Mimedx Group, Inc 10-Q for FY2019 Q3

Mimedx Group, Inc. (MDXG)

10-Q 2020-07-06 For: 2019-09-30

Added on April 04, 2026

About this 10-Q

Mimedx Group, Inc filed this 10-Q on July 6, 2020, covering the quarter ended September 30, 2019 (FY2019 Q3).

Headline figures

Quarter ended September 30, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $88.86M; up 2.2% from $86.96M a year earlier
Net income: $12.38M; compared with a net loss of $178K a year earlier
Diluted EPS: $0.11; compared with $0.00 a year earlier

Search and read filings like this one from Claude or ChatGPT with the SEC filings MCP server →



Florida		26-2792552
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification Number)



1775 West Oak Commons Ct. NE Marietta, GA		30062
(Address of principal executive offices)		(Zip Code)



Large accelerated filer o	Accelerated filer x	Non-accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company ¨	Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(A) of the Exchange Act. ¨



Part I FINANCIAL INFORMATION
Item 1	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statement of Operations	6
	Condensed Consolidated Statement of Stockholders’ Equity	7
	Condensed Consolidated Statements of Cash Flows	9
	Notes to the Unaudited Consolidated Financial Statements	10
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4	Controls and Procedures	38
Part II OTHER INFORMATION
Item 1	Legal Proceedings	39
Item 1A	Risk Factors	39
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3	Defaults upon Senior Securities	39
Item 4	Mine Safety Disclosures	39
Item 5	Other Information	39
Item 6	Exhibits	41
Signatures		42



	September 30, 2019 (unaudited)			December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents	$	94,122		$	45,118
Accounts receivable	21,389			—
Inventory, net	12,034			15,986
Prepaid expenses	1,895			6,673
Income tax receivable	843			454
Other current assets	3,739			5,818
Total current assets	134,022			74,049
Property and equipment, net	13,180			17,424
Right of use asset	3,630			—
Goodwill	19,976			19,976
Intangible assets, net	7,952			9,608
Other assets	507			1,787
Total assets	$	179,267		$	122,844
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	9,420		$	14,864
Accrued compensation	21,076			23,024
Accrued expenses	37,438			31,842
Current portion of long term debt	3,750			—
Other current liabilities	1,683			1,817
Total current liabilities	73,367			71,547
Long term debt, net	62,174			—
Other liabilities	4,151			1,642
Total liabilities	139,692			73,189
Stockholders’ equity:
Preferred stock; $.001 par value; 5,000,000 shares authorized and 0 shares issued and outstanding	—			—
Common stock; $.001 par value; 150,000,000 shares authorized; 112,703,926 issued and 110,985,531 outstanding at September 30, 2019 and 112,703,926 issued and 109,098,663 outstanding at December 31, 2018	113			113
Additional paid-in capital	143,647			164,744
Treasury stock at cost: 1,718,395 shares at September 30, 2019 and 3,605,263 shares at December 31, 2018	(9,521		)	(38,642		)
Accumulated deficit	(94,664		)	(76,560		)
Total stockholders' equity	39,575			49,655
Total liabilities and stockholders' equity	$	179,267		$	122,844



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


•	our strategic focus, as illustrated by our strategic priorities and our ability to implement these priorities;


•	our ability to access capital sufficient to implement our strategic priorities;


•	our expectations regarding our ability to fund our ongoing and future operating costs;


•	the advantages of our products and development of new products;


•	the regulatory pathway for our products, including our existing and planned investigative new drug application and pre-market approval requirements, the design and success of our clinical trials and pursuit of biologic license applications (“BLAs”) for certain products;


•	our expectations regarding costs relating to compliance with regulatory standards, including those arising from our clinical trials, pursuit of BLAs, and cGMP compliance;


•	our ability to continue marketing our micronized products and certain other products during and following the end of the period of enforcement discretion announced by the United States Food and Drug Administration (“FDA”);


•	expectations regarding government and other third-party coverage and reimbursement for our products;


•	our belief in the sufficiency of our intellectual property rights in our technology;


•	the outcome of pending litigation and investigations;


•	our ability to relist our common stock, par value $0.001 per share (the “Common Stock”) on The Nasdaq Capital Market;


•	demographic and market trends;


•	our ability to procure sufficient supplies of human tissue to manufacture and process our products;


•	ongoing and future effects arising from the Audit Committee Investigation, the Restatement, and related litigation;


•	our plans to remediate the identified material weaknesses in our internal control environment and to strengthen our internal control environment; and



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018

Net sales	$	88,863		$	86,959		$	222,855		$	266,525
Cost of sales	13,205			7,355			30,372			25,984
Gross margin	75,658			79,604			192,483			240,541

Operating expenses:
Selling, general and administrative	51,258			58,740			152,761			192,233
Investigation, restatement and related	7,242			16,269			46,374			31,307
Research and development	2,691			3,962			8,421			11,225
Amortization of intangible assets	269			260			769			758
Impairment of intangible asset	—			—			446			—
Operating income (loss)	14,198			373			(16,288		)	5,018

Other income (expense)
Interest (expense) income, net	(2,255		)	99			(2,313		)	312
Other income, net	127			—			272			—

Income (loss) before income tax provision	12,070			472			(18,329		)	5,330
Income tax provision benefit (expense)	309			(650		)	225			915

