December 31, 2009, the Company sold 7,697,865 shares of common
stock at a price of $.60 per share and received proceeds of $4,618,720. Under the terms of
the offering, for every two shares of common stock purchased, the investor received a 5-year
warrant to purchase one share of common stock for $1.50, (a Warrant). Through December 31,
2009, the
Company issued a total of 3,848,933 warrants. The warrants met all the requirements for
equity classification under GAAP and are recorded in stockholders equity. |
|
|
From January 1, 2010, through January 21, 2010, the Company sold an additional 1,308,332
shares of common stock and issued an additional 654,163 warrants and received proceeds of
$785,000. |
|
|
The Company closed the offering on January 21, 2010. |
|
|
In connection with the October 2009 Private Placement, the Company entered into a registration
rights agreement which provides Piggy-Back registration rights to each investor. |
|
|
Alynx merger transaction: |
|
|
On January 29, 2008 MiMedx entered into an Agreement and Plan of Merger (Merger Agreement)
with Alynx. The merger transaction became effective on February 8, 2008.
|
55
|
|
In accordance with the Merger Agreement, Alynx issued 52,283,090 shares of common stock to
MiMedx shareholders based on a conversion rate of 3.091421 for each share of MiMedx common
stock. All Preferred Stock of MiMedx (Series A, B and C) was exchanged for a Series A
Preferred Stock of Alynx based on a conversion rate of one share of Alynx Series A Preferred
Stock for every five shares of MiMedx Preferred Stock. The Alynx Series A preferred stock
was convertible into common stock and contained no cash redemption features. On March 31,
2008, all of the Alynx Series A Preferred Stock shares were converted into common shares of
the Company at a rate of five shares of Common Stock of the Company for every one share of
Series A Preferred Stock of Alynx. |
|
|
The Company incurred approximately $1,870,000 of merger costs related to the merger
acquisition. These costs, (including 205,851 shares of common stock which had a value of
approximately $1,126,000) are included in general and administrative expenses in the statement
of operations for the year ended March 31, 2008. |
|
|
Because Alynx had de minimus operations, the merger transaction was accounted for as a reverse
acquisition (recapitalization) whereby MiMedx was deemed to be the acquirer for accounting
purposes. |
|
|
On March 31, 2008, with shareholder approval, the Company affected a reverse stock split.
Each share of common stock was converted into .3234758 shares of post reverse split shares of
common stock. All share amounts have been retroactively adjusted for all periods presented. |
|
|
Conversion of Alynx Series A Preferred Stock: |
|
|
The following series of preferred stock were issued prior to the Alynx merger transaction and,
as previously discussed, were all redeemed through the issuance of Alynx Series A Preferred
Stock: |
|
|
|
Preferred Series A stock: |
|
|
|
|
During the period ended March 31, 2007, MiMedx issued 11,212,800 shares of Series A
Convertible Preferred Stock for $13,097,194 ($14,016,000 net of $918,806 transaction
expenses). Additionally, the placement agent received detachable warrants to acquire up to
524,080 shares of the Companys common stock at $1.25 per share with a fair value of
$183,428 on the date of issuance. In April 2008, the placement agent executed a cashless
exercise of these warrants and the Company issued 417,594 shares of common stock. |
|
|
|
|
The preferred stockholders had voting rights identical to those of common stockholders,
were entitled to dividends only when, or if, declared by the Board of Directors and had
preference over the common stockholders in the event of the Companys liquidation. |
|
|
|
|
The preferred stock was convertible into common stock at the option of the holder at any
time on a one share for one share basis, subject to adjustment for stock splits, stock
dividends, recapitalizations and the like. |
|
|
|
|
This preferred stock was to automatically convert to common stock upon the Company becoming
a publicly traded company, an upstream merger or consolidation, a sale of substantially all
the Companys assets or the consent of holders of the majority of the then outstanding shares of Series A Preferred Stock. There was no beneficial conversion feature associated
with this transaction. |
|
|
|
|
Preferred series B stock: |
|
|
|
|
In connection with the SpineMedica acquisition the Company issued 5,922,397 shares of
Series B Convertible Preferred Stock. See Note 4. |
|
|
|
|
Preferred series C stock: |
|
|
|
|
The Company sold 1,285,001 shares of Preferred Series C Stock for $3,855,000 or $3.00 per
share in September and October 2007. Preferred Series C stockholders had voting rights
identical to those of common stockholders, were entitled to dividends only when, or if,
declared by the Board of Directors and had preference over the common stockholders in the
event of the Companys liquidation. The preferred stock was convertible into common stock
at the option of the holder at any time on a one share for one share basis, subject to
adjustment for stock splits, stock dividends, recapitalizations and the like. |
|
|
|
|
This preferred stock was to automatically convert to common stock upon the Company becoming
a publicly traded company, an upstream merger or consolidation, a sale of substantially all
the Companys assets or the consent of holders of the majority of the then outstanding shares of Series C preferred stock.
|
56
|
|
The Company has three share-based compensation plans, the MiMedx Group, Inc. Assumed 2006 Stock
Incentive Plan (the 2006 Plan), the MiMedx Inc. 2007 Assumed Stock Plan (the Assumed 2007
Plan) and the MiMedx Group Inc. Amended and Restated Assumed 2005 Stock Plan (the Assumed
2005 Plan) which provide for the granting of qualified incentive and non-qualified stock
options, stock appreciation awards and restricted stock awards to employees, directors,
consultants and advisors. The awards are subject to a vesting schedule as set forth in each
individual agreement. The Company intends to use only the 2006 Plan to make future grants.
