MIMEDX GROUP, INC. (Form: 10-Q, Received: 11/14/2011 17:20:27)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, 2011

o 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)

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

60 Chastain Center Blvd., Suite 60 Kennesaw, GA		30144
(Address of principal executive offices)		(Zip Code)

(678) 384-6720

Registrant’s 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 x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x 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):

Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company x
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of October 31, 2011, there were 74,256,895 shares outstanding of the registrant’s common stock.

MIM EDX GROUP, INC.

Table of Contents

Part I FINANCIAL INFORMATION

	Item 1

		Condensed Consolidated Financial Statements

			Condensed Consolidated Balance Sheets (unaudited)
				September 30, 2011 and December 31, 2010	2
			Condensed Consolidated Statements of Operations (unaudited)
				Three and nine months ended September 30, 2011 and 2010	3
			Condensed Consolidated Statement of Stockholders’ Equity (unaudited)
				Nine months ended September 30, 2011	4
			Condensed Consolidated Statements of Cash Flows (unaudited)
				Nine months ended September 30, 2011 and 2010	5
			Notes to the Unaudited Condensed Consolidated Financial Statements
				Three and nine months ended September 30, 2011 and 2010	6

	Item 2			Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

	Item 3			Quantitative and Qualitative Disclosures About Market Risk	28

	Item 4			Controls and Procedures	29

Part II OTHER INFORMATION

	Item 1			Legal Proceedings	29

	Item 1A			Risk Factors	29

	Item 2			Unregistered Sales of Equity Securities and Use of Proceeds	30

	Item 3			Defaults under Senior Securities	30

	Item 4			Submission of Matters to a Vote of Security Holders	30

	Item 5			Other Information	30

	Item 6			Exhibits	30

	Signatures				31

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MIMEDX GROUP, INC. AND SUBSIDIARIES

CONDENSED CONS OLIDA TED BALANCE SHEETS

ASSETS
	September 30,
	2011			December 31,
	(unaudited)			2010
Current assets:
Cash and cash equivalents	$	637,192		$	1,340,922
Accounts receivable, net		1,501,565			162,376
Inventory		609,139			111,554
Prepaid expenses and other current assets		254,694			90,946

Total current assets		3,002,590			1,705,798

Property and equipment, net of accumulated depreciation of $1,775,925 and $1,392,704, respectively		916,871			756,956
Goodwill		4,040,443			857,597
Intangible assets, net of accumulated amortization of $3,134,538 and $2,132,606, respectively		15,424,462			3,929,394
Deposits and other long term assets		167,257			102,500

Total assets	$	23,551,623		$	7,352,245


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses	$	1,877,402		$	848,285
Convertible notes, plus accrued interest of $3,432		-			403,432
Notes payable, plus accrued interest of $268		37,398			-
Deferred rent current		6,620			-
Customer deposits		14,725			-
Current portion of convertible debt, net of unamortized discount of $245,296 plus accrued interest of $36,712		1,041,416			-
Current portion of earn-out liability payable In MiMedx common stock		3,850,000			-
Total current liabilities		6,827,561			1,251,717

Earn-out liability payable in MiMedx common stock, net of current portion		3,554,700			-
Convertible line of credit with related party, net of unamortized discount of $52,698 plus accrued interest of $21,042		1,268,344			-
Other liabilities		48,862			-
Total liabilities		11,699,467			1,251,717

Commitments and contingency (Note 11)		-			-

Stockholders' equity:
Preferred stock; $.001 par value; 5,000,000 shares authorized and 0 shares issued and outstanding		-			-
Common stock; $.001 par value; 100,000,000 shares authorized; 74,306,895 issued and 74,256,895 outstanding for 2011 and 64,381,910 issued and 64,331,910 outstanding for 2010		74,307			64,382
Additional paid-in capital		71,247,000			57,888,506
Treasury stock (50,000 shares at cost)		(25,000	)		(25,000	)
Accumulated deficit		(59,444,151	)		(51,827,360	)

Total stockholders' equity		11,852,156			6,100,528

Total liabilities and stockholders' equity	$	23,551,623		$	7,352,245

See notes to condensed consolidated financial statements

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MIMEDX GROUP, INC. AND SUBSIDIARIES

CONDENSED CO NSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010

REVENUES:
Net sales	$	2,152,094		$	108,027		$	5,124,980		$	544,956

OPERATING COSTS AND EXPENSES:
Cost of products sold		843,366			539,697			2,291,647			1,355,210
Research and development expenses		485,236			842,929			1,995,626			2,168,043
Selling, general and administrative expenses		2,475,849			1,579,259			8,162,847			5,121,933

LOSS FROM OPERATIONS		(1,652,357	)		(2,853,858	)		(7,325,140	)		(8,100,230	)

OTHER INCOME (EXPENSE), net
Interest (expense) income, net		(113,366	)		(584	)		(291,651	)		(592,866	)


LOSS BEFORE INCOME TAXES		(1,765,723	)		(2,854,442	)		(7,616,791	)		(8,693,096	)
Income taxes		-			-			-			-

NET LOSS	$	(1,765,723	)	$	(2,854,442	)	$	(7,616,791	)	$	(8,693,096	)

Net loss per common share
Basic and diluted	$	(0.02	)	$	(0.05	)	$	(0.11	)	$	(0.15	)

Shares used in computing net loss per common share
Basic and diluted		73,767,674			61,049,942			72,082,605			57,874,093

See notes to condensed consolidated financial statements

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MIMEDX GROUP, INC. AND SUBSIDARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited)

	Convertible
	Preferred Stock								Additional
	Series A				Common Stock				Paid-in		Treasury			Accumulated
	Shares		Amount		Shares		Amount		Capital		Stock			Deficit			Total

Balances, December 31, 2010		-		-		64,381,910	$	64,382	$	57,888,506	$	(25,000	)	$	(51,827,360	)	$	6,100,528

Employee share-based compensation expense		-		-		-		-		1,032,261		-			-			1,032,261

Other share-based compensation expense		-		-		-		-		285,154		-			-			285,154

Exercise of stock options		-		-		490,000		490		295,263		-			-			295,753

Sale of common stock and warrants (net of $34,733 of offering costs)		-		-		3,778,321		3,779		3,739,809		-			-			3,743,588

Shares issued in conjunction with conversion of convertible debt		-		-		406,664		406		406,257		-			-			406,663

Shares issued in conjunction with acquisition of Surgical Biologics, LLC		-		-		5,250,000		5,250		7,082,250		-			-			7,087,500

Beneficial conversion feature recognized on convertible debt		-		-		-		-		437,500		-			-			437,500

Discount on benefical conversion feature recognized on line of credit		-		-		-		-		80,000		-			-			80,000

Net loss for the peiod		-		-		-		-		-		-			(7,616,791	)		(7,616,791	)

Balances, September 30, 2011		-	$	-		74,306,895	$	74,307	$	71,247,000	$	(25,000	)	$	(59,444,151	)	$	11,852,156

See notes to condensed consolidated financial statements

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MIMEDX GROUP, INC. AND SUBSIDIARIES

CONDENSED CO NSOLIDA TED STATEMENTS OF CASH FLOWS

(unaudited)

	Nine Months Ended September 30,
	2011			2010
Cash flows from operating activities:
Net loss	$	(7,616,791	)	$	(8,693,096	)
Adjustments to reconcile net loss to net cash flows from operating activities, net of effects of acquisition:
Depreciation		330,851			337,594
Amortization of intangible assets		1,001,931			500,949
Amortization of debt discount and deferred financing costs		246,807			499,610
Employee share-based compensation expense		1,032,261			731,216
Other share-based compensation expense		285,154			105,062
Increase (decrease) in cash resulting from changes in:
Accounts receivable		(818,102	)		(230,731	)
Inventory		(150,479	)		(86,901	)
Prepaid expenses and other current assets		(161,010	)		(2,392	)
Other assets		(48,174	)		57,957
Accounts payable and accrued expenses		833,013			609,276
Accrued interest		65,281			-
Other liabilities		(9,825	)		-
Net cash flows from operating activities		(5,009,083	)		(6,171,456	)

