Filed by Bowne Pure Compliance
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2008
OR
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o |
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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 to
Commission file number 0-52491
MIMEDX GROUP, INC.
(Exact name of registrant as specified in its charter)
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Florida
(State or other jurisdiction of incorporation)
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26-2792552
(I.R.S. Employer Identification Number) |
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1234 Airport Road, Suite 105
Destin, Florida
(Address of principal executive offices)
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32541
(Zip Code) |
(850) 269-0000
Registrants telephone number, including area code
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 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
As of August 10, 2008, there were 37,282,128 shares outstanding of the registrants common stock.
MIMEDX GROUP, INC.
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
MIMEDX GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEETS
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June 30, |
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March 31, |
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2008 |
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2008 |
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(unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
3,875,106 |
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$ |
6,749,609 |
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Prepaid expenses and other current assets |
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67,577 |
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189,253 |
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Total current assets |
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3,942,683 |
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6,938,862 |
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Property and equipment,
net of accumulated depreciation of $288,878 (June) and $191,588 (March) |
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1,582,818 |
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1,452,436 |
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Goodwill |
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857,597 |
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857,597 |
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Intangible assets, net of accumulated amortization of $490,552 (June) and
$323,848 (March) |
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5,616,449 |
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5,783,153 |
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Deposits |
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150,114 |
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146,433 |
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Total assets |
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$ |
12,149,661 |
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$ |
15,178,481 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
841,898 |
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$ |
948,478 |
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Total current liabilities |
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$ |
841,898 |
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$ |
948,478 |
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Commitments
and contingency (Notes 4 and 8) |
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Stockholders equity: |
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Preferred stock; $.001 par value; 5,000,000
shares authorized and 0 (June and March) shares
issued and outstanding |
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Common stock; $.001 par value; 100,000,000
shares authorized and 37,282,128 (June) and 36,864,534
(March) shares issued and outstanding |
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37,282 |
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36,864 |
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Additional paid-in capital |
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32,456,207 |
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32,226,983 |
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Deficit accumulated during the development stage |
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(21,185,726 |
) |
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(18,033,844 |
) |
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Total stockholders equity |
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11,307,763 |
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14,230,003 |
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Total liabilities and stockholders
equity |
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$ |
12,149,661 |
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$ |
15,178,481 |
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1
MIMEDX GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Period from |
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Inception |
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Three Months Ended |
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(November 22, 2006) |
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June 30, |
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through |
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2008 |
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2007 |
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June 30, 2008 |
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Research and development expenses |
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$ |
953,546 |
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$ |
137,649 |
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$ |
3,080,445 |
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Acquired in-process research and development |
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7,177,000 |
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General and administrative expenses |
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2,236,321 |
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747,242 |
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11,466,352 |
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Loss from operations |
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(3,189,867 |
) |
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(884,891 |
) |
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(21,723,797 |
) |
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Other income (expense) |
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37,985 |
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195,565 |
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549,663 |
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Loss before income taxes |
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(3,151,882 |
) |
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(689,326 |
) |
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(21,174,134 |
) |
Income taxes |
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Net loss |
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$ |
(3,151,882 |
) |
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$ |
(689,326 |
) |
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$ |
(21,174,134 |
) |
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Net loss per common share |
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Basic and diluted |
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$ |
(0.09 |
) |
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$ |
(0.05 |
) |
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Shares used in computing net loss per common share |
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Basic and diluted |
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37,073,595 |
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14,000,000 |
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2
MIMEDX GROUP, INC. AND SUBSIDARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
PERIOD FROM INCEPTION (NOVEMBER 22, 2006) THROUGH JUNE 30, 2008
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Deficit |
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Convertible |
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Convertible |
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Convertible |
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Accumulated |
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Preferred Stock |
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Preferred Stock |
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Preferred Stock |
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Additional |
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Stock |
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Note |
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During the |
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Series A |
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Series B |
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Series C |
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Common Stock |
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Paid-in |
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Subscriptions |
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Receivable, |
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Development |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Shares |
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Amount |
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Capital |
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Receivable |
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Related party |
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Stage |
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Total |
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Balances, November 22, 2006 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
|
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$ |
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|