The number of assumed options under the Assumed 2005 Plan and Assumed 2007 Plan outstanding at
December 31, 2009 totaled 956,250 and the maximum number of shares of common stock which can be
issued under the 2006 Plan is 5,500,000 at December 31, 2009. |
|
|
Activity with respect to the stock options is summarized as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Range of |
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
Exercise |
|
|
average Exercise |
|
|
Intrinsic |
|
|
|
Shares |
|
|
Prices |
|
|
Price |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at April 1, 2008 |
|
|
4,446,250 |
|
|
$ |
.0001 5.44 |
|
|
$ |
2.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at April 1, 2008 |
|
|
2,036,667 |
|
|
|
.0001 5.44 |
|
|
|
1.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
1,100,000 |
|
|
|
.73 5.38 |
|
|
|
.94 |
|
|
|
|
|
Cancelled |
|
|
(1,187,500 |
) |
|
|
.0001 5.44 |
|
|
|
3.29 |
|
|
|
|
|
Exercised |
|
|
(57,500 |
) |
|
|
.0001 |
|
|
|
.0001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2009 |
|
|
4,301,250 |
|
|
|
.0001 5.44 |
|
|
|
1.60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2009 |
|
|
3,208,749 |
|
|
|
.0001 5.44 |
|
|
|
1.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
2,312,500 |
|
|
|
.50 .76 |
|
|
|
.60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancelled |
|
|
(411,250 |
) |
|
|
.50 5.44 |
|
|
|
3.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(20,000 |
) |
|
|
.0001 |
|
|
|
.0001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2009 |
|
|
6,182,500 |
|
|
$ |
.0001 2.40 |
|
|
$ |
1.10 |
|
|
$ |
307,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2009 |
|
|
3,662,082 |
|
|
$ |
.0001 2.40 |
|
|
$ |
1.35 |
|
|
$ |
80,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The intrinsic value of options exercised during the nine months ended December 31, 2009 was
approximately $15,000. |
|
|
Following is a summary of stock options outstanding and exercisable at December 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding |
|
|
Options Exercisable |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Weighted- |
|
|
|
|
|
|
Weighted- |
|
Exercise |
|
Number |
|
|
Remaining |
|
|
Average |
|
|
Number |
|
|
Average |
|
Price |
|
Outstanding |
|
|
Contractual Life |
|
|
Exercise Price |
|
|
Exercisable |
|
|
Exercise Price |
|
$.0001 .50 |
|
|
1,083,750 |
|
|
4.7 (years) |
|
$ |
.49 |
|
|
|
292,500 |
|
|
$ |
.46 |
|
.65 1.00 |
|
|
3,392,500 |
|
|
|
7.2 |
|
|
|
.80 |
|
|
|
1,790,832 |
|
|
|
.89 |
|
1.80 |
|
|
956,250 |
|
|
|
6.1 |
|
|
|
1.80 |
|
|
|
936,250 |
|
|
|
1.80 |
|
2.40 |
|
|
750,000 |
|
|
|
2.8 |
|
|
|
2.40 |
|
|
|
642,500 |
|
|
|
2.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,182,500 |
|
|
|
6.0 |
|
|
|
1.10 |
|
|
|
3,662,082 |
|
|
|
1.35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
|
|
A summary of the status of the Companys unvested stock options as of December 31, 2009, and
changes during the nine months ended December 31, 2009, is presented below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Grant Date |
|
Unvested Stock Options |
|
Shares |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
Unvested at April 1, 2009 |
|
|
1,092,501 |
|
|
|
.55 |
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
2,312,500 |
|
|
|
.50 |
|
Vested |
|
|
(827,083 |
) |
|
|
.49 |
|
Cancelled |
|
|
(57,500 |
) |
|
|
1.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2009 |
|
|
2,520,418 |
|
|
|
.50 |
|
|
|
|
|
|
|
|
|
|
|
Total unrecognized compensation expense at December 31, 2009 was approximately $1,054,000
and will be charged to expense through December 2012. |
|
|
The fair value of the options granted was estimated on the date of grant using the
Black-Scholes option-pricing model that uses assumptions for expected volatility, expected
dividends, expected term, and the risk-free interest rate. Expected volatilities are based on
historical volatility of peer companies and other factors estimated over the expected term of
the options. The term of employee options granted is derived using the simplified method
which computes expected term as the average of the sum of the vesting term plus the contract
term. The term for non-employee options is generally based upon the contractual term of the
option. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of
grant for the period of the expected term or contractual term as described. |
|
|
The assumptions used in calculating the fair value of options using the Black-Scholes
option-pricing model are set forth in the following table: |
|
|
|
|
|
|
|
Nine Months Ended |
|
Year Ended |
|
|
December 31, 2009 |
|
March 31, 2009 |
Dividend yield |
|
0% |
|
0% |
Expected volatility |
|
112.06 to 145.32% |
|
68.85 76.90% |
Risk free interest rates |
|
1.54 to 2.53% |
|
1.89 3.11% |
Expected lives |
|
3.5 to 6 years |
|
5.75 6 years |
|
|
The weighted-average grant date fair value for options granted during the nine months
ended December 31, 2009 and the year ended March 31, 2009 was approximately $.50 and $.63,
respectively. |
|
|
The Company grants common stock warrants in connection with equity shares purchases by
investors as an additional incentive for providing long term equity capital to the Company and
as additional compensation to consultants and advisors. The warrants are granted at negotiated
prices in connection with the equity share purchases and at the market price of the common
stock in other instances. The warrants have been issued for terms of five years.