Cash flows from investing activities:
Purchases of equipment		(417,900	)		(149,183	)
Cash paid for acquisition, net of cash aquired of $33,583		(466,417	)		-
Net cash flows from investing activities		(884,317	)		(149,183	)

Cash flows from financing activities:
Proceeds from Note Payable with related party		1,300,000			-
Repayment of Line of Credit		(99,000	)		-
Repayment of Notes Payable		(50,671	)		-
Proceeds from sale of common stock and warrants and common stock with registration rights, net		3,743,588			785,000
Proceeds from exercise of stock options		295,753			102,626
Proceeds from exercise of warrants		-			3,207,969
Net cash flows from financing activities		5,189,670			4,095,595

Net change in cash		(703,730	)		(2,225,044	)

Cash, beginning of period		1,340,922			2,653,537

Cash, end of period	$	637,192		$	428,493

Supplemental disclosure of cash flow information:
Cash paid for interest	$	4,842		$	-
Cash paid for income taxes	$	-		$	-

Supplemental disclosure of non-cash financing activity:

During the nine months ended September 30, 2011:

the Company converted its outstanding convertible debt and accrued interest to equity by issuing 406,664 shares of common stock

the Company issued 5,250,000 shares of stock valued at $7,087,500 in conjunction with its acquisition of Surgical Biologics, LLC

the Company recognized a beneficial conversion feature valued at $437,500 related to the convertible debt issued with regard to its acquisition of Surgical Biologics, LLC

the Company recognized a beneficial conversion feature valued at $80,000 related to the convertible debt issued with regard the Note Payable to related party

During the nine months ended September 30, 2010:

the Company converted its outstanding convertible debt and accrued interest to equity by issuing 7,135,114 shares of common stock

the Company recognized the amortization of debt discount and deferred financing costs related to the conversion of convertible debt in the amount of $599,001.

See notes to condensed consolidated financial statements

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MIMEDX GROUP, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

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 of America (“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 and nine months ended September 30, 2011 and 2010, are not necessarily indicative of the results that may be expected for the fiscal year. The balance sheet at December 31, 2010, 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 year ended December 31, 2010 included in our Annual Report on Form 10-K for the year ended December 31, 2010, filed with the Securities and Exchange Commission (“SEC”) on March 31, 2011.

The Company operates in one business segment, Biomaterials, which includes the design, manufacture, and marketing of products and amnion tissue processing for a variety of surgical applications using the Company’s proprietary biomaterials—CollaFix™, HydroFix™, EpiFix® and AmnioFix®.

2. Significant accounting policies

Please see the Company’s 10-K filing for the fiscal year ended December 31, 2010 for a description of all significant accounting policies.

Revenue Recognition

The Company recognizes revenue in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Subtopic 605-10-S99, “Revenue Recognition”.

Sales revenue is recognized when the products are shipped. Advance payments received for products are recorded as deferred revenue and are generally recognized when the product is shipped. The Company reduces sales revenue for estimated customer returns and other allowances. The Company recorded approximately $21,700 and $5,100 for net sales returns provisions for the three months ended September 30, 2011 and 2010, respectively. For the nine months ended September 30, 2011 and 2010, there were net sales returns provisions of $42,500 and $29,500, respectively.

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 computed using the weighted-average number of common and dilutive common equivalent shares from stock options, warrants and convertible debt using the treasury stock method. 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 debt would be anti-dilutive.

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The following table sets forth the computation of basic and diluted net loss per share:

	Three months ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010

Net loss	$	(1,765,723	)	$	(2,854,442	)	$	(7,616,791	)	$	(8,693,096	)
Denominator for basic earnings per share - weighted average shares		73,767,674			61,049,942			72,082,605			57,874,093
Effect of dilutive securities: Stock options and warrants outstanding and convertible debt (a)		—			—			—			—

Denominator for diluted earnings per share - weighted average shares adjusted for dilutive securities		73,767,674			61,049,942			72,082,605			57,874,093

Loss per common share - basic and diluted	$	(0.02	)	$	(0.05	)	$	(0.11	)	$	(0.15	)

(a)	Securities outstanding that were excluded from the computation, because they would have been anti-dilutive are as follows:

	September 30, 2011		September 30, 2010
Outstanding Stock Options		10,355,000		8,255,650
Outstanding Warrants		8,096,417		4,426,185
Convertible line of credit with related party		1,300,000		—
Convertible Debt, promissory note		1,250,000		—
		21,001,417		12,681,835

Goodwill

The Company accounts for goodwill under the provisions of FASB ASC Topic 350, “Intangibles – Goodwill and Other” (ASC 350). Goodwill is not amortized, but is subject to impairment tests on an annual basis or at an interim date if certain events or circumstances indicate that the asset might be impaired. The most recent annual test as of December 31, 2010, indicated that goodwill was not impaired. There were no indicators of impairment as of September 30, 2011.

Recently adopted accounting pronouncements

In December 2010, the FASB issued Accounting Standards Update (ASU) 2010-28: Intangibles — Goodwill and Other: When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (Topic 350). The amendments to the Codification in this update modify Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. Goodwill of a reporting unit is required to be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. This update is effective starting in the first quarter of 2011 with early adoption not permitted. Adoption of this update had no impact on our financial statements.

In December 2010, the FASB issued ASU 2010-29: Business Combinations: Disclosure of Supplementary Pro Forma Information for Business Combinations (Topic 805). The amendments to the Codification in this ASU apply to any public entity that enters into business combination that are material on an individual or aggregate basis and specify that the entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The update also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The update is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning in January 2011 with early adoption permitted. We adopted this update for the acquisition completed in 2011.

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Recently issued accounting pronouncements not yet adopted

In September 2011, the FASB issued ASU Update No. 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The amendment simplifies how entities test goodwill for impairment. The amendments in the Update permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Previous guidance under Topic 350 required an entity to test goodwill for impairment, on at least an annual basis, by comparing the fair value of a reporting unit with its carrying amount, including goodwill (step one). If the fair value of a reporting unit is less than its carrying amount, then the second step of the test must be performed to measure the amount of the impairment loss, if any. Under the amendments in this Update, an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, and early adoption is permitted. Its adoption is not expected to significantly impact the Company’s consolidated financial statements.

In June 2011, the FASB issued ASU Update No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The amendments to the Codification in this ASU will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The standard does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. This standard is effective for interim and annual periods beginning after December 15, 2011. Because this ASU impacts presentation only, it will have no effect on our financial condition, results of operations or cash flows.

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). The amendments to the Codification in this ASU will provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This guidance is effective for the Company beginning on January 1, 2012. Its adoption is not expected to significantly impact the Company’s consolidated financial statements.

3. Liquidity and management’s plans

The Company raised approximately $145,000 through a private placement during the quarter ended September 30, 2011. In addition, on October 25, 2011, the Company’s Chairman and CEO signed a loan commitment whereby the CEO will provide the Company, or to obtain other lenders to loan for the Company’s general working capital purposes, a line of credit of up to $1,500,000 less any amounts subscribed for by any other lenders.

As of September 30, 2011, the Company had approximately $637,000 of cash and cash equivalents. The Company reported total current assets of approximately $3,003,000 and current liabilities payable in cash of approximately $2,978,000 after adjusting for the short term earn-out liability payable in MiMedx common stock in the second quarter of 2012. The Company believes that its anticipated cash from operations and existing cash and cash equivalents, and the line of credit will enable the Company to meet its operational liquidity needs, fund its planned investing activities and pay its debt when due for the next twelve months.

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4. Acquisition of Surgical Biologics, LLC

On December 21, 2010, we entered into an Agreement and Plan of Merger (“the Merger Agreement”) with Membrane Products Holdings, LLC and OnRamp Capital Investments, LLC, the owners of Surgical Biologics, LLC (“Surgical Biologics”), a privately held company headquartered in Kennesaw, Georgia. This transaction closed on January 5, 2011 and as a result we acquired all of the outstanding shares of Surgical Biologics in exchange for $500,000 cash, a total of $1,250,000 in 4% Convertible Secured Promissory Notes, and $7,087,500 in stock, represented by 5,250,000 shares of our common stock (525,000 of which were held in escrow for the purpose of securing the indemnification obligations outlined in the Merger Agreement). Contingent consideration may be payable in a formula determined by sales and certain expenses for the years 2011 and 2012. The contingent consideration was valued at $7,404,700 and is shown in the schedule below as fair value of earn-out. We completed the acquisition of Surgical Biologics in an effort to extend our biomaterials product lines.