$ |
|
|
Issuance of common stock at inception |
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|
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12,880,000 |
|
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|
12,880 |
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|
|
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|
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|
|
|
|
|
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|
(11,592 |
) |
|
|
1,288 |
|
Employee share-based compensation
expense |
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|
|
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|
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|
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|
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|
|
|
|
|
13,409 |
|
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|
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|
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|
|
|
|
|
|
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|
13,409 |
|
Other share-based compensation expense |
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17,980 |
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17,980 |
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Common stock issued in connection
with purchase of license agreement |
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1,120,000 |
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1,120 |
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894,880 |
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|
896,000 |
|
Issuance of note receivable, related
party |
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(2,000,000 |
) |
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(2,000,000 |
) |
Sale of Series A Preferred stock |
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|
11,212,800 |
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14,016,000 |
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(918,806 |
) |
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(1,233,750 |
) |
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|
11,863,444 |
|
Accrued interest income |
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(7,644 |
) |
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(7,644 |
) |
Net loss for the period |
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|
|
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(650,777 |
) |
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(650,777 |
) |
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Balances, March 31, 2007 |
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11,212,800 |
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14,016,000 |
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14,000,000 |
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|
14,000 |
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|
7,463 |
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(1,233,750 |
) |
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|
(2,007,644 |
) |
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|
(662,369 |
) |
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|
10,133,700 |
|
Employee share-based compensation
expense |
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649,783 |
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649,783 |
|
Other share-based compensation expense |
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158,247 |
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158,247 |
|
Collection of stock subscription
receivable |
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|
1,233,750 |
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|
1,233,750 |
|
Accrued interest income |
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(41,250 |
) |
|
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|
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|
(41,250 |
) |
SpineMedica Corp. acquisition |
|
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|
|
|
|
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|
|
5,922,397 |
|
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|
7,402,996 |
|
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|
|
|
|
|
|
|
2,911,117 |
|
|
|
2,911 |
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|
|
2,316,908 |
|
|
|
|
|
|
|
2,048,894 |
|
|
|
|
|
|
|
11,771,709 |
|
Sale of Series C Preferred stock |
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
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|
1,285,001 |
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|
3,855,000 |
|
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3,855,000 |
|
Stock options issued in connection
with purchase of intellectual property |
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116,000 |
|
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116,000 |
|
Exercise of stock options |
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1,200 |
|
|
|
1 |
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|
2,159 |
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|
|
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|
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 |
) |
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|
|
Alynx Merger Transaction Costs (expensed) |
|
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|
|
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|
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|
|
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|
|
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|
|
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|
205,851 |
|
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|
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 |
|
Employee share-based compensation
expense (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193,058 |
|
Other share-based compensation
expense (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36,584 |
|
Cashless exercise of stock warrants (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
417,594 |
|
|
|
418 |
|
|
|
(418 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period (unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,151,882 |
) |
|
|
(3,151,882 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2008 (unaudited) |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
37,282,128 |
|
|
$ |
37,282 |
|
|
$ |
32,456,207 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(21,185,726 |
) |
|
$ |
11,307,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial statements
3
MIMEDX GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from |
|
|
|
|
|
|
|
|
|
|
|
Inception |
|
|
|
Three Months Ended |
|
|
(November 22, 2006) |
|
|
|
June 30, |
|
|
through |
|
|
|
2008 |
|
|
2007 |
|
|
June 30, 2008 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,151,882 |
) |
|
$ |
(689,325 |
) |
|
$ |
(21,174,134 |
) |
Adjustments to reconcile net loss to net cash flows from
operating activities, net of effects of acquisition: |
|
|
|
|
|
|
|
|
|
|
|
|
Acquired in-process research and development |
|
|
|
|
|
|
|
|
|
|
7,177,000 |
|
Depreciation |
|
|
97,290 |
|
|
|
1,993 |
|
|
|
289,445 |
|
Amortization of intangible assets |
|
|
166,704 |
|
|
|
30,627 |
|
|
|
490,551 |
|
Employee share-based compensation expense |
|
|
193,058 |
|
|
|
23,925 |
|
|
|
856,250 |
|
Other share-based compensation expense |
|
|
36,584 |
|
|
|
30,315 |
|
|
|
212,811 |
|
Issuance of common stock for transaction fees |
|
|
|
|
|
|
|
|
|
|
1,126,379 |
|
Accrued interest on notes receivable, related party |
|
|
|
|
|
|
(84,450 |
) |
|
|
(48,894 |
) |
Change in fair value of investment, related party |
|
|
|
|
|
|
|
|
|
|
41,775 |
|
Increase (decrease) in cash resulting from changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
|
121,676 |
|
|
|
(464,327 |
) |
|
|
(48,499 |
) |
Accounts payable and accrued expenses |
|
|
(106,580 |
) |
|
|
(940,738 |
) |
|
|
(56,216 |
) |
Deferred interest income |
|
|
|
|
|
|
|
|
|
|
(43,200 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from operating activities |
|
|
(2,643,150 |
) |
|
|
(2,091,980 |
) |
|
|
(11,176,732 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of equipment |
|
|
(227,672 |
) |
|
|
(555,649 |
) |
|
|
(1,408,474 |
) |
Cash paid for intangible asset |
|
|
|
|
|
|
|
|
|
|
(100,000 |
) |
Cash paid for security deposits |
|
|
(3,681 |
) |
|
|
(21,412 |
) |
|
|
(116,312 |
) |
Cash received in acquisition of SpineMedica Corp. |
|
|
|
|
|
|
|
|
|
|
1,957,405 |
|
Cash paid for acquisition costs of SpineMedica Corp. |
|
|
|
|
|
|
8,235 |
|
|
|
(227,901 |
) |
Payments from (advances to) related party |
|
|
|
|
|
|
|
|
|
|
(2,008,522 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from investing activities |
|
|
(231,353 |
) |
|
|
(568,826 |
) |
|
|
(1,903,804 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from Series A preferred stock |
|
|
|
|
|
|
1,233,750 |
|
|
|
14,016,000 |
|
Proceeds from Series C preferred stock |
|
|
|
|
|
|
|
|
|
|
3,855,000 |
|
Proceeds from common stock sale |
|
|
|
|
|
|
|
|
|
|
1,288 |
|
Proceeds from exercise of stock options |
|
|
|
|
|
|
|
|
|
|
2,160 |
|
Offering costs paid in connection with Series A preferred
stock offering |
|
|
|
|
|
|
|
|
|
|
(918,806 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flows from financing activities |
|
|
|
|
|
|
1,233,750 |
|
|
|
16,955,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash |
|
|
(2,874,503 |
) |
|
|
(1,427,056 |
) |
|
|
3,875,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period |
|
|
6,749,609 |
|
|
|
10,456,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period |
|
$ |
3,875,106 |
|
|
$ |
9,029,652 |
|
|
$ |
3,875,106 |
|
|
|
|
|
|
|
|
|
|
|
4
MIMEDX GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIODS ENDED JUNE 30, 2008 AND 2007 AND THE PERIOD FROM
INCEPTION (NOVEMBER 22, 2006)
THROUGH JUNE 30, 2008
1. |
|
Basis of Presentation: |
The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States (GAAP) for
interim financial information and with the instructions to Form 10-Q and Article 10 of
Regulations S-X. Accordingly, they do not include all of the information and footnotes
required by GAAP for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a fair
presentation of the results of operations for the periods presented have been included.