|
58
|
|
Common Stock warrants issued, redeemed and outstanding during the nine months ended December
31, 2009 and the year ended March 31, 2009 are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
|
|
|
|
Exercise |
|
|
|
Number |
|
|
Price per Share |
|
|
|
|
|
|
|
|
|
|
Warrants outstanding at April 1, 2008 |
|
|
709,331 |
|
|
$ |
1.41 |
|
|
|
|
|
|
|
|
|
|
Cashless exercise of warrants (417,594 shares of
common stock issued) |
|
|
(524,080 |
) |
|
|
(1.25 |
) |
|
|
|
|
|
|
|
|
|
Warrants issued in connection with private placement
of common stock (Note 7) |
|
|
975,000 |
|
|
|
.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding at March 31, 2009 |
|
|
1,160,251 |
|
|
|
.91 |
|
|
|
|
|
|
|
|
|
|
Issued to placement agents in connection with
the 3% convertible senior secured promissory
notes offering |
|
|
315,520 |
|
|
|
.50 |
|
|
|
|
|
|
|
|
|
|
Issued in connection with related party
convertible promissory note |
|
|
1,666,667 |
|
|
|
.60 |
|
|
|
|
|
|
|
|
|
|
Issued in connection with private placement of common
stock |
|
|
3,848,933 |
|
|
|
1.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding at December 31, 2009 |
|
|
6,991,371 |
|
|
$ |
1.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding at December 31,
2009 consist of
the following: |
|
|
|
|
|
|
|
|
|
Assumed by the Company in connection with
acquisition
of SpineMedica Corp. in July 2007
($1.80 exercise
price); expire October, 2010 |
|
|
|
|
|
|
175,251 |
|
|
|
|
|
|
|
|
|
|
Service provided by consultant in October,
2007 ($3.00
exercise price); expire October, 2012 |
|
|
|
|
|
|
10,000 |
|
|
|
|
|
|
|
|
|
|
Issued in connection with September
2008 private placement
($.73 exercise price); expire February 2014 |
|
|
|
|
|
|
975,000 |
|
|
|
|
|
|
|
|
|
|
Issued in connection with 3%
convertible senior secured
promissory notes offering
($1.50 exercise price);
expire June 2014 |
|
|
|
|
|
|
315,520 |
|
|
|
|
|
|
|
|
|
|
Issued in connection with
convertible promissory note
(exercise price $.60); expire September 2012 |
|
|
|
|
|
|
1,666,667 |
|
|
|
|
|
|
|
|
|
|
Issued in connection with private placement of common
Stock ($1.50 exercise price); expire January 2015 |
|
|
|
|
|
|
3,848,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total warrants outstanding at December 31, 2009 |
|
|
|
|
|
|
6,991,371 |
|
|
|
|
|
|
|
|
|
59
|
|
Warrants may be exercised in whole or in part by: |
|
|
|
notice given by the holder accompanied by payment of an amount equal to the warrant
exercise price multiplied by the number of warrant shares being purchased ; or |
|
|
|
election by the holder to exchange the warrant (or portion thereof) for that number
of shares equal to the product of (a) the number of shares issuable upon exercise of
the warrant (or portion) and (b) a fraction, (x) the numerator of which is the market
price of the shares at the time of exercise minus the warrant exercise price per share
at the time of exercise and (y) the denominator of which is the market price per share
at the time of exercise. |
|
|
These warrants are not mandatorily redeemable, do not obligate the Company to repurchase its
equity shares by transferring assets or issue a variable number of shares. |
|
|
The warrants require that the Company deliver shares as part of a physical settlement or a
net-share settlement, at the option of the holder, and do not provide for a net-cash
settlement. |
|
|
All of our warrants are classified as equity as of December 31, 2009. |
|
|
Significant items comprising the Companys deferred tax assets and liabilities are as follows
at December 31, 2009 and March 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Share-based compensation expense |
|
$ |
733,000 |
|
|
$ |
678,000 |
|
Furniture, software and equipment |
|
|
283,000 |
|
|
|
283,000 |
|
Accrued expenses |
|
|
20,000 |
|
|
|
14,000 |
|
Net operating loss carryforward |
|
|
11,358,000 |
|
|
|
9,266,000 |
|
|
|
|
|
|
|
|
|
|
|
12,394,000 |
|
|
|
10,241,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Intangible assets |
|
|
(78,000 |
) |
|
|
(78,000 |
) |
|
|
|
|
|
|
|
Net deferred tax assets |
|
|
12,316,000 |
|
|
|
10,163,000 |
|
|
|
|
|
|
|
|
Valuation allowance |
|
|
(12,316,000 |
) |
|
|
(10,163,000 |
) |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
The reconciliation of the Federal statutory income tax rate of 34% to the effective rate is as
follows for the periods ended December 31, 2009 and March 31, 2009: |
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
March 31, 2009 |
|
|
|
|
|
|
|
|
|
|
Federal statutory rate |
|
|
34.00 |
% |
|
|
34.00 |
% |
State taxes, net of federal benefit |
|
|
3.96 |
% |
|
|
3.96 |
% |
Permanent difference |
|
|
(12.00 |
%) |
|
|
(2.24 |
%) |
Valuation allowance |
|
|
(25.96 |
%) |
|
|
(32.72 |
%) |
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
% |
|
|
|
|
|
|
|
|
|
Income taxes are based on estimates of the annual effective tax rate and evaluations of
possible future events and transactions and may be subject to subsequent refinement or
revision.