In total, the 4% Convertible Promissory Notes are convertible into up to 1,250,000 shares of the Company’s common stock at $1.00 per share (a) at any time upon the election of the holder of the Convertible Notes; or (b) at the election of the Company, at any such time as the closing price per share of the Company’s common stock (as reported by the OTCBB or on any national securities exchange on which the Company’s shares may be listed, as the case may be) closes at no less than $1.75 per share for not less than 20 consecutive trading days in any period prior to the maturity date. If converted, the Common Stock will be available to be sold following satisfaction of the applicable conditions as set forth in Rule 144. The 4% Convertible Promissory Notes mature in eighteen (18) months and earn interest at 4% per annum on the outstanding principal amount payable in cash on the maturity date or convertible into shares of common stock of the Company as provided for above. The 4% Convertible Promissory Notes are secured by a security interest in the Intellectual Property, including the Patents and know-how and trade secrets related thereto, owned by, or exclusively licensed to, Surgical Biologics, LLC.

The Company has evaluated the 4% Convertible Promissory Notes for accounting purposes under GAAP and has determined that the conversion feature meets the conventional-convertible exemption and, accordingly, bifurcation and fair-value measurement of the conversion feature is not required. We are required to re-evaluate this conclusion upon each financial statement closing date while the 4% Convertible Promissory Notes are outstanding. Notwithstanding, the 4% Convertible Promissory Notes were issued with a beneficial conversion feature having an intrinsic value of $437,500. The intrinsic value of the beneficial conversion feature was determined by comparing the contracted conversion price to the fair value of the common on the date the respective 4% Convertible Promissory Notes were issued. A beneficial conversion feature only exists when the embedded conversion feature is “in-the-money” at the commitment date.

As a result of the beneficial conversion feature, the 4% Convertible Promissory Notes were recorded net of a discount of $437,500 related to the beneficial conversion feature, the offset of which is recorded in paid-in capital, and the discount will be amortized through periodic charges to interest expense over the tem of the 4% Convertible Notes using the effective interest method.

The contingent consideration which was valued at $7,404,700 was classified as a liability. The Company has evaluated the contingent consideration for accounting purposes under GAAP and has determined that the contingent consideration is within the scope of ASC 480 Distinguishing Liabilities from Equity whereby a financial instrument other than an outstanding share, that embodies a conditional obligation that the issuer may settle by issuing a variable number of its equity shares, shall be classified as a liability if, at inception, the monetary value of the obligation is based solely or predominantly on variations in something other than the fair value of the issuer’s equity shares.

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The actual purchase price was based on cash paid, the fair value of our stock on the date of the Surgical Biologics acquisition, and direct costs associated with the combination. The actual purchase price was allocated as follows:

Value of 5,250,000 shares issued at $1.35 per share	$	7,087,500
Cash paid at closing		350,000
Cash retained for working capital		150,000
Assumed Debt		182,777
Convertible Secured Promissory Note		1,250,000
Fair value of earn-out		7,404,700
Total fair value of purchase price	$	16,424,977

Assets purchased:
Tangible assets:
Working capital, net of assumed debt	$	671,880
Other assets, net		385
Property, plant and equipment		72,866
		745,131
Intangible assets:
Customer relationships		3,520,000
Supplier relationships		241,000
Patents and know-how		5,530,000
Trade names and trademarks		1,008,000
In-process research and development – liquid		2,160,000
In-process research and development – other		25,000
Licenses and permits		13,000
		12,497,000

Goodwill		3,182,846
Total Assets Purchased	$	16,424,977

Working capital and other assets were composed of the following:

Working capital:
Cash	$	33,583
Prepaid Expenses		2,738
Accounts Receivable		181,087
License Receivable		340,000
Inventory		347,106
Accounts payable and accrued expenses		(196,101	)
Deferred rent and customer deposits		(36,533	)
Debt-free working capital		671,880

Current portion of debt		(62,590	)
Long-term debt		(21,187	)
Line of credit		(99,000	)
Net working capital	$	489,103

Deposits	$	16,582
Deferred rent (non-current)		(16,197	)
	$	385

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The combination was accounted for as a purchase business combination as defined by FASB Topic 805 – Business Combinations. The allocation of the purchase price to the assets acquired and liabilities assumed was based on an independent valuation report obtained by us.

The values assigned to intangible assets are subject to amortization. The intangible assets were assigned the following lives for amortization purposes:

	Estimated useful
Intangible asset:	life (in years)
Customer relationships	14
Supplier relationships	14
Patents and know-how	14
Trade names and trademarks	indefinite
In-process research and development – liquid	indefinite
In-process research and development – other	indefinite
Licenses and permits	3

Goodwill consists of the excess of the purchase price paid over the identifiable net assets and liabilities acquired at fair value. Goodwill was determined using the residual method based on an independent appraisal of the assets and liabilities acquired in the transaction. Goodwill is tested for impairment as defined by FASB Topic 350 – Intangibles – Goodwill and Other.

Pro Forma Financial Information

The following unaudited Pro Forma summary financial information presents the consolidated results of operations as if the acquisition of Surgical Biologics had occurred on January 1, 2010. The Pro Forma results are shown for illustrative purposes only and do not purport to be indicative of the results that would have been reported if the acquisition had occurred on the date indicated or indicative of the results that may occur in the future.

ProForma information for the three and nine months ended September 30, 2011 and 2010 are as follows:

	Three months ended September 30,						Nine months ended September 30,
	2011			2010			2011			2010
Revenues	$	2,152,000		$	670,000		$	5,125,000		$	2,324,000

Net income (loss)	$	(1,766,000	)	$	(3,045,000	)	$	(7,381,000	)	$	(9,475,000	)

(Loss) per share	$	(0.02	)	$	(0.05	)	$	(0.10	)	$	(0.15	)

The 2011 supplemental pro forma earnings for the nine months ended September 30, 2011 were adjusted to exclude $236,000 of acquisition-related legal, audit and accounting costs. The supplemental pro forma earnings for the three and nine months ended September 30, 2010 were adjusted to include $70,000 and $192,000, respectively, of amortization of deferred financing costs related to the $1,250,000 note payable, $167,000 and $501,000, respectively, of amortization costs related to $9,304,000 in recorded intangible assets with defined useful lives and $0 and $236,000, respectively, of acquisition related legal, audit and accounting costs which was included in the reported Net Income for the quarter ended March 31, 2011 as a result of the acquisition. The shares outstanding used in calculating the loss per share for the 2010 periods were adjusted to include 5,250,000 shares issued as part of the purchase price and assumed issued on January 1, 2010.