Operating results for the three months ended June 30, 2008 and 2007 are not necessarily
indicative of the results that may be expected for the fiscal year. The balance sheet at
March 31, 2008 has been derived from the audited consolidated financial statements at that
date, but does not include all of the information and footnotes required by GAAP for complete
financial statements.
You should read these condensed consolidated financial statements together with the historical
consolidated financial statements of the Company for the years ended March 31, 2008 and period
from inception (November 22, 2006) through March 31, 2008 and 2007 included in our Annual
Report on Form 10-K for the year ended March 31, 2008, filed with the Securities and Exchange
Commission (SEC) on June 27, 2008.
MiMedx, Inc. (MiMedx) was incorporated in Florida in 2006. MiMedx entered into an Agreement
and Plan of Merger (Merger Agreement) on January 29, 2008 with a publicly-traded Nevada
Corporation, Alynx, Co. (Alynx), a public shell company, which was consummated 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 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 the 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, Inc. and SpineMedica, LLC.
The financial statements include the accounts of MiMedx Group, Inc. and its wholly-owned
subsidiaries MiMedx, Inc. and SpineMedica, LLC. All significant inter-company balances and
transactions have been eliminated.
2. |
|
Significant accounting policies: |
Net loss per share
Basic net loss per common share is computed using the weighted-average number of common shares
outstanding during the period. Diluted net loss per common share is typically computed using
the weighted-average number of common and dilutive common equivalent shares from stock
options, warrants and convertible preferred stock using the treasury stock method.
5
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 and
convertible preferred stock would be anti-dilutive.
The following table sets forth the computation of basic and diluted net loss per share:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(3,151,882 |
) |
|
$ |
(689,326 |
) |
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per
share-weighted average shares |
|
|
37,073,595 |
|
|
|
14,000,000 |
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: Stock
options and warrants outstanding
(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per
shareweighted average shares adjusted
for dilutive securities |
|
|
37,073,595 |
|
|
|
14,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per common sharebasic and diluted |
|
$ |
(.09 |
) |
|
$ |
(.05 |
) |
|
|
|
|
|
|
|
|
|
|
(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: |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
Stock options, warrants, and convertible preferred stock |
|
|
4,581,501 |
|
|
|
13,437,131 |
|
Recently issued accounting pronouncements:
In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (SFAS 157).
SFAS 157 clarifies the principle that fair value should be based on the assumptions that
market participants would use when pricing an asset or liability. Additionally, it establishes
a fair value hierarchy that prioritizes the information used to develop those assumptions.
SFAS 157 is effective for financial statements issued for fiscal years beginning after
November 15, 2007. Effective April 1, 2008 the Company adopted the provisions of SFAS 157.
The adoption of the Standard had no effect on the consolidated financial statements.
In April 2008, FASB Staff Position No. 142-3, Determination of the Useful Life of Intangible
Assets (FSP 142-3) was issued. This standard amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset under FASB Statement 142, Goodwill and Other Intangible Assets. FASP 142-3
is effective for financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those fiscal years. Early adoption is prohibited. The
Company has not determined the impact on its financial statements of this accounting
standard.
6
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 June 30, 2008 the
Company experienced net losses of $21,174,134 (unaudited) and cash used in operations of
$11,176,732 (unaudited). As of June 30, 2008, the Company has not emerged from the
development stage. 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 related party
advances. The Company is currently attempting to raise additional funds and such funds may
not be available on favorable terms, 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 may not be
able to 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 pressures or unanticipated customer requirements. Any of these events could
adversely affect the Companys ability to achieve the Companys development and
commercialization goals, which could have a material and adverse effect on the Companys
business, results of operations and financial condition.