|
60
|
|
The Company has incurred net losses since its inception and, therefore, no current income tax
liabilities have been incurred for the periods presented. The amount of unused tax losses
available to carry forward and apply against taxable income in future years totaled
approximately $29,900,000 at December 31, 2009 and $24,400,000 at March 31, 2009. The loss
carry forwards
expire in 2029. Due to the Companys losses, management has established a valuation allowance
equal to the amount of net deferred tax assets since management cannot determine that
realization of these benefits is more likely than not. |
|
|
Under Section 382 and 383 of the Internal Revenue Code, if an ownership change occurs with
respect to a loss corporation, as defined, there are annual limitations on the amount of the
net operating loss and other deductions which are available to the Company. At this time the
Company has not yet determined whether some of the loss carryforwards may be subject to these
limitations. |
11. |
|
Gain on Settlement of Payables: |
|
|
During the nine months ended December 31, 2009, the Company negotiated
a settlement of certain outstanding payables primarily related to
legal expenses incurred during the fiscal year ended March 31, 2009.
As a result of this negotiation the Company recognized a gain on
settlement of payables of approximately $585,000, which is included in
general and administrative expenses in our consolidated statement of
operations for the nine months ended December 31, 2009. |
12. |
|
Termination of agreement: |
|
|
On August 19, 2009, the Company and Thomas J. Graham, M.D. (Graham)
and Phantom Hand Project, LLC (Phantom), entered into an Amendment
and Settlement Agreement (the Agreement). |
|
|
The Agreement (i) terminates the Cost Recovery and Revenue Sharing Letter agreement between
MiMedx and Graham dated May 22, 2008; (ii) terminates the Finders Fee Letter Agreement
between MiMedx and Graham dated May 22, 2008; (iii) transfers to Graham certain provisional
patent applications that MiMedx did not intend to pursue and to which no value was ascribed;
(iv) accelerates the vesting of options to purchase 250,000 shares of the Companys common
stock previously issued to Graham and extends the period in which such options may be
exercised through the five year anniversary of their date of issuance, without regard to
whether Graham continues to serve as a consultant to MiMedx; (v) obligates Graham to forfeit
50,000 shares of the Companys common stock issued to him previously; (vi) amends the
Consulting Agreement dated September 21, 2007, between MiMedx and Graham; and (vii) provides
for certain payments to Graham upon a disposition of certain of the intellectual property
comprising MiMedxs Level Orthopedics division (the Level Assets) prior to September 20,
2010. |
|
|
In connection with the amendment of the options and the recovery of the common stock (recorded
as treasury stock), the Company recorded expense of approximately $48,000, which represented
the fair value of the amended options calculated utilizing the Black-Scholes-Merton model less
the fair value of the common stock surrendered on the date of the agreement. |
13. |
|
Related party transactions: |
|
|
In October 2009, the Companys Chairman of the Board (the holder) completed an advance of
$500,000 to fund the Companys working capital evidenced by a 5% Convertible Promissory Note
(the Note). The Note was due and payable in full on December 20, 2009 and, at the option of
the holder, was convertible into the number of shares of Common Stock of the Company equal to
the outstanding principal amount and accrued interest of the Note divided by $.60 per share.
Additionally, under the terms of the Note, the Company issued 1,666,666 warrants to the holder
with an exercise price of $.60 per share and a fair value of $975,833 on the date of repayment
which was recognized as a financing expense. The warrants expire in September 2012. The
outstanding principal and accrued interest of approximately $505,000 was paid back to the
holder in December 2009.
|
61
|
|
On the inception date, the Company evaluated the terms and conditions of the note and
determined the Note possessed a certain feature, the conversion provision, that was not
clearly and closely related to the host debt instrument. When a hybrid debt instrument, such
as the Note, embodies derivative features that are not clearly and closely related to the host
instrument, current accounting standards afford the Company an option to (1) bifurcate from
the hybrid instrument one compound derivative financial instrument that would be carried as
a derivative liability at fair value and recognize the balance of the proceeds as a
note payable with subsequent accretions of the resulting discount as interest expense over the
term of the note or (2) carry the entire hybrid financial instrument at fair value. After
reviewing the terms and conditions of the arrangement in its entirety, the Company elected to
carry the entire hybrid convertible debt instrument at fair value with subsequent adjustments
to fair value charged or credited to the statement of operations. Upon repayment of the Note
in December 2009, the Company re-measured the fair value of the instrument and recorded the
change in fair value to the statement of operations. |
|
|
At inception, the terms of the warrants did not provide for all of the conditions necessary
for equity classification and were recorded as a derivative liability. Upon repayment of the
note, because the number of shares and conversion price became fixed, the warrants met the
criteria for classification as equity, were adjusted to fair value and reclassified from
derivative liability to equity. |
|
|
The Company incurred expenses of approximately, $71,000 during the nine months ended December
31, 2009 and $23,000 during the year ended March 31, 2009 related to administrative fees
provided by an entity owned by the current Chairman of the Board. |
|
|
The Company incurred expenses of approximately $20,000 and $55,000 during the nine months
ended December 31, 2009 and the year ended March 31, 2009, respectively, related to aircraft
use from an entity owned by the former Chairman of the Board and current member of the Board
of Directors. |
|
|
The Company incurred expenses of approximately $11,000 during the nine months ended December
31, 2009 and $25,000 during the year ended March 31, 2009 related to the lease of office space
from an entity owned by the former Chairman of the Board and current member of the Board of
Directors. |
|
|
The Company incurred expenses of approximately, $73,000 during the nine months ended December
31, 2009 for management consulting services provided by a company owned by the Chief Operating
Officer prior to his employment in September 2009. |
|
|
All the above related party expenses were included in general and administrative expenses,
except for the warrant expense which is in other expense, in the accompanying consolidated
statements of operations. |
|
|
The Company has a 401(k) plan (the Plan) covering employees who have attained 21 years of
age and have completed 3 months of service. Under the Plan, participants may defer up to 100%
of their eligible wages to a maximum of $16,500 per year (annual limit for 2009). Employees
age 50 or over in 2009 may make additional pre-tax contributions up to $5,000 above and beyond
normal plan and legal limits. Annually, the Company may elect to match employee contributions
up to 3% of the employees compensation. Additionally, the Company may elect to make a
discretionary contribution to the Plan. The Company did not provide matching contributions
for the nine months ended December 31, 2009 and the year ended March 31, 2009. |
|
|
The Company has entered into consulting agreements with individuals to provide consulting and
advisory services to the Company. The agreements provide for terms of three years. |
|
|
At December 31, 2009 the minimum future consulting payments due under non-cancellable
consulting agreements is $18,750 all payable during the year ended December 31, 2010.