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5. Inventories

Inventories consisted of the following items as of September 30, 2011, and December 31, 2010:

	September 30,		December 31,
	2011		2010
Raw materials	$	139,207	$	61,332
Work in process		174,065		42,241
Finished goods		295,867		7,981
Total	$	609,139	$	111,554

6. Intangible assets and royalty agreement

Intangible assets activity is summarized as follows:

		September 30, 2011							December 31, 2010
	Weighted
	Average	Gross					Net		Gross					Net
	Amortization	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Lives	Value		Amortization			Value		Value		Amortization			Value
Intangible assets subject to amortization:
License-Shriners Hsp for Children & USF Research	10 years	$	996,000	$	(463,133	)	$	532,867	$	996,000	$	(388,433	)	$	607,567
License - SaluMedica LLC Spine Repair	10 years		2,399,000		(1,239,569	)		1,159,431		2,399,000		(1,017,557	)		1,381,443
License - Polyvinyl Alcohol Cryogel	10 years		2,667,000		(930,854	)		1,736,146		2,667,000		(726,616	)		1,940,384
Customer Relationships	14 years		3,520,000		(188,571	)		3,331,429		—		—			—
Supplier Relationships	14 years		241,000		(12,911	)		228,089		—		—			—
Patents & Know-How	14 years		5,530,000		(296,250	)		5,233,750		—		—			—
Licenses/Permits	3 years		13,000		(3,250	)		9,750		—		—			—
			15,366,000		(3,134,538	)		12,231,462		6,062,000		(2,132,606	)		3,929,394
Intangible assets not subject to amortization:
Trade Names/Trademarks	indefinite		1,008,000		—			1,008,000		—		—			—
In-process Research & Development-Liquid	indefinite		2,160,000		—			2,160,000		—		—			—
In-process Research & Development-Other	indefinite		25,000		—			25,000		—		—			—
		$	18,559,000	$	(3,134,538	)	$	15,424,462	$	6,062,000	$	(2,132,606	)	$	3,929,394

(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 30 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. Due to its contingent nature, this amount is not recorded as a liability. The Company will also be required to pay a royalty of 3% on all commercial sales revenues from 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. On December 31, 2009, the Company completed the sale of its first commercial product and met its first milestone under this agreement. As a result, the Company issued an additional 100,000 shares of common stock to the licensor valued at $71,000. At September 30, 2011 and 2010, there are no additional amounts accrued for this obligation due to its contingent nature.

(d)

On January 5, 2011, the Company acquired Surgical Biologics, LLC. As a result, the Company recorded intangible assets for customer and supplier relationships, patents and know-how, licenses/permits, trade names and trademarks and in-process research and development.

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Estimated future amortization expense related to the September 30, 2011 net carrying amount of $12,231,462 for intangible assets subject to amortization is as follows:

	Estimated
	Amortization
Year ending December 31,	Expense
2011 (1)	$	333,977
2012		1,335,909
2013		1,335,909
2014		1,331,575
2015		1,225,337
Thereafter		6,668,755
	$	12,231,462

(1)

Estimated amortization expense for the year ending December 31, 2011 includes only amortization to be recorded after September 30, 2011.

7 . Debt

3% Convertible Senior Secured Promissory Notes

In April 2009, the Company commenced a private placement to sell 3% Convertible Senior Secured Promissory Notes (the “Senior Notes”) to accredited investors. The offering was completed on June 17, 2009, and the Company received aggregate proceeds of $3,472,000, representing the face value of the Notes. The aggregate proceeds include $250,000 of Senior Notes sold to the Chairman of the Board, President and CEO, and $150,000 of Senior Notes sold to a director.

The Senior Notes were convertible into up to 6,944,000 shares of the Company’s common stock at $.50 per share (a) at any time upon the election of the holder of the Senior Notes; (b) automatically in the event of a merger transaction; or (c) at the election of the Company, at such time as the closing price per share of the Company’s common stock closes at not less than $1.50 for not less than 20 consecutive trading days in any period prior to the maturity date. Once converted, the Common Stock may be sold following satisfaction of the applicable conditions set forth in Rule 144. Maturity was set for three years and interest was earned at 3% per annum on the outstanding principal amount payable in cash on the maturity date or convertible into shares of common stock. The Senior Notes were secured by a first priority lien on all of the assets, including intellectual property, of MiMedx, Inc.

The Company evaluated the Senior Notes for accounting purposes under GAAP and determined that the conversion feature met the conventional-convertible exemption and, accordingly, bifurcation and fair-value measurement of the conversion feature was not required. Notwithstanding, the Senior Notes were issued with a beneficial conversion feature, having an intrinsic value of approximately $676,500. Accordingly, the Senior Notes were recorded net of a discount of $676,500, the offset of which was recorded in paid-in capital, with the discount amortized through periodic charges to interest expense during the term of the Senior Notes using the effective interest method.

In conjunction with the offering, the Company incurred total placement fees of $236,614, consisting of $138,040 in cash and $98,574 representing the fair value of 315,520 common stock warrants issued to the placement agents at an exercise price of $.50 per share. The warrants expire in five years. The direct costs of $236,614 were recorded as deferred financing costs and were amortized over the term of the Senior Notes using the effective interest method. The warrants were classified in stockholders’ equity.

On March 31, 2010, the Company elected to exercise its right to convert the outstanding Note Payable amount, including accrued interest of $3,532,361 into common stock at a conversion price of $0.50 per share, resulting in the issuance of 7,064,721 shares of common stock. This decision was made based upon the “Trading Value Conversion” event per the terms of the Note whereby as of March 30, 2010, the trading price of the Common Stock closed at not less than $1.50 per share for not less than 20 consecutive trading days prior to the Maturity Date. As a result of the conversion, the Company recognized the remaining unamortized discount of $499,610 related to the beneficial conversion feature as interest expense in 2010. In addition, $174,739 in unamortized deferred financing costs were charged against additional paid in capital.

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Hybrid Debt Instrument

In October 2010, the Company and its Chairman of the Board and CEO as well as two other Company directors entered into a Subscription Agreement for a 5% Convertible Promissory Note (“Subscription Agreement”) and, in connection therewith, issued a 5% Convertible Promissory Note (“Note”) and a Warrant to Purchase Common Stock (“Warrant”), which expires in three years.

Under the terms of the Subscription Agreement, the Chairman & CEO agreed to advance the Company $400,000, comprised of a $150,000 Note dated October 20, 2010 and a $250,000 Note dated November 4, 2010, and the two Company directors agreed to advance $50,000 each to fund its working capital needs. Such indebtedness was evidenced by the Note, which included interest at the rate of 5% per annum, and was due and payable in full on December 31, 2010, and, at the option of the holder, was convertible into the number of shares of common stock of the Company equal to the quotient of (a) the outstanding principal amount and accrued interest of the Note as of the date of such election, divided by (b) the selling price per share, if any, of the Company’s common stock pursuant to a private placement approved by the Corporation’s Board of Directors on September 10, 2010, or, if there are no such sales, $1.00 per share (the “Conversion Price”). In connection with the Subscription Agreement and the Note, the Company issued one Warrant for the number of shares of common stock of the Company by dividing the aggregate amount of the advances by the Conversion Price resulting in 500,000 warrants being issued. The exercise price of the Warrant is the Conversion Price.

The issuance of the aforementioned securities was not registered in reliance on Section 4(2) of the Securities Act of 1933, as amended.

According to GAAP, proceeds from the sale of debt instruments with stock purchase warrants (detachable call options) shall be allocated to the two elements based upon the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. The portion of the proceeds so allocated to the warrants shall be accounted for as paid-in capital. The remainder of the proceeds shall be allocated to the debt instrument portion of the transaction. Also, the embedded beneficial conversion feature present in the convertible instrument shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The amount of the warrants and beneficial conversion feature totaled $287,449 which has been recorded as a debt discount that was charged to interest expense for the year ended December 31, 2010.

The fair value of the Warrant was determined based upon the Black-Scholes-Merton pricing model using the following underlying assumptions:

	October 20	November 4
Term	3 Years	3 Years
Volatility	58.75%	58.31%
Interest Rate	1.11%	1.04%

As of December 31, 2010 the holders of the two notes with an initial face value of $50,000 each exercised the conversion option. The holder of the other two notes agreed to extend the term of the notes until February 28, 2011, at which time the holder exercised the conversion option. Upon this election, the Company issued 406,664 shares of MiMedx common stock, 203,332 callable warrants and 203,332 contingent warrants.

Revolving Secured Line of Credit Agreement

On March 31, 2011, the Company and its Chairman of the Board and CEO (“the Lender”) entered into a Subscription Agreement for a 5% Convertible Senior Secured Promissory Note (“Subscription Agreement”) and, in connection therewith, agreed to issue a 5% Convertible Senior Secured Promissory Note (“Note”) in the amount borrowed by the Company, and a First Contingent Warrant (“First Contingent Warrant”) and a Second Contingent Warrant (“Second Contingent Warrant”) to Purchase Common Stock per the terms described below. The First and Second Contingent Warrants each expire in five years; however, each is subject to automatic terminations as defined in the First Contingent Warrant and Second Contingent Warrant terms.