Net income (loss)	$	12,379		$	(178	)	$	(18,104	)	$	6,245

Net income per common share - basic	$	0.12		$	0.00		$	(0.17	)	$	0.06

Net income per common share - diluted	$	0.11		$	0.00		$	(0.17	)	$	0.06

Weighted average shares outstanding - basic	107,157,561			105,935,736			106,929,643			104,403,622

Weighted average shares outstanding - diluted	109,590,008			105,935,736			106,929,643			109,177,577



	Common Stock Issued			Additional Paid - in		Treasury Stock				Accumulated
	Shares	Amount		Capital		Shares	Amount			Deficit			Total
Balance at June 30, 2019	112,703,926	$	113	$	136,298	1,155,034	$	(4,684	)	$	(107,043	)	$	24,684
Share-based compensation expense	—	—		2,685		—	—			—			2,685
Restricted stock shares canceled/forfeited	—	—		4,664		530,274	(4,664		)	—			—
Shares repurchased for tax withholding	—	—		—		33,087	(173		)	—			(173		)
Net income	—	—		—		—	—			12,379			12,379
Balance at September 30, 2019	112,703,926	$	113	$	143,647	1,718,395	$	(9,521	)	$	(94,664	)	$	39,575


•	The parties to the contract have approved the contract (in writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations;


•	The entity can identify each party’s rights regarding the goods or services to be transferred; and


•	The entity can identify the payment terms for the goods or services to be transferred.


•	It is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.


•	For customer arrangements where collection was considered probable within 90 days from the date of the original shipment or implantation of the products, we concluded the Step 1 Criteria were met (the “Transition Adjustment”).



	Amounts Invoiced and Not Collected			Deferred Cost of Sales
Amounts prior to Transition Adjustment	$	48,883		$	6,415
Revenue recognized related to amounts invoiced and not collected at September 30, 2019:
Transition Adjustment during the three months ended September 30, 2019	(21,385		)	(2,565		)
Write-off of customer contracts where collection is no longer reasonably assured (a)	(10,273		)	(1,438		)
Amounts as of September 30, 2019	$	17,225		$	2,412
(a) The Company determined that for approximately $10.3 million of existing contracts where payment had not been received, collection was no longer reasonably assured. As a result, $1.4 million of deferred cost of sales relating to these customers was written off. Any future collections relating to these customer contracts will be recorded as revenue at the time payment is received.



	September 30, 2019			December 31, 2018
Raw materials	$	315		$	516
Work in process	7,085			11,123
Finished goods	5,626			4,936
Inventory, gross	13,026			16,575
Reserve for obsolescence	(992		)	(589		)
Inventory, net	$	12,034		$	15,986



	September 30, 2019			December 31, 2018
Leasehold improvements	$	5,312		$	4,804
Lab and clean room equipment	14,429			13,787
Furniture and office equipment	15,086			15,145
Construction in progress	765			1,507
Property and equipment, gross	35,592			35,243
Less accumulated depreciation	(22,412		)	(17,819		)
Property and equipment, net	$	13,180		$	17,424



Year ending December 31,	Maturities
2019 (excluding the nine months ended September 30, 2019)	$	386
2020	1,561
2021	1,528
2022	1,552
2023	196
Thereafter	—
Total lease payments	5,223
Less: imputed interest	(870		)
	$	4,353



Year ending December 31,
2019	$	1,640
2020	1,579
2021	1,625
2022	1,673
2023	205
Thereafter	—
Total lease payments	$	6,722



	September 30, 2019							December 31, 2018
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Amortized intangible assets
Licenses	$	1,414	$	(1,166	)	$	248	$	1,414	$	(1,066	)	$	348
Patents and know how	9,093		(4,908		)	4,185		9,180		(4,475		)	4,705
Customer and supplier relationships	3,761		(2,351		)	1,410		4,271		(2,202		)	2,069
Non-compete agreements	120		(60		)	60		120		(38		)	82
Total amortized intangible assets	$	14,388	$	(8,485	)	$	5,903	$	14,985	$	(7,781	)	$	7,204

Unamortized intangible assets
Trade names and trademarks	$	1,008				$	1,008	$	1,008				$	1,008
Patents in process	1,041					1,041		1,396					1,396
Total intangible assets	$	16,437				$	7,952	$	17,389				$	9,608



Year ending December 31,	Estimated Amortization Expense
2019 (excluding the nine months ended September 30, 2019)	$	246
2020	985
2021	977
2022	955
2023	954
Thereafter	1,786
	$	5,903



	September 30, 2019		December 31, 2018
Legal costs	$	16,576	$	10,056
Settlement costs	7,944		8,673
Pricing adjustment settlement with Veterans Affairs	6,894		6,894
Estimated returns	2,365		2,325
Accrued clinical trials	1,337		1,233
External commissions	1,139		962
Other	1,183		1,699
Total	$	37,438	$	31,842


•	Maximum Total Leverage Ratio, defined as funded debt divided by consolidated adjusted EBITDA, of not more than 3.0 to 1.0 as of the last day of the previous four consecutive fiscal quarters.


•	During the period from June 10, 2019 through June 10, 2020, an amount equal to 3% of the principal amount of the BT Term Loan prepaid on such date; and