|
62
|
|
The Company has entered into employment agreements with terms ranging from one to three years.
At December 31, 2009 the minimum future employment payments due under these agreements
approximates $166,000 and are all payable during the year ended December 31, 2010. |
|
|
The Company leases office space in Tampa, Florida and Marietta, Georgia. These leases expire
during 2012 and 2011, respectively. |
|
|
Future minimum lease payments under these operating leases are as follows: |
|
|
|
|
|
Years ending December 31, |
|
|
|
|
2010 |
|
$ |
284,000 |
|
2011 |
|
|
227,000 |
|
2012 |
|
|
90,000 |
|
|
|
|
|
Total minimum payments |
|
$ |
601,000 |
|
|
|
|
|
|
|
Rent expense on all operating leases for the nine months ended December 31, 2009 and the year
ended March 31, 2009 was approximately $212,000 and $277,000, respectively. |
|
|
The Company has minimum royalty payments due in conjunction with one of its licenses, as
follows: |
|
|
|
|
|
Due Date January |
|
Amount |
|
2010 |
|
$ |
25,000 |
|
2011 |
|
|
35,000 |
|
2012 |
|
|
45,000 |
|
2013 |
|
|
50,000 |
|
63
|
|
|
Item 9. |
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
None.
|
|
|
Item 9A(T). |
|
Controls and Procedures |
Disclosure Controls and Procedures
We maintain disclosure controls and procedures within the meaning of Rule 13a-15(e) of the
Securities Exchange Act of 1934, as amended, or the Exchange Act. Our disclosure controls and
procedures are designed to provide reasonable assurance that information required to be disclosed
by the Company in the reports filed under the Exchange Act, such as this Annual Report on Form
10-K, is recorded, processed, summarized and reported within the time periods specified in the U.S.
Securities and Exchange Commissions rules and forms. Our disclosure controls and procedures
include controls and procedures designed to provide reasonable assurance that such information is
accumulated and communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In
designing and evaluating our disclosure controls and procedures, management recognizes that any
controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and no evaluation of controls and procedures
can provide absolute assurance that all control issues and instances of fraud, if any, within a
company have been detected. Management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
As required by Rule 13a-15(b) of the Exchange Act, prior to filing this Annual Report on Form
10-K, we carried out an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual
Report on Form 10-K. Based on their evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures were effective as of the end of the
period covered by this Annual Report on Form 10-K.
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as
amended). Our management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2009. In making this assessment, our management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control-Integrated Framework. Our management has concluded that, as of December 31, 2009, our
internal control over financial reporting is effective based on these criteria.
An evaluation was also performed under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer, of any changes in
our internal control over financial reporting that occurred during our last fiscal quarter and that
has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting. That evaluation did not identify any change in our internal control over
financial reporting that occurred during our latest fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting.
This Annual Report on Form 10-K does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by our independent registered public accounting
firm pursuant to temporary rules of the SEC that permit us to provide only managements report in
this Annual Report on Form 10-K.
|
|
|
Item 9B. |
|
Other Information |
None.
64
PART III
|
|
|
Item 10. |
|
Directors, Executive Officers and Corporate Governance |
Information required by this Item will be contained in our definitive proxy statement relating
to our Annual Meeting of Shareholders under the captions Corporate Governance, Executive
Officers, Nominees for Election of Directors and Section 16(a) Beneficial Ownership Reporting
Compliance, or similar captions which are incorporated herein by reference.
We have adopted our Code of Business Conduct and Ethics and a copy is posted on our website
at http://mimedx.com/governance.aspx. In the event that we amend any of the provisions of
this Code of Business Conduct and Ethics that require disclosure under applicable law, SEC rules or
listing standards, we intend to disclose such amendment on our website.
Any waiver of the Code of Business Conduct and Ethics for any executive officer or director
must be approved by the Board and will be disclosed on a Form 8-K filed with the SEC, along with
the reasons for the waiver.
|
|
|
Item 11. |
|
Executive Compensation |
Information required by this Item will be contained in our definitive proxy statement relating
to our Annual Meeting of Shareholders under the caption Executive Compensation, which is
incorporated herein by reference.
|
|
|
Item 12. |
|
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder
Matters |
Information required by this Item will be contained in our definitive proxy statement relating
to our Annual Meeting of Shareholders under the captions Security Ownership of Certain Beneficial
Owners and Management, Executive Compensation, and Equity Compensation Plan Information, which
is incorporated herein by reference.
|
|
|
Item 13. |
|
Certain Relationships and Related Transactions, and Director Independence |
Information required by this Item will be contained in our definitive proxy statement relating
to our Annual Meeting of Shareholders under the caption Certain Relationships and Related
Transactions, which is incorporated herein by reference.
|
|
|
Item 14. |
|
Principal Accounting Fees and Services |
Information required by this Item will be contained in our definitive proxy statement relating
to our Annual Meeting of Shareholders under the captions Ratification of Appointment of
Independent Registered Public Accounting Firm and Corporate Governance, which are incorporated
herein by reference.