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Under the terms of the Subscription Agreement, the Chairman & CEO agreed to issue a Revolving Secured Line of Credit Agreement (“Credit Agreement”) to the Company of up to $3,600,000 to fund its working capital needs. The first borrowing in the amount of $800,000 was on March 31, 2011, resulting in the issuance of 400,000 contingent warrants at an exercise price of $0.01 per warrant. Additional borrowings in the amount of $500,000 were drawn during the three months ended June 30, 2011, resulting in the issuance of 250,000 contingent warrants at an exercise price of $0.01 per warrant.

Per the agreement, this commitment shall be reduced based the amount of funds raised through other financing activities beginning on April 1, 2011. Since April 1, 2011, the Company raised approximately $2,545,000 through a private placement. Based upon the amount borrowed under the Credit Agreement and the amount raised through the private placement, there is no additional credit available under the Credit Agreement. The Company may repay and reborrow, provided there is no event of default, as needed. The initial termination date of the Credit Agreement is December 31, 2012 and the Company may elect to extend the termination date until December 31, 2013 upon payment of an extension fee. Each borrowing bears interest on the outstanding principal at a rate per annum equal to 5%. Collateral for the Credit Agreement includes (i) all of the Company’s intellectual property with the exception of intellectual property owned by Surgical Biologics, LLC, and (ii) all accessions to, substitutions for and replacements, products and proceeds thereof, as more particularly set forth in the Security and Intercreditor Agreement.

At the option of the holder, the Note is convertible into the number of shares of common stock of the Company equal to the quotient of the outstanding principal amount and accrued interest of the Note as of the date of such election divided by $1.00 per share.

The Contingent Warrants provide for the following:

First Contingent Warrant – upon borrowing under the Note, the Company shall issue to the Lender a warrant to purchase 25% of the shares of Common Stock that would be issuable upon conversion of the outstanding principal balance of the Note immediately after borrowing, less the aggregate number of shares of Common Stock subject to all First Contingent Warrants previously issued to Lender, at an exercise price of $0.01 per share;

Second Contingent Warrant – upon borrowing under the Note, the Company shall issue to the Lender an additional warrant to purchase 25% of the shares of Common Stock that would be issuable upon conversion of the outstanding principal balance of the Note immediately after borrowing, less the aggregate number of shares of Common Stock subject to all Second Contingent Warrants previously issued to Lender, at an exercise price of $0.01 per share;

As of September 30, 2011, the Company has issued 650,000 warrants under the Secured Line of Credit Agreement, based on the borrowing of $1,300,000 under the agreement. The issuance of the aforementioned securities was not registered in reliance on Section 4(2) of the Securities Act of 1933, as amended.

The contingent warrants have not been included in our earnings per share calculation per the guidance in ASC 260-10-45-13 Earnings per share : Treatment of Contingently Issuable Shares in Weighted-Average Shares Outstanding which states that shares issuable for little or no cash consideration upon the satisfaction of certain conditions (contingently issuable shares) shall be considered outstanding common shares and included in the computation of basic EPS as of the date that all necessary conditions have been satisfied (in essence, when issuance of the shares is no longer contingent).

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8. Common Stock Placements

October 2009 Private Placement

In October 2009, the Company commenced a private placement to sell common stock and warrants. From October 30, 2009, through December 31, 2009, the Company sold 7,697,865 shares of common stock at a price of $.60 per share and received proceeds of $4,618,720. Under the terms of the offering, for every two shares of common stock purchased, the investor received a 5-year warrant to purchase one share of common stock for $1.50 (a “Warrant”). Through December 31, 2009, the Company issued a total of 3,848,933 warrants. The warrants met all the requirements for equity classification under GAAP and are recorded in stockholders’ equity.

From January 1, 2010, through January 21, 2010, the Company sold an additional 1,308,332 shares of common stock and issued an additional 654,163 warrants and received proceeds of $785,000. The Company closed the offering on January 21, 2010.

In connection with the October 2009 Private Placement, the Company entered into a registration rights agreement which provides “Piggy-Back” registration rights to each investor.

October 2010 Private Placement

In October 2010, the Company commenced a private placement to sell common stock and warrants. From October 30, 2010, through December 31, 2010, the Company sold 2,405,000 shares of common stock at a price of $1.00 per share and received proceeds of $2,337,020 net of $67,980 in offering costs. Under the terms of the offering, for each share purchased, the investor received one 5-year warrant to purchase the common stock of the Company at an exercise price of $1.50 per share. The terms of the warrant, (the “Callable Warrant”) are that for every two shares of common stock purchased, the holder is issued a 5-year warrant to purchase one share of the Company’s Common Stock at an exercise price of $1.50 per share. The Callable Warrant does not carry registration rights and is callable by the Company at any time after the issuance if the closing sale price of the Stock exceeds $1.75 for fifteen (15) or more consecutive trading days. Upon written notice, the Company may redeem the Callable Warrant at a price of $0.01 per share.

The contingent warrants have been issued to each investor and will become exercisable provided certain conditions are met. The First Contingent Warrant, (the “First Contingent Warrant”) is issued to each investor to purchase 25% of the number of shares of Stock purchased, at an exercise price of $0.01 per share, provided that the First Contingent Warrant shall only be exercisable if the Company’s Gross Revenue as reported in the Company’s Audited Financial Statements for the year ended December 31, 2011, do not equal or exceed $11,500,000 and further provided that such Warrant shall be null and void in the event that prior to issuance of such Audited Financial Statements (the “First Measurement Date”) the closing trading price of the Stock is at least $1.50 per share for ten or more consecutive trading days.

The Second Contingent Warrant, (the “Second Contingent Warrant”) is issued to each investor to purchase 25% of the number of shares of Stock purchased, at an exercise price of $0.01 per share, provided that the Second Contingent Warrant shall only be exercisable if the Company’s Gross Revenue as reported in the Company’s Audited Financial Statements for the year ended December 31, 2011, do not equal or exceed $31,150,000 and further provided that such Warrant shall be null and void in the event that prior to issuance of such Audited Financial Statements (the “Second Measurement Date”) the closing trading price of the Stock is at least $1.75 per share for ten or more consecutive trading days.

The contingent warrants have not been included in our earnings per share calculation per the guidance in ASC 260-10-45-13 Earnings per share: Treatment of Contingently Issuable Shares in Weighted-Average Shares Outstanding which states that shares issuable for little or no cash consideration upon the satisfaction of certain conditions (contingently issuable shares) shall be considered outstanding common shares and included in the computation of basic EPS as of the date that all necessary conditions have been satisfied (in essence, when issuance of the shares is no longer contingent).

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For the nine months ended September 30, 2011, the Company sold an additional 3,778,321 shares of Common Stock and issued an additional 1,889,161 warrants and received net cash proceeds of approximately $3,744,000. The warrants met all the requirements for equity classification under GAAP and are recorded in stockholders’ equity.

The Company's Chairman and CEO invested $600,000 in the October 2010 Private Placement, receiving 300,000 warrants with an exercise price of $1.50, 150,000 First Contingent warrants at an exercise price of $0.01 and 150,000 Second Contingent warrants at an exercise price of $0.01 as per the aforementioned terms of the offering.

In connection with the October 2010 Private Placement, the Company entered into a registration rights agreement that provides “Piggy-Back” registration rights to each investor .

9. Equity

Stock Incentive Plans

The Company has three share-based compensation plans: the MiMedx Group, Inc. Assumed 2006 Stock Incentive Plan (the “2006 Plan”), the MiMedx Inc. 2007 Assumed Stock Plan (the “Assumed 2007 Plan”) and the MiMedx Group Inc. Amended and Restated Assumed 2005 Stock Plan (the “Assumed 2005 Plan”) which provide for the granting of qualified incentive and non-qualified stock options, stock appreciation awards and restricted stock awards to employees, directors, consultants and advisors. The awards are subject to a vesting schedule as set forth in each individual agreement. The Company intends to use only the 2006 Plan to make future grants. The number of assumed options under the Assumed 2005 Plan and Assumed 2007 Plan outstanding at September 30, 2011 totaled 910,000 and the maximum number of shares of common stock which can be issued under the 2006 Plan is 9,500,000 at September 30, 2011.