4. |
|
Intangible assets and royalty agreement: |
Intangible assets activity is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intellectual |
|
|
|
|
|
|
License |
|
|
License |
|
|
License |
|
|
Property |
|
|
|
|
|
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
(d) |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 1, 2008 |
|
|
881,466 |
|
|
|
2,195,487 |
|
|
|
2,596,000 |
|
|
|
110,200 |
|
|
|
5,783,153 |
|
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization |
|
|
(24,900 |
) |
|
|
(74,004 |
) |
|
|
(64,900 |
) |
|
|
(2,900 |
) |
|
|
(166,704 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008 |
|
|
856,566 |
|
|
|
2,121,483 |
|
|
|
2,531,100 |
|
|
|
107,300 |
|
|
|
5,616,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
On January 29, 2007, the Company acquired a license from Shriners Hospitals for
Children and University of South Florida Research Foundation, Inc. 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 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. |
|
(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. There are no 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. The agreement also provides for royalty payments upon approval and sale
of certain products. There are no amounts accrued for this obligation due to
its contingent nature. |
7
Expected future amortization of intangible assets is as follows:
|
|
|
|
|
Year ending June 30, |
|
|
|
|
|
|
|
|
|
2009 |
|
$ |
666,821 |
|
2010 |
|
|
666,821 |
|
2011 |
|
|
666,821 |
|
2012 |
|
|
666,821 |
|
2013 |
|
|
666,821 |
|
Thereafter |
|
|
2,282,344 |
|
|
|
|
|
|
|
$ |
5,616,449 |
|
|
|
|
|
5. |
|
Stock Options and Warrants: |
Stock Options:
Activity with respect to the stock options is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
average Exercise |
|
|
Intrinsic |
|
|
|
Shares |
|
|
Prices |
|
|
Value |
|
Options outstanding at
April 1, 2008 |
|
|
4,446,250 |
|
|
$ |
2.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
50,000 |
|
|
|
5.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited/Cancelled |
|
|
(100,000 |
) |
|
|
2.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at
June 30, 2008 |
|
|
4,396,250 |
|
|
|
2.24 |
|
|
$ |
10,375,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at
June 30, 2008 |
|
|
2,440,208 |
|
|
|
1.83 |
|
|
$ |
5,758,891 |
|
|
|
|
|
|
|
|
|
|
|
Following is a summary of stock options outstanding and exercisable at June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding |
|
|
Options Exercisable |
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
Range of |
|
|
|
|
|
Average |
|
|
Weighted- |
|
|
|
|
|
|
Weighted- |
|
Exercise |
|
Number |
|
|
Remaining |
|
|
Average |
|
|
Number |
|
|
Average |
|
Prices |
|
Outstanding |
|
|
Contractual Life |
|
|
Exercise Price |
|
|
Exercisable |
|
|
Exercise Price |
|
$.0001 1.00 |
|
|
1,270,000 |
|
|
|
3.69 |
|
|
$ |
.89 |
|
|
|
819,166 |
|
|
$ |
.91 |
|
1.80 2.40 |
|
|
2,476,250 |
|
|
|
6.31 |
|
|
|
2.09 |
|
|
|
1,458,542 |
|
|
|
1.94 |
|
5.38 5.44 |
|
|
650,000 |
|
|
|
5.06 |
|
|
|
5.44 |
|
|
|
162,500 |
|
|
|
5.44 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,396,250 |
|
|
|
5.36 |
|
|
|
2.24 |
|
|
|
2,440,208 |
|
|
|
1.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
A summary of the status of the Companys unvested stock options follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Grant Date |
|
Unvested Stock Options |
|
Shares |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
Unvested at April 1, 2008 |
|
|
2,300,626 |
|
|
|
.49 |
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
50,000 |
|
|
|
3.45 |
|
|
|
|
|
|
|
|
|
|
Expired |
|
|
(37,500 |
) |
|
|
.30 |
|
|
|
|
|
|
|
|
|
|
Vested |
|
|
(357,084 |
) |
|
|
.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested at June 30, 2008 |
|
|
1,956,042 |
|
|
|
.67 |
|
|
|
|
|
|
|
|
|
Total unrecognized compensation expense at June 30, 2008 was approximately $1,825,000 and will
be charged to expense through June, 2011.
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:
|
|
|
|
|
|
|
Three Months Ended |
|
|
June 30, 2008 |
|
June 30, 2007 |
Dividend yield |
|
0% |
|
0% |
Expected volatility |
|
70.05% |
|
81.34% to 93.99% |
Risk free interest rates |
|
3.11% |
|
4.54% to 4.74% |
Expected lives |
|
6 years |
|
2.75 to 5 years |
The weighted-average grant date fair value for options granted during the three months ended
June 30, 2008, and 2007, was approximately $3.45, and $.38, respectively.
9
Warrants:
A summary of our common stock warrant activity for the three months ended June 30, 2008 is 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 outstanding at June 30, 2008 |
|
|
185,251 |
|
|
$ |
1.86 |
|
|
|
|
|
|
|
|
The Company grants common stock warrants to placement agents in connection with direct equity share purchases by
investors 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. Warrants issued to date have terms of 5 years.
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.
Warrants totaling 175,251, with exercise prices of $1.80 per share and expiration dates of
October 24, 2009, were assumed by the Company in conjunction with our acquisition of
Spinemedica Corp. in July 2007.
Warrants for 10,000 shares, with an exercise price of $3.00 per share, were issued in October
2007 for services provided by a consultant. These warrants expire in October 2012 and have
piggyback registration rights which expire on October 9, 2008 and do not require the Company
to pay any consideration to the holder if a registration statement is not declared effective
or maintained.
The Company has incurred net losses since its inception and, therefore, no current income tax
liabilities have been incurred for the periods presented. 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.
7. |
|
Related party transactions: |
The
Company incurred expenses of approximately $16,000 and $5,300 during the three months ended June 30,
2008 related to aircraft usage and the lease of office space,
respectively, from entities owned by the
Chairman of the Board.
10
8. |
|
Contractual Commitments: |
The table below sets forth our known contractual obligations as of June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period |
|
|
|
|
|
|
|
Less than |
|
|
|
|
|
|
|
Contractual Obligations |
|
Total |
|
|
1 year |
|
|
2-3 years |
|
|
4-5 years |
|
Consulting Agreements |
|
$ |
575,000 |
|
|
$ |
306,000 |
|
|
$ |
269,000 |
|
|
$ |
|
|
Employment Agreements |
|
|
1,957,000 |
|
|
|
1,227,000 |
|
|
|
730,000 |
|
|
|
|
|
Operating Lease Obligations |
|
|
1,013,000 |
|
|
|
272,000 |
|
|
|
562,000 |
|
|
|
179,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,545,000 |
|
|
$ |
1,805,000 |
|
|
$ |
1,561,000 |
|
|
$ |
179,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In May 2008, the Company entered into agreements with a consultant/shareholder which require
payments in the event the Company receives proceeds from the sale or disposition of certain
intellectual property contributed by the consultant/shareholder. As of June 30, 2008 no commitments have been paid or accrued under these agreements due to
their contingent nature.