65
PART IV
|
|
|
Item 15. |
|
Exhibits, Financial Statement Schedules. |
(a) |
|
Documents filed as part of this report: |
|
(1) |
|
Financial Statements |
|
|
(2) |
|
Financial Statement Schedules |
|
|
|
|
None |
|
|
(3) |
|
Exhibits |
|
|
|
|
See Item 15(b) below. Each management contract or compensation plan has been identified. |
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
|
|
3.1 |
(2) |
|
Articles of Incorporation of MiMedx Group, Inc. |
3.2
|
(2) |
|
Bylaws of MiMedx Group, Inc. |
10.1
|
(1)* |
|
MiMedx, Inc. 2006 Stock Incentive Plan |
10.2
|
(1) * |
|
Declaration of Amendment to MiMedx, Inc. 2006 Stock Incentive Plan |
10.3
|
(1) * |
|
Form of Incentive Award Agreement under the MiMedx, Inc. 2006 Stock Incentive Plan, including a list of
officers and directors receiving options thereunder |
10.4
|
(1) * |
|
Form of Nonqualified Incentive Award Agreement under the MiMedx, Inc. 2006 Stock Incentive Plan, including a
list of officers and directors receiving options thereunder |
10.5
|
(1) * |
|
MiMedx, Inc. 2005 Assumed Stock Plan |
10.6
|
(1) * |
|
Declaration of Amendment to MiMedx, Inc. 2005 Assumed Stock Plan |
10.7
|
(1) * |
|
Form of Incentive Award Agreement under the MiMedx, Inc. Assumed 2005 Stock Plan (formerly the SpineMedica
Corp. 2005 Employee, Director and Consultant Stock Plan), including a list of officers and directors receiving
options thereunder |
10.8
|
(1) * |
|
Form of Nonqualified Incentive Award Agreement under the MiMedx, Inc. Assumed 2005 Stock Plan (formerly the
SpineMedica Corp. 2005 Employee, Director and Consultant Stock Plan) |
10.9
|
(1) * |
|
MiMedx, Inc. Assumed 2007 Stock Plan (formerly the SpineMedica Corp. 2007 Stock Incentive Plan) |
10.10
|
(1) * |
|
Declaration of Amendment to MiMedx, Inc. Assumed 2007 Stock Plan (formerly the SpineMedica Corp. 2007 Stock
Incentive Plan) |
10.11
|
(1) * |
|
Form of Incentive Award Agreement under the MiMedx, Inc. Assumed 2007 Stock Plan (formerly the SpineMedica
Corp. 2007 Stock Incentive Plan) |
10.12
|
(1) * |
|
Form of Nonqualified Incentive Award Agreement under the MiMedx, Inc. Assumed 2007 Stock Plan (formerly the
SpineMedica Corp. 2007 Stock Incentive Plan) |
10.13
|
(1) |
|
Form of MiMedx, Inc. Employee Proprietary Information and Inventions Assignment Agreement |
10.23
|
(1) |
|
Lease between MiMedx, Inc. and University of South Florida Research Foundation, Incorporated dated March 6, 2007 |
10.32
|
(1) |
|
Technology License Agreement between MiMedx, Inc., Shriners Hospitals for Children, and University of South
Florida Research Foundation dated January 29, 2007 |
10.33
|
(1) |
|
Technology License Agreement between SpineMedica Corp. and SaluMedica, LLC dated August 12, 2005 |
10.34
|
(1) |
|
Trademark License Agreement between SaluMedica, LLC and SpineMedica Corp. dated August 12, 2005 |
10.35
|
(1) |
|
Technology License Agreement between SpineMedica Corp. and SaluMedica, LLC dated August 3, 2007 |
10.36
|
(1) |
|
First Amendment Technology License Agreement between SpineMedica Corp. and SaluMedica, LLC dated August 3, 2007 |
10.37
|
(1) |
|
Trademark License Agreement between SaluMedica, LLC and SpineMedica Corp dated August 13, 2007 |
10.38
|
(1) |
|
Acknowledgement of Georgia Tech Research Corporation dated August 12, 2005 |
10.39
|
(1) |
|
License Agreement between Georgia Tech Research Corporation and Restore Therapeutics, Inc. dated March 5, 1998 |
10.40
|
(1) |
|
First Amendment to License Agreement between Georgia Tech Research Corporation and Restore Therapeutics, Inc.