Activity with respect to the stock options is summarized as follows:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value
Outstanding at January 1, 2011		8,257,650		$	1.20
Granted		2,951,000		$	1.19
Exercised		(490,000	)	$	0.60
Forfeited or cancelled		(363,650	)	$	1.73
Outstanding at September 30, 2011		10,355,000		$	1.20		6.8	$	1,278,795

Vested or expected to vest at September 30, 2011		6,265,190		$	1.21		5.4	$	1,070,221

The intrinsic value of the options exercised during the three months ended September 30, 2011, was approximately $211,100.

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Following is a summary of stock options outstanding and exercisable at September 30, 2011:

		Options Outstanding						Options Exercisable
Range of Exercise Prices		Number outstanding		Weighted- Average Remaining Contractual Term (in years)		Weighted- Average Exercise Price		Number Exercisable		Weighted- Average Exercise Price
$	0.50		588,000		3.1	$	0.50		481,704	$	0.50
$	0.65 - $1.00		3,247,500		5.5	$	0.81		2,868,116	$	0.82
$	1.04 - $1.80		5,969,500		8.4	$	1.38		2,365,370	$	1.55
$	2.40		550,000		1.0	$	2.40		550,000	$	2.40
			10,355,000		6.8	$	1.20		6,265,190	$	1.21

A summary of the status of the Company’s unvested stock options follows:

Unvested Stock Options	Number of Shares			Weighted- Average Grant Date Fair Value
Unvested at January 1, 2011		2,679,787		$	0.87
Granted		2,951,000		$	0.65
Cancelled/expired		(363,650	)	$	0.54
Vested		(1,177,327	)	$	0.70
Unvested at September 30, 2011		4,089,810		$	0.75

Total unrecognized compensation expense related to granted stock options at September 30, 2011, was approximately $3,146,000 and will be charged to expense through July 2015.

The fair value of options granted by the Company is estimated on the date of grant using the Black-Scholes-Merton 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-Merton option-pricing model are set forth in the following table:

	Nine Months ended September 30,			Year ended December 31,
	2011			2010
Expected volatility		57.3-57.8	%		57.9-60.2	%
Expected life (in years)		6			6
Expected dividend yield		—			—
Risk-free interest rate		0.93% - 2.24	%		1.15% - 2.75	%

The weighted-average grant date fair value for options granted during the nine months ended September 30, 2011 was approximately $0.65.

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Warrants

The Company grants common stock warrants in connection with equity share purchases by investors as an additional incentive for providing long term equity capital to the Company and as additional compensation to consultants and advisors. The warrants are granted at negotiated prices in connection with the equity share purchases and at the market price of the common stock in other instances. The warrants have been issued for terms of five years.

Following is a summary of warrants outstanding at September 30, 2011:

	Number of Warrants		Weighted- Average Exercise Price per Warrant		Number of Contingent Warrants		Weighted- Average Exercise Price per ContingentWarrant
Warrants outstanding at January 1, 2011		6,003,924	$	1.21		1,252,990	$	0.01
Issued in connection with private placement of common stock		1,889,161	$	1.50		1,889,162	$	0.01
Issued in connection with convertible promissory notes		203,332	$	1.50		203,332	$	0.01
Issued in connection with line of credit with related party		—	$	—		650,000	$	0.01
Expired warrants		—	$	—		—	$	—
Exercised in connection with private placement of common stock		—	$	—		—	$	—
Warrants outstanding at September 30, 2011		8,096,417	$	1.31		3,995,484	$	0.01

Warrants may be exercised in whole or in part by:

·	notice given by the holder accompanied by payment of an amount equal to the warrant exercise price multiplied by the number of warrant shares being purchased; or

election by the holder to exchange the warrant (or portion thereof) for that number of shares equal to the product of (a) the number of shares issuable upon exercise of the warrant (or portion) and (b) a fraction, (x) the numerator of which is the market price of the shares at the time of exercise minus the warrant exercise price per share at the time of exercise and (y) the denominator of which is the market price per share at the time of exercise.

These warrants are not mandatorily redeemable, do not obligate the Company to repurchase its equity shares by transferring assets or issue a variable number of shares.

The warrants require that the Company deliver shares as part of a physical settlement or a net-share settlement, at the option of the holder, and do not provide for a net-cash settlement.

All of our warrants are classified as equity as of September 30, 2011 and December 31, 2010.

In April 2010, the Company offered investors in the October 2009 Private Placement a discount to their existing $1.50 warrant exercise price to $1.00 if they exercised their warrants to purchase common stock for cash by May 1, 2010. As a result of this offer, the Company received proceeds of approximately $3,200,000, net of placement agent fees, and issued 3,200,000 shares of common stock as of May 1, 2010. The aggregate proceeds include $833,000 in common stock issued to the Chairman and CEO, $20,850 to the President and Chief Operating Officer and $20,833 to one other Company director. As a result of this activity, the number of warrants outstanding as of September 30, 2011 was 8,096,417. The Company grants common stock warrants, in connection with equity share purchases by investors as an additional incentive for providing long term equity capital to the Company, to placement agents in connection with direct equity share and convertible debt purchases by investors and as additional compensation to consultants and advisors.

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10. Income taxes

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 Company’s 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.

11. Contractual Commitments

The Company has entered into operating lease agreements for facility space and equipment, and employment agreements with our VP-Sales for EMEA and for some key employees acquired with Surgical Biologics. In addition, the Company has minimum royalty payments due in conjunction with one of its licenses. The estimated annual lease, royalty, and employment agreement expense are as follows:

12-month period ended September 30,
2012	$	1,014,401
2013		549,445
Thereafter		171,613
	$	1,735,459

12. Subsequent Events

On October 25, 2011, the Company’s Chairman and CEO signed a loan commitment whereby the CEO will provide the Company a line of credit of up to $1,500,000 less any amounts subscribed for by any other lenders.

On November 14, 2011, the Company’s Board of Director’s approved by unanimous consent a resolution increasing the size of the debt offering from $1,500,000 to $2,500,000 and that the minimum principal amount of each note issued thereunder be reduced from $250,000 to $150,000. The First Contingent Warrants to be issued in connection with the Debt Offering were revised to remove the provision that would render the First Contingent Warrants null and void in the event that, prior to the date of issuance of the audited financial statements for the year ended December 31, 2011, the closing trading price of the Common Stock is at least $1.50 per share for ten (10) or more consecutive trading days, and to make other conforming changes to the terms of the debt offering as may be necessary or desirable in the opinion of the Company’s General Counsel to effectuate the foregoing change.

The revolving line of credit will be established pursuant to one or more Convertible Senior Secured Revolving Promissory Notes (the “Notes”). Interest on the Notes will be payable in quarterly installments with all principal and accrued and unpaid interest due and payable on December 31, 2012, subject to extension by the Company to December 31, 2013, upon payment to Lenders of an extension payment in the amount of 5% of the outstanding aggregate principal amount of the Notes. The Notes may be converted into Common Stock at a conversion price of $1.00 per share, at any time upon the election of Lender holding the Note. The Notes may be prepaid at any time upon thirty (30) days prior written notice without premium or penalty.

The Notes will be secured by a first priority lien in all of the patents and other intellectual property owned by the Company, excluding only the patents and other intellectual property owned by Surgical Biologics, LLC. The Company shall issue to each Lender a warrant to purchase the number of shares of Common Stock equal to 25% of the shares of Common Stock that would be issuable upon conversion of such Lender’s Note at an exercise price of $0.01 per share subject to the attainment of certain revenue targets in 2011 ($11,500,000) and 2012 ($31,150,000) respectively as a First and Second Contingent Warrant. The Second Contingent Warrants shall be null and void in the event that prior to date of issuance of the audited financial statements the closing trading price of the Common Stock is at least $1.75 during the aforementioned period following the year 2012. The Contingent Warrants have a term of five (5) years from the date of issuance. The Company’s Chairman and CEO has loaned the company $300,000 under the terms of the revolving line of credit as of November 14, 2011 resulting in the issuance of 150,000 contingent warrants.