Registration rights:
Certain shareholders of the Company have registration rights covering 18,420,200 shares of the
Companys common stock pursuant to an agreement dated July 23, 2007. The rights will be
effective nine months after the Company either closes an underwritten public offering or
receives in the aggregate a minimum of $10,000,000 in cash from the sale or a series of
related sales of the Companys securities at a time when its equity securities are registered
under Section 12 of the Exchange Act. As such, these are contingent rights subject to events
within the Companys control. When and if these events occur and the nine month period
expires, the majority of the holders of the registration rights can demand that the Company
use its best efforts to register such shares on up to two occasions but not more than once in
any 12-month period, subject to certain restrictions. The holders of those shares also have
certain piggyback registration rights. The various registration rights expire upon the
earlier of the fifth anniversary from when the Company has its first underwritten public
offering or the date when the holder of such shares is able to sell the registrable shares
under Rule 144. Pursuant to a separate registration rights agreement, dated February 8, 2008,
the holders of approximately 17,600 additional shares of the Companys common stock have
piggyback registration rights which are substantially the same as those granted in July 2007.
The registration rights agreements do not require the Company to pay any consideration to
holders if an SEC registration statement is not declared effective or maintained. Beginning
February 9, 2009, most, if not all, of the shares subject to the registration rights
agreements will be eligible for sale pursuant to Rule 144. Approximately 966,667 of the
shares are held by persons who are affiliates. Affiliates will be subject to the condition
that the Company be current in its filings before they may utilize Rule 144, and to Rule 144
volume limitations.
11
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This Form 10-Q 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.
All forward-looking statements are subject to the risks and uncertainties inherent in
predicting the future. Our actual results may differ materially from those projected, stated or
implied in these forward-looking statements as a result of many factors, including our critical
accounting policies and risks and uncertainties related, but not limited to, overall industry
environment, delay in the introduction of products, regulatory delays, negative clinical results,
and our financial condition. These and other risks and uncertainties are described in more detail
in our most recent Annual Report on Form 10-K, as well as other reports that we file with the SEC.
Forward-looking statements speak only as of the date they are made and should not be relied
upon as representing our views as of any subsequent date. We undertake no obligation to update or
revise such statements to reflect new circumstances or unanticipated events as they occur, except
as required by applicable laws, and you are urged to review and consider disclosures that we make
in this and other reports that we file with the SEC that discuss factors germane to our business.
Background of MiMedx Group, Inc.
The predecessor to MiMedx Group, Inc. was originally formed as a Utah corporation on July 30,
1985 under the name Leibra, Inc. We later changed domicile, through a merger, to Nevada, and later
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 at least the past 10 years, seeking to acquire an interest in a business with
long-term growth potential. On March 6, 2007, we (then Alynx, Co.) filed a registration statement
with the SEC on Form 10-SB to register our common stock under the Securities Exchange Act of 1934.
We have filed periodic reports with the SEC since that time.
As used herein, the terms the Company, we, our and us refer to MiMedx Group, Inc., a
Florida corporation (formerly Alynx, Co., a Nevada corporation), and our consolidated subsidiaries
as a combined entity, except where it is clear that the terms mean only MiMedx Group, Inc.
On February 8, 2008, MiMedx Group, Inc. (then Alynx, Co.), MMX Acquisition Corp., a Florida
corporation wholly-owned by Alynx, Co., and MiMedx, Inc., a Florida-based, privately-held,
development-stage medical device company (MiMedx), consummated the arrangement set forth in an
Agreement and Plan of Merger between the parties (the Merger), whereby (i) MMX Acquisition Corp.
merged with and into MiMedx; (ii) MiMedx became a wholly-owned subsidiary of the Company; and (iii)
former MiMedx shareholders received approximately 97.25% of the post-merger companys outstanding
shares. On March 31, 2008, we merged into a Florida entity, thereby becoming MiMedx Group, Inc. and
also effected a reverse split so that each former MiMedx shareholder owned the same number of
shares in the Company as such shareholder held in MiMedx prior to the Merger.
12
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. As a
result, the financial statements presented are the historical financial statements of MiMedx.
Overview
We are a development stage enterprise based in Tampa, Florida. The Company has generated no
operating revenue and has a history of losses since its inception in November 2006.
We currently operate in one business segment, musculoskeletal products, which will include the
design, manufacture and marketing of four major market categories: soft-tissue reconstructive
products, fixation devices, spinal products and joint reconstruction products including tendons and
ligaments of the hand and upper and lower extremity joint markets, and procedure-specific
instrumentation required to implant our reconstructive systems. Fixation devices may include
internal, bone-to-bone fixation devices that do not address the spine. Spinal products may include
artificial spinal discs to treat cervical pain and degeneration as well as lumbar indications,
facet arthroplasty, intervertebral spacers, spinous process spacers, and other spinal systems and
implants, as well as orthobiologics. Other product categories may include arthroscopy products,
general surgical implants and instruments, operating room supplies and other surgical products and
implants.
MiMedxs core technology is a unique cross-linking process that utilizes nordihydroguaiaretic
acid (NDGA), a naturally occurring compound. Initial bench testing shows that collagen
cross-linked with NDGA produces a very strong, biocompatible, and durable material which could
possibly be used to treat a number of orthopedic and general soft-tissue trauma and disease
disorders. The core technology is licensed to us and is embodied in two patents. It 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 could potentially be developed and
patented that are all tied to the core patented technology.