dated November 18, 1998 |
10.41
|
(1) |
|
Second Amendment to License Agreement between Georgia Tech Research Corporation and SaluMedica, LLC (f/k/a
Restore Therapeutics, Inc.) dated February 28, 2005 |
10.42
|
(1) |
|
Third Amendment to License Agreement between Georgia Tech Research Corporation and SaluMedica, LLC dated
August 12, 2005 |
66
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
10.43
|
(1) |
|
Assignment of Invention and Non-Provisional Patent Application from David N. Ku to SpineMedica Corp. dated
August 11, 2005 |
10.44
|
(1) |
|
Assignment of Invention and Non-Provisional Patent Application from SaluMedica, LLC to SaluMedica, LLC dated
August 12, 2005 |
10.45
|
(1) |
|
Form of SpineMedica, Corp. Employee Proprietary Information and Inventions Assignment Agreement |
10.46
|
(1) |
|
Purchase Agreement between SpineMedica Corp. and SaluMedica, LLC dated March 12, 2007 |
10.47
|
(1) |
|
Letter Agreement between MiMedx, Inc. and SaluMedica, LLC dated June 26, 2007 |
10.54
|
(3) |
|
Investment Agreement dated March 31, 2008 between MiMedx Group, Inc. and SaluMedica, LLC |
10.55
|
(3) |
|
Technology License Agreement dated March 31, 2008 between MiMedx Group, Inc. and SaluMedica, LLC |
10.56
|
(3) |
|
Trademark License Agreement dated March 31, 2008 between MiMedx Group, Inc. and SaluMedica, LLC |
10.65
|
(5) |
|
Form of Indemnification Agreement |
10.66
|
(5)* |
|
Declaration of Amendment to Alynx, Co. Assumed 2006 Stock Incentive Plan (formerly the MiMedx, Inc. 2006 Stock
Incentive Plan) |
10.67
|
(6)* |
|
MiMedx Group, Inc. Amended and Restated Assumed 2005 Stock Plan |
10.68
|
(7)* |
|
Form of Incentive Stock Option Award Agreement under MiMedx Group, Inc. Amended and Restated Assumed 2005 Stock
Plan |
10.69
|
(7)* |
|
Form of Nonqualified Stock Option Award Agreement under MiMedx Group, Inc. Amended and Restated Assumed 2005
Stock Plan |
10.71
|
(8) |
|
Form of Subscription Agreement |
10.72
|
(8) |
|
Form of 3% Convertible Senior Secured Promissory Note |
10.73
|
(8) |
|
Form of Security and Intercreditor Agreement |
10.74
|
(9) |
|
Sale and Purchase Agreement with UPex Holdings, LLC |
10.76
|
(10) |
|
Subscription Agreement 5% Convertible Promissory Note |
10.77
|
(10) |
|
5% Convertible Promissory Note |
10.78
|
(10) |
|
Warrant to Purchase Common Stock |
10.79
|
(10) |
|
Right of First Refusal Agreement between MiMedx Group, Inc., and Matthew J. Miller |
10.82
|
(11) |
|
Form of Subscription and Stock Purchase Agreement Accredited Investor |
10.83
|
(11) |
|
Form of Subscription and Stock Purchase Agreement Unaccredited Investor |
10.84
|
(11) |
|
Form of Registration Rights Agreement |
10.85
|
(11) |
|
Form of Warrant to Purchase Common Stock |
21.1
|
(1) |
|
Subsidiaries of MiMedx Group, Inc. |
23.1
|
# |
|
Consent of Independent Registered Public Accounting Firm |
31.1
|
# |
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Acts of 2002 |
31.2
|
# |
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Acts of 2002 |
32.1
|
# |
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2
|
# |
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
67
|
|
|
Notes |
|
* |
|
Indicates a management contract or compensatory plan or arrangement |
|
# |
|
Filed herewith |
|
All other footnotes indicate a document previously filed as an exhibit to and incorporated by
reference from the following: |
|
(1) |
|
Incorporated by reference to the exhibit with the same number filed with the Registrants
Form 8-K filed February 8, 2008 |
|
(2) |
|
Incorporated by reference to the exhibit with the same number filed with the Registrants
Form 8-K filed April 2, 2008 |
|
(3) |
|
Incorporated by reference to the exhibit with the same number filed with the Registrants
Form 8-K filed April 4, 2008 |
|
(4) |
|
Incorporated by reference to the exhibit with the same number filed with the Registrants Form
10-K filed June 27, 2008 |
|
(5) |
|
Incorporated by reference to the exhibit with the same number filed with the Registrants
Form 8 -K filed July 15, 2008 |
|
(6) |
|
Incorporated by reference to exhibit 10.4 filed with the Registrants Form S-8 filed
August 29, 2008 |
|
(7) |
|
Incorporated by reference to the exhibit with the same number filed with the Registrants
Form 8 -K on September 4, 2008 |
|
(8) |
|
Exhibits 10.71, 10.72, and 10.73 are incorporated by reference to Exhibits 10.1, 10.2, and
10.3, respectively, to the Registrants Form 8-K filed May 5, 2009 |
|
(9) |
|
Incorporated by reference to Exhibit 2.1 to the Registrants Form 8-K filed October 22, 2009 |
|
(10) |
|
Exhibits 10.76, 10.77, 10.78, 10.79 are incorporated by reference to Exhibits 10.1, 10.2,
10.3, and 10.4, respectively, to the Registrants Form 8-K filed September 28, 2009 |
|
(11) |
|
Exhibits 10.82, 10.83, 10.84, and 10.85 are incorporated by reference to Exhibits 10.1, 10.2,
10.3, and 10.4, respectively, to the Registrants Form 8-K filed January 7, 2010 |
68
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
March 30, 2010 |
MIMEDX GROUP, INC.
|
|
|
By: |
/s/ Michael J. Senken
|
|
|
|
Michael J. Senken |
|
|
|
Chief Financial Officer |
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
Signature / Name |
|
Title |
|
Date |
|
|
|
|
|
/s/ Parker H. Petit
Parker H. Petit
|
|
Chief Executive Officer
(principal executive officer)
|
|
March 30, 2010 |
|
|
|
|
|
/s/ Michael J. Senken
Michael J. Senken
|
|
Chief Financial Officer
(principal financial and accounting officer)
|
|
March 30, 2010 |
|
|
|
|
|
/s/ Steve Gorlin
Steve Gorlin
|
|
Director
|
|
March 30, 2010 |
|
|
|
|
|
/s/ Kurt M. Eichler
Kurt M. Eichler
|
|
Director
|
|
March 30, 2010 |
|
|
|
|
|
/s/ Charles E. Koob
Charles E. Koob
|
|
Director
|
|
March 30, 2010 |
|
|
|
|
|
/s/ Larry W. Papasan
Larry W. Papasan
|
|
Director
|
|
March 30, 2010 |
|
|
|
|
|
/s/ A. Kreamer Rooke, Jr.