The terms of the applicable to the line of credit and the Notes (including, without limitation, the terms of the Contingent Warrants) are subject to change by the Board or by certain authorized officers as may be deemed necessary to make the notes more saleable.

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Item 2. Man agemen t’s 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 Company’s products by the market, and management’s 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 to, 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.

Overview

MiMedx Group, Inc. ("MiMedx Group") is an integrated developer, manufacturer and marketer of patent-protected regenerative biomaterials and bioimplants processed from human amniotic membrane. MiMedx Group has emerged from a development-focused start-up company into a fully integrated operating company with the expertise to capitalize on its science and technology and the capacity to generate sales growth and profitability.

" Innovations in Regenerative Biomaterials " is the framework behind our mission to give physicians products and tissues to help the body heal itself. Our biomaterial platform technologies include the device technologies HydroFix™ and CollaFix™, and our tissue technologies, AmnioFix® and EpiFix®. Our tissue technologies, processed from the human amniotic membrane, utilize our proprietary Purion® process that was developed by our wholly-owned subsidiary, Surgical Biologics, to produce a safe, effective and minimally manipulated implant. Surgical Biologics is the leading supplier of amniotic tissue, having supplied over 35,000 implants to date to distributors and OEMs for application in the Ophthalmic, Orthopedics, Spine, Wound Care and Dental sectors of healthcare.

Recent Events

On January 5, 2011, the Company acquired all of the outstanding equity interests in Surgical Biologics, LLC, for an aggregate of $16.4 million in cash, stock and assumed debt. Certain additional considerations are contingent pending certain earn-out provisions. This strategic acquisition brings together market leading know-how in amnion tissue processing technology with a global distribution network uniquely positioned to rapidly exploit significant market opportunities across multiple surgical indications.

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Surgical Biologics, (“SB”), is located in Kennesaw, Georgia. Surgical Biologics develops bioimplants processed from human amniotic membrane that can be used for a wide range of surgical indications including ocular surface repair, gum repair, wound care, burns, and many other types of surgery that require the repair of a patient's integumental (native) tissue. SB is focused on developing technologically innovative bioimplants that offer the surgeon a variety of clinical options; allowing for greater flexibility in treatment, as well as improved surgical results.

Surgical Biologics currently distributes tissue in several different membrane subsegments, such as ocular, dental, spine and wound care. The wound care and tissue management market in the U.S. is currently valued at approximately $7.4B, in which our products could play a strong role. The regenerative dental market is estimated at approximately $232M. The Millennium Research Group has projected the anti‐adhesion market to reach an estimated $500M in 2012, and the ocular market is valued at approximately $100M. Each market’s sub‐segment has unique competitors, products and distribution methods. Amniotic membrane, as processed by SB, has unique “bio‐active” properties that offer benefits that most competitive products cannot offer. SB’s tissues provide anti-inflammatory, anti-angiogenesis, anti-scarring and barrier properties as well as enhanced healing at the surgical site.

Surgical Biologics has developed a specialized method for the processing of amniotic membrane. This patent pending process, named Purion®, consists of unique methods which maximize yield, while minimizing manufacturing costs. The Purion® process was engineered to create an implant that is optimized for ease of use while providing the patient with the maximum assurance of safety. Surgical Biologics currently has seven patents pending that have been filed with the United States Patent Office. The patent filings consist of the intellectual property used to process tissues and/or apply the tissues in a unique manner in surgery.

During the second quarter, the Company announced the launch of EpiFix®, a bioimplant specifically processed to offer a wide variety of wound healing and wound care options and the launch of AmnioFix® Nerve Wrap, the Company’s latest biologic implant, which is processed to offer surgical and healing options for nerve repair. SB continues to research new opportunities for amniotic tissue, and currently has several additional offerings in the first stages of conceptualization.

The Company also received three 510(k) clearances during the 2 nd quarter relating to its HydroFix™ technology platform. One of the clearances related to HydroFix™ Ortho Shield, which is indicated for the management and protection of tendon injuries in which there has been no substantial loss of tendon tissue. The two additional clearances were for HydroFix™ Vaso Shield. This device is indicated for use as a cover for vessels during anterior vertebral surgery, and has now received clearance for an expanded range of sizes and for a higher temperature exposure limit.

Also during the second quarter, the Company completed the closing of its Tampa, Florida facility on July 1, 2011. We have consolidated into the facility in which our Surgical Biologics subsidiary is located, and secured additional space close by that houses our HydroFix™ and Collafix™ production and will allow for future growth.

During the most recent quarter, the Company announced that it has partnered with Affirmative Solutions, a national leading distributor of spine, biologic and other medical products and devices to the U.S. Veteran’s Administration (“VA”) and Department of Defense (“DOD”) facilities. This partnership and distribution agreement allows the offering of EpiFix® at over 100 major VA, DOD and commercial facilities across the country.

The Company received the American Podiatric Medical Association (“APMA”) Seal of Approval on its EpiFix® Amniotic Membrane Allograft during the third quarter. The Seal of Approval is granted by APMA’s Board following the successful completion of an extensive review process in which the foot care product is scientifically evaluated.

Results of Operations comparison for the Three Months Ended September 30, 2011 to the Three Months Ended September 30, 2010

Revenue

Revenue increased approximately $2,044,000 to $2,152,000 for the three months ended September 30, 2011, as compared to $108,000 for the three months ended September 30, 2010. The increase in revenue as compared to September 30, 2010 is due primarily to sales of our amniotic membrane tissue. The Company experienced strong demand in the Spine, Wound Care, Ophthalmology, and Orthopedics markets.

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Cost of Products Sold

Cost of products as a percentage of revenue improved to 39.2% from 499.6% as compared to prior year. The improvement was due primarily to the increase in revenue. It should be noted that as our sales levels and corresponding production levels increase, these costs as a percentage of total revenues will continue to decrease resulting in higher gross margins.

Personnel costs represent approximately $532,800 or 63.2% of total manufacturing, quality assurance and regulatory spending for the three months ended September 30, 2011. We employed 24 full-time and 2 part-time manufacturing and quality assurance technicians at September 30, 2011, compared to 9 full-time personnel for the three months ended September 30, 2010. The increase of 15 full-time and 2 part-time employees was due to the support of increased production and the addition of the amnion processing and quality assurance staff of Surgical Biologics.

Research and Development Expenses

Our research and development expenses (“R&D expenses”) decreased approximately $357,700 or 42.4% to $485,300 during the three months ended September 30, 2011, compared to approximately $843,000 in the prior year. Approximately $108,000, or 22.3%, of R&D expenses for the quarter were attributable to the addition of Surgical Biologics staff, which was offset by decreases in personnel costs as a result of the closure of our Tampa facility as well as lower costs in animal studies related to our CollaFix™ product. Overall spending on animal studies in the quarter was $112,000. This spending level is expected to decline over the balance of the year.

Our research and development expenses consist primarily of internal personnel costs, fees paid to external consultants, and supplies and instruments used in our laboratories. As of September 30, 2011, we employed 6 full-time employees, compared to 13 full-time and 2 part-time R&D employees at September 30, 2010. The closure of the Tampa facility resulted in a reduction of 9 full-time and 2 part-time employees, while two employees from the Tampa R&D group relocated to Kennesaw and joined the production team. During the quarter, the Company filed 2 provisional patent applications for collagen technology and 2 non-provisional patent applications for the hydrogel technology.

Selling, General and Administrative Expenses

Selling, General & Administrative Expenses excluding non-cash related charges for depreciation, amortization and share based compensation expense was approximately $1,757,000 for the quarter ended September 30, 2011 as compared to approximately $974,000 in the quarter ended September 30, 2010. The increase of approximately $783,000 includes expenses related to expansion of our sales department correlating with our increased sales, and the addition of resources dedicated to the Wound Care and Spine markets as well as Medical reimbursement to support our expansion into new markets, and a two support personnel. Our selling, general and administrative expenses consist of personnel costs, professional fees, sales commissions, sales training costs, industry trade show fees and expenses, product promotions and product literature costs, facilities costs and other sales, marketing and administrative costs. As of September 30, 2011, we employed 19 full-time and 3 part-time personnel in selling, general and administrative functions, compared to 11 full-time and 2 part-time personnel for the nine months ended September 30, 2010.