Characteristics and benefits of products that we believe could possibly be developed using
this licensed technology are:
|
|
|
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 configured as
follows: |
|
|
|
Linear arrays of fibers for tendons |
|
|
|
|
Fiber braids for ligament bioprostheses |
|
|
|
|
Woven meshes for general surgical use; |
|
|
|
NDGA-treated biomaterials have been tested and results preliminarily suggest that
the materials are biocompatible and biodegradable; |
|
|
|
|
Biocompatibilization (making a material biocompatible that may otherwise not be) of
in-dwelling medical devices by coating with NDGA polymerized collagen; |
|
|
|
|
NDGA treatment of xenograft (animal in origin) and allograft (human in origin)
materials could make them more biocompatible and possibly improve functional lifetime;
and |
|
|
|
|
NDGA-treated collagen-based biorivets have the potential to be used for bone
repair. |
MiMedxs efforts presently focus on development of the potential products identified and
designing a manufacturing process for those products. We are planning to initially pursue linear
arrays and braided constructs for tendon repair as the first products to enter clinical
development.
13
SpineMedica is currently developing two products in addition to a surgical sheet discussed
below: a cervical total disc replacement and a posterior interbody fusion device market.
SpineMedica owns specific rights to a poly-vinyl alcohol (PVA) and 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. We believe
the intervertebral disc space and the normal mobility of the spine can be preserved using a
biomimetic material like this specific hydrogel. This hydrogel, in a form called Salubria®, has
been used in other medical device applications and we believe it has demonstrated biocompatibility
and durability inside the human body. In the United States, the FDA has cleared the material for
use next to nerves and in the European Union and Canada it has been cleared for use next to nerves
and to replace worn-out and lesioned cartilage in the knee. SpineMedica has recently begun
developing a third product for the spine, a vessel guard made of the hydrogel material. This vessel
guard, which is anticipated to be a 510(k) device with the FDA, would be designed to reduce the
risk of potential vessel damage during a spinal revision surgery.
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. Initially, SpineMedica plans to focus on developing the
hydrogel surgical sheet technology for a spine surgery vessel guard used for anterior spinal
surgeries. Additionally, we believe there is potential for this technology to be used in the
prevention of scarring and as an anti-adhesive or in tissue repair.
Results of Operations for the Three Months Ended June 30, 2008 Compared to the Three Months Ended
June 30, 2007
Research and Development Expenses
We incurred approximately $954,000 of research and development expenses during the three
months ended June 30, 2008 compared to approximately $138,000 during the three months ended June
30, 2007. These costs consist primarily of fees paid to external consultants and service providers
supporting our development efforts, internal personnel costs, and supplies and instruments used in
our laboratories. Fees paid to external consultants and service providers approximated $432,000
and $93,000 for the three months ended June 30, 2008 and 2007, respectively. As of June 30, 2008
we employed 22 employees devoted to research and development, compared to 5 employees devoted to
research and development at June 30, 2007. Supplies and instruments used for research and
development increased significantly as we expanded the staff and undertook additional research and
development of our technologies. We anticipate continued increases in the area of research and
development in the foreseeable future as we progress our technologies into clinical development to
obtain approval from the FDA to market our technologies.
General and Administrative Expenses
General and administrative expenses for the three months ended June 30, 2008 approximated
$2,236,000 compared to approximately $747,000 for the three months ended June 30, 2007. General
and administrative expenses primarily consist of personnel costs, professional fees consisting of
legal and accounting fees, travel and entertainment expenses, and facilities costs. During the
three months ended June 30, 2008, salaries and benefits approximated $1,107,000 compared to
approximately $440,000 for the three months ended June 30, 2007. As of June 30, 2008,we employed
17 personnel not related to research and development functions as compared to 10 as of June 30,
2007. Professional fees of approximately $528,000 were incurred during the three months ended June
30, 2008 as compared to approximately $152,000 during the three months ended June 30, 2007. These
professional fees are primarily attributed to general counsel merger and acquisition costs, costs
incurred in filing patents, and accounting and reporting fees. Facility costs consist primarily of
leasing office and lab space in Tampa, Florida and in Marietta, Georgia. The first lease we
entered into was in April 2007. Prior to April 2007, we operated out of the offices of our
founder, for no consideration.
During the three months ended June 30, 2008, we recorded $97,000 in depreciation expense and
$167,000 in amortization expense as compared to recording less than $2,000 in depreciation expense
and approximately $31,000 in amortization during the three months ended June 30, 2007. We
depreciate our assets on a straight-line basis, principally over five to seven years and amortize
our intangible assets over a period of 10 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.
14
Share Based Compensation
We follow the provisions of 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). The total share based compensation recognized during the three
months ended June 30, 2008 and 2007 approximated $230,000 and $54,000, respectively.
Other Income
We recorded net interest income of approximately $38,000 during the three months ended June
30, 2008 and approximately $204,000 during the three months ended June 30, 2007 as a result of our
investment of the net proceeds of our Series A Preferred Stock, which occurred in March 2007.
Liquidity and Capital Resources
Since inception, we have funded our development, operating costs and capital expenditures
through issuances of stock.
We had approximately $3,875,000 of cash and cash equivalents on hand as of June 30, 2008.
We estimate that the cash and cash equivalents on hand will be sufficient to fund operations
for at least 3 to 4 months from June 30, 2008, but 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.