A. Kreamer Rooke, Jr.
|
|
Director
|
|
March 30, 2010 |
|
|
|
|
|
/s/ Joseph G. Bleser
Joseph G. Bleser
|
|
Director
|
|
March 30, 2010 |
|
|
|
|
|
/s/ J. Terry Dewberry
J. Terry Dewberry
|
|
Director
|
|
March 30, 2010 |
|
|
|
|
|
/s/ Bruce Hack
Bruce Hack
|
|
Director
|
|
March 30, 2010 |
69
Exhibit 23.1
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8
(No. 333-153255) of our report dated, March 30, 2010, with respect to the
consolidated financial statements of MiMedx Group, Inc. included in this Annual Report on Form 10-K
for the nine months ended December 31, 2009.
|
|
|
|
|
|
|
|
|
/s/ Cherry, Bekaert & Holland, L.L.P.
|
|
|
Cherry, Bekaert & Holland, L.L.P. |
|
|
|
|
|
Tampa, Florida
March 30, 2010
Exhibit 31.1
EXHIBIT 31.1
Section 302 Certification
I, Parker H. Petit, certify that:
1. |
|
I have reviewed this annual report on Form 10-K of MiMedx Group, Inc.; |
|
2. |
|
Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report; |
|
3. |
|
Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report; |
|
4. |
|
The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in the Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
|
designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this annual report is being prepared, |
|
|
(b) |
|
designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles, |
|
|
(c) |
|
evaluated the effectiveness of the registrants disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this annual
report based on such evaluation, and |
|
|
(d) |
|
disclosed in this annual report any change in the registrants
internal control over financial reporting that occurred during the
registrants last fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the registrants
internal control over financial reporting; and |
5. |
|
The registrants other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrants auditors and the audit committee of the
registrants board of directors (or persons performing the equivalent
function): |
|
(a) |
|
all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrants
ability to record, process, summarize and report financial
information; and |
|
|
(b) |
|
any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal control over financial reporting. |
Date: March 30, 2010
|
|
|
|
|
|
/s/ Parker H. Petit
|
|
|
Parker H. Petit |
|
|
Chief Executive Officer |
|
Exhibit 31.2
EXHIBIT 31.2
Section 302 Certification
I, Michael J. Senken, certify that:
1. |
|
I have reviewed this annual report on Form 10-K of MiMedx Group, Inc.; |
|
2. |
|
Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report; |
|
3. |
|
Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report; |
|
4. |
|
The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in the Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have: |
|
(a) |
|
designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this annual report is being prepared, |
|
|
(b) |
|
designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles, |
|
|
(c) |
|
evaluated the effectiveness of the registrants disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this annual
report based on such evaluation, and |
|
|
(d) |
|
disclosed in this annual report any change in the registrants
internal control over financial reporting that occurred during the
registrants last fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the registrants
internal control over financial reporting; and |
5. |
|
The registrants other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrants auditors and the audit committee of the
registrants board of directors (or persons performing the equivalent
function): |
|
(a) |
|
all significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrants
ability to record, process, summarize and report financial
information; and |
|
|
(b) |
|
any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal control over financial reporting. |
Date: March 30, 2010
|
|
|
|
|
|
/s/ Michael J. Senken
|
|
|
Michael J. Senken |
|
|
Chief Financial Officer |
|
Exhibit 32.1
Exhibit 32.1
Section 906 Certification
The undersigned Parker H. Petit, the Chief Executive Officer of MiMedx Group, Inc. (the
Company), has executed this certification in connection with the filing with the Securities and
Exchange Commission of the Companys Annual Report on Form 10-K for the nine months ending December
31, 2009 (the Report). The undersigned hereby certifies, to the best of his knowledge, that:
(1) |
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
|
the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company. |
Date: March 30, 2010
|
|
|
|
|
|
/s/ Parker H. Petit
|
|
|
Parker H. Petit |
|
|
Chief Executive Officer |
|
A signed original of the written statement required by Section 906 has been provided to MiMedx
Group, Inc. and will be retained by MiMedx Group, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.
Exhibit 32.2
Exhibit 32.2
Section 906 Certification
The undersigned Michael J. Senken, the Chief Financial Officer of MiMedx Group, Inc. (the
Company), has executed this certification in connection with the filing with the Securities and
Exchange Commission of the Companys Annual Report on Form 10-K for the nine months ending December
31, 2009 (the Report). The undersigned hereby certifies, to the best of his knowledge, that:
(1) |
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
(2) |
|
the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company. |
Date: March 30, 2010
|
|
|
|
|
|
/s/ Michael J. Senken
|
|
|
Michael J. Senken |
|
|
Chief Financial Officer |
|
A signed original of the written statement required by Section 906 has been provided to MiMedx
Group, Inc. and will be retained by MiMedx Group, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.