We are considering the possible issuance of additional shares of capital stock, in connection
with a PIPE transaction, and are working toward such a financing transaction, but there can be no
assurance that funds will be available, or that the price we can obtain will be acceptable.
Our working capital requirements will depend upon numerous factors, including the progress of
our research and development programs, pre-clinical testing, clinical trials, timing and cost of
seeking as well as achievement of regulatory milestones, and the ability to sell or license our
technologies in the marketplace. In any event, we will require substantial funds in addition to
those presently available to develop all of our programs to meet our business objectives. If we
wish to acquire another business or other intellectual property or products, we will require
additional capital to fund those acquisitions.
We expect to incur losses from operations for the foreseeable future. We expect, assuming we
are successful in completing a financing transaction, that general and administrative expenses will
continue to increase as we expand our finance and administrative staff, add infrastructure, and
incur additional costs related to being an operating public company in the United States, including
the costs of directors and officers insurance, investor relations programs and increased
professional fees.
Contractual Obligations
Contractual obligations associated with our ongoing business activities are expected to result
in cash payments in future periods. A table summarizing the amounts and estimated timing of these
future cash payments as of June 30, 2008 is provided in Note 8 of the unaudited condensed
consolidated financial statements included in Item 1.
Critical Accounting Policies
We follow accounting principles generally accepted in the United States in preparing our
financial statements, which require us to make certain estimates and apply judgments that affect
our financial position and results of operations. We continually review our accounting policies and
financial information disclosures. A summary of our significant accounting policies that require
the use of estimates and judgments in preparing the financial statements was provided in our Annual
Report on Form 10-K for the year ended March 31, 2008. During
the first three months of fiscal 2009, there were no material changes to the accounting
policies and assumptions previously disclosed.
15
Recent Accounting Pronouncements
In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (SFAS 157).
SFAS 157 clarifies the principle that fair value should be based on the assumptions that market
participants would use when pricing an asset or liability. Additionally, it establishes a fair
value hierarchy that prioritizes the information used to develop those assumptions. SFAS 157 is
effective for financial statements issued for fiscal years beginning after November 15, 2007.
Effective April 1, 2008 the Company adopted the provisions of SFAS 157. The adoption of the
Standard had no effect on the condensed consolidated financial statements.
In April 2008, FASB Staff Position No. 142-3, Determination of the Useful Life of Intangible
Assets (FSP 142-3) was issued. This standard amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of a recognized
intangible asset under FASB Statement 142, Goodwill and Other Intangible Assets. FASP 142-3 is
effective for financial statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. Early adoption is prohibited. The Company has not
determined the impact, if any, of this accounting standard on its financial statements.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
In the normal course of doing business we 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 4T. Controls and Procedures.
Disclosure Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the
Exchange Act), we have carried out an evaluation of the effectiveness of the design and operation
of our disclosure controls and procedures as of the end of the period covered by this report. This
evaluation was carried out under the supervision and with the participation of our management,
including our Chief Executive Officer and Principal Financial Officer. Based upon that evaluation,
our Chief Executive Officer and Principal Financial Officer concluded that our controls and
procedures were effective as of the end of the period covered by this report.
Disclosure controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or submitted under the
Exchange Act is recorded, processed, summarized, and reported within the time periods specified in
the SECs rules and forms. Disclosure controls and procedures include controls and procedures
designed to ensure that information required to be disclosed in our reports filed under the
Exchange Act is accumulated and communicated to management, including our Chief Executive Officer,
as appropriate, to allow timely decisions regarding disclosures.
16
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the
three months ended June 30, 2008 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
We have confidence in our internal controls and procedures. Nevertheless, our management,
including our Chief Executive Officer and Principal Financial Officer, does not expect that our
disclosure procedures and controls or our internal controls will prevent all errors or intentional
fraud. An internal control system, no matter how well-conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of such internal controls are met.
Further, the design of an internal control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all internal control systems, no evaluation of controls can provide
absolute assurance that all our control issues and instances of fraud, if any, have been detected.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
None.
17
Item 6. Exhibits.
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Exhibit |
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Number |
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Reference |
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Description |
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3.1 |
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(1 |
) |
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Articles of Incorporation of MiMedx Group, Inc. |
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3.2 |
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(1 |
) |
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Bylaws of MiMedx Group, Inc. |
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10.1 |
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(2 |
) |
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Cost Recovery and Revenue Sharing Letter Agreement between MiMedx, Inc. and
Thomas J. Graham, M.D., dated May 22, 2008 |
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10.2 |
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(2 |
) |
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Finders Fee Letter Agreement between MiMedx, Inc. and Thomas J. Graham,
M.D., dated May 22, 2008 |
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10.3 |
* |
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(3 |
) |
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Assignment and Assumption of Employment Agreement of Steve Gorlin between
MiMedx Group, Inc. and MiMedx, Inc. dated June 20, 2008 |
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10.4 |
* |
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(3 |
) |
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Assignment and Assumption of Employment Agreement of Thomas W. DAlonzo
between MiMedx Group, Inc. and MiMedx, Inc. dated June 21, 2008 |
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10.5 |
* |
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(3 |
) |
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Assignment and Assumption of Employment Agreement of John C. Thomas, Jr.
between MiMedx Group, Inc. and MiMedx, Inc. dated June 24, 2008 |
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10.6 |
* |
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(3 |
) |
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Assignment and Assumption of Employment Agreement of Matthew J. Miller
between MiMedx Group, Inc. and MiMedx, Inc. dated June 23, 2008 |
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10.7 |
* |
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(3 |
) |
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Assignment and Assumption of Employment Agreement of Brian J. Splan between
MiMedx, Inc. and MiMedx Group, Inc. dated June 20, 2008 |
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10.8 |
* |
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# |
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Amendment to Employment Agreement of Matthew Miller, dated September 25, 2007 |
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31.1 |
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# |
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Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 |
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31.2 |
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# |
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Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 |
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32.1 |
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# |
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Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
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32.2 |
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# |
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Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
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(1) |
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Incorporated by reference to Form 8-K filed April 2, 2008. |
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(2) |
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Incorporated by reference to Form 8-K filed May 29, 2008. |
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(3) |
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Incorporated by reference to Form 10-K filed June 27, 2008. |
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# |
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Filed or furnished herewith. |
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* |
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Indicates a management contract or compensatory plan or arrangement. |
18
SIGNATURES
Pursuant to the requirements 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.
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MIMEDX GROUP, INC.
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Date: August 14, 2008
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By: |
/s/ John C. Thomas, Jr.
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John C. Thomas, Jr., Chief Financial Officer |
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(Principal financial officer and duly authorized officer) |
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19
EXHIBIT INDEX
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Exhibit |
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Number |
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Description |
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10.8 |
* |
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Amendment to Employment Agreement of Matthew Miller, dated September 25, 2007 |
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31.1 |
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Certification of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 |
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31.2 |
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Certification of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 |
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32.1 |
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Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
|
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|
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32.2 |
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Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 |
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* |
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Indicates a management contract or compensatory plan or arrangement. |
20
Filed by Bowne Pure Compliance
Exhibit 10.8
September 25, 2007
MiMedx, Inc.
1234 Airport Road
Suite 105
Destin, Florida 32541
Re: Resignation as President and Amendment to Employment Agreement
Dear MiMedx, Inc.:
I hereby resign from my position as President of MiMedx, Inc. (the Company) in order to
accept the position of Executive Vice President of the Company, effective as of the date above.
Pursuant to Paragraph 15 of that certain Employment Agreement between myself and the Company
dated March 1, 2007, the Company and I hereby agree to amend Paragraph 1 of such Employment
Agreement to read in its entirety as follows:
1. Position and Duties. Executive shall be employed by the Company as Executive Vice
President, reporting to the Companys Chairman of the Board. Executive agrees to devote sufficient
business time, energy, and skill to his duties at the Company. These duties shall include all
those duties customarily performed by an Executive Vice President and the Executives services
shall be performed primarily out of the Companys Tampa office.
This amendment shall be effective as of the date set forth above.
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Sincerely,
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/s/ Matthew J. Miller |
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Matthew J. Miller |
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AGREED TO AND ACCEPTED BY: |
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MiMedx, Inc. |
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By: /s/ John C. Thomas, Jr. |
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Name: John C. Thomas, Jr.
Its: Chief Financial Officer and Secretary |
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Filed by Bowne Pure Compliance
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14(A) AND 15d-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
I, Thomas W. DAlonzo, certify that:
1. I have reviewed this Form 10-Q for the quarter ended June 30, 2008, of MiMedx Group, Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial information
included in this 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
report;
4. The registrants other certifying officer(s) 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 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 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 report based on such evaluation; and
d. Disclosed in this report any change in the registrants internal
control over financial reporting that occurred during the registrants most
recent fiscal quarter (the registrants fourth fiscal quarter in the case of an
annual report) 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(s) 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
functions):
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.
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Date: August 14, 2008 |
/s/
Thomas W. DAlonzo
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Thomas W. DAlonzo |
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Chief Executive Officer |
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Filed by Bowne Pure Compliance
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULES 13a-14(A) AND 15d-14(A)
OF THE SECURITIES EXCHANGE ACT OF 193
I, John C. Thomas, Jr., certify that:
1. I have reviewed this Form 10-Q for the quarter ended June 30, 2008, of MiMedx Group, Inc.;
2. Based on my knowledge, this 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 report;
3. Based on my knowledge, the financial statements, and other financial information
included in this 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
report;
4. The registrants other certifying officer(s) 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 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 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 report based on such evaluation; and
d. Disclosed in this report any change in the registrants internal
control over financial reporting that occurred during the registrants most
recent fiscal quarter (the registrants fourth fiscal quarter in the case of an
annual report) 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(s) 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
functions):
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: August 14, 2008
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/s/ John C. Thomas, Jr.
|
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John C. Thomas, Jr. |
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Chief Financial Officer |
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Filed by Bowne Pure Compliance
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of MiMedx Group, Inc. (the Company) on Form 10-Q for the
quarter ending June 30, 2008 as filed with the Securities and Exchange Commission on the date
hereof (the Report), I, Thomas W. DAlonzo, Chief Executive Officer of the Company, pursuant to
18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby
certify, that to the best of my knowledge:
(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.
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Date: August 14, 2008 |
/s/ Thomas W. DAlonzo
|
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Thomas W. DAlonzo |
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Chief Executive Officer |
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A signed original of this 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.
Filed by Bowne Pure Compliance
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of MiMedx Group, Inc. (the Company) on Form 10-Q for the
quarter ending June 30, 2008 as filed with the Securities and Exchange Commission on the date
hereof (the Report), I, John C. Thomas, Jr., the principal financial officer of the Company,
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, hereby certify, that to the best of my knowledge:
(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.
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Date: August 14, 2008 |
/s/ John C. Thomas, Jr.
|
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John C. Thomas, Jr. |
|
|
Principal Financial Officer |
|
A signed original of this 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.