During the three months ended September 30, 2011, we recorded approximately $99,000 in depreciation expense, which was a decrease of approximately $15,000 or 13.4% as compared to the quarter ended September 30, 2010. We depreciate our assets on a straight-line basis, principally over five to seven years. Share based compensation for the three months ended September 30, 2011 was approximately $286,000, a decrease of approximately $47,000 or 14.2% as compared to the three months ended September 30, 2010.

During the three months ended September 30, 2011, we recorded approximately $334,000 in amortization expense, which was an increase of 100% or approximately $167,000 as compared to the same period in 2010. The increase is directly attributable to the acquisition of Surgical Biologics. We amortize our intangible assets over a 3 to 14 year period, 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 evaluate all goodwill and intangibles for impairment based on events or changes in circumstances as they occur.

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Other Expense/Income

We recorded other expense of approximately $113,000 during the three months ended September 30, 2011, compared with approximately $600 of other expense during the three months ended September 30, 2010. Of the $113,000 incurred as of September 30, 2011, approximately $86,000 was amortization of the discount on the acquisition convertible note and amortization of the beneficial conversion feature on the Line of Credit with a related party, approximately $27,000 was interest expense related to the acquisition convertible note and assumed debt. The approximate $600 incurred as of September 30, 2010 was interest expense.

Results of Operations for the Nine months Ended September 30, 2011 Compared to the Nine months Ended September 30, 2010

Revenue

Revenue increased $4,580,000 to $5,125,000 during the nine months ended September 30, 2011, as compared to $545,000 for the nine months ended September 30, 2010, as we experienced strong demand in the Spine, Wound Care, Ophthalmology, and Orthopedics markets for our amniotic membrane tissue products.

Cost of Products Sold

Cost of products sold as a percentage of revenue improved to 44.7% for the nine months ended September 30, 2011 as compared to 248.7% for the same period in 2010. The improvement was due primarily to the increase in revenue. It should be noted that as our sales levels and corresponding production levels increase, these costs as a percentage of total revenues will continue to decrease resulting in higher gross margins. Personnel costs represent approximately $1,303,000 or 56.8% of total manufacturing, quality assurance and regulatory spending.

Research and Development Expenses

Our research and development expenses (“R&D expenses”) decreased approximately $172,000 or 8.0% to $1,996,000 during the nine months ended September 30, 2011, compared to approximately $2,168,000 for the nine months ended September 30, 2010. The decrease was due primarily to a reduction in personnel and operating costs related to the closure of the Tampa facility of approximately $654,000, which was offset by the addition of Surgical Biologics R&D costs of approximately $327,000, increased spending on animal studies to support our new product development of approximately $98,000, increased patent legal costs of approximately $34,000, and an increase of general lab supplies of approximately $23,000.

Our research and development expenses consist primarily of internal personnel costs, fees paid to external consultants, and supplies and instruments used in our laboratories. Since January 1, 2011, the Company received 2 Issued Patents, one each for hydrogel and collagen technologies; filed 6 provisional patent applications, 3 each for the amnion and collagen technologies; and filed 9 non-provisional patent applications, 5 and 4 for the collagen and hydrogel technologies, respectively.

Selling, General and Administrative Expenses

Selling, General and Administrative expenses (“SG&A expenses”) excluding non-cash related charges for depreciation, amortization and share based compensation were approximately $5,513,000 for the nine months ended September 30, 2011 as compared to approximately $3,457,000 in prior year which was an increase of approximately $2,056,000 or 59.5%. Approximately $1,415,000 of the increase in SG&A expenses were attributable to the acquisition of Surgical Biologics including $217,000 in legal fees and $33,000 in external auditing fees, the majority of which is related to the merger, $461,000 in additional expenses for Surgical Biologics staff and general office expenses, and $704,000 in sales and marketing expenses and rent. The remaining $641,000 increase in SG&A expenses reflects an increase of $897,000 in sales and marketing expenses due in part to our expanded sales team to support our rapid growth, increased commissions due to increased sales, trade show and market launch expenses, and rent. These increases were offset by decreases in SG&A of $256,000, primarily due to reductions in accounting and human resources personnel costs and other administrative expenses.

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Our selling, general and administrative expenses consist of personnel costs, professional fees, sales commissions, sales training costs, industry trade show fees and expenses, product promotions and product literature costs, facilities costs and other sales, marketing and administrative costs.

During the nine months ended September 30, 2011 and 2010, we recorded approximately $331,000 and $338,000 in depreciation expense, respectively. The reduced depreciation of $7,000 was attributable to leasehold improvements in the terminated Marietta facility being fully depreciated, offset by the acquisition of Surgical Biologics and some additional lab equipment acquired during the nine months ended September 30, 2011. We depreciate our assets on a straight-line basis, principally over five to seven years. Share based compensation for the nine months ended September 30, 2011 was approximately $1,317,000, an increase of approximately $481,000 or 57.5% as compared to the nine months ended September 30, 2010.

During the nine months ended September 30, 2011 and 2010, we recorded approximately $1,002,000 and $501,000 in amortization expense, respectively. All of the $501,000 increase was attributable to the acquisition of Surgical Biologics. We amortize our intangible assets over a 3 to 14 year period, 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.

Other Expense/Income

We recorded other expense of approximately $292,000 during the nine months ended September 30, 2011, compared with approximately $593,000 of other expense during the nine months ended September 30, 2010. Of the $292,000 incurred as of September 30, 2010, $220,000 is amortization of the discount on the acquisition convertible note and on the convertible line of credit, and $69,000 is interest expense related to the acquisition convertible note and assumed debt, and $3,000 was foreign exchange loss during the period. The interest expense for the nine months ended September 30, 2010 related primarily to the amortization of the debt discount on the 3% Convertible Senior Secured Promissory Notes and the accelerated recognition of the unamortized portion of the discount upon conversion.

Liquidity and Capital Resources

Revenues continue to increase quarter over quarter while management maintains tight controls over spending. Cash required by operations for the quarter declined approximately $1,040,000 as compared to the previous quarter. The Company raised approximately $145,000 through a private placement during the quarter ended September 30, 2011. In addition, on October 25, 2011, the Company’s Chairman and CEO signed a loan commitment whereby the CEO will provide the Company, or to obtain other lenders to loan for the Company’s general working capital purposes, a line of credit of up to $1,500,000 less any amounts subscribed for by any other lenders.

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Discussion of cash flows

Net cash used in operations during the nine months ended September 30, 2011, decreased approximately $1,162,000 to $5,009,000 compared to $6,171,000 used in operating activities for the nine month period ended September 30, 2010, primarily attributable to our increased sales activity. The changes in assets and liabilities included in the Statement of Cash Flows are net of the effects of the Surgical Biologics acquisition.

Net cash used in investing activities during the nine months ended September 30, 2011, increased approximately $735,000 to $884,000 compared to $149,000 used in investing activities for the nine month period ended September 30, 2010. Of the $735,000 increase, $466,000 was cash paid in conjunction with the Surgical Biologics acquisition, and $269,000 was cash paid for additional lab equipment and furniture for the Kennesaw facility.

Net cash flows from financing activities during the nine months ended September 30, 2011 increased approximately $1,094,000 to $5,190,000 compared to $4,096,000 during the nine months ended September 30, 2010. Cash flows from financing activities during the current year include approximately $3,744,000 related to our October 2010 Private Placement, $1,300,000 borrowed from our Revolving Secured Line of Credit, approximately $296,000 received from the exercise of stock options, the repayment of approximately $99,000 outstanding under a line of credit assumed in the acquisition of Surgical Biologics, and the payment of approximately $51,000 in principal and interest on three notes assumed in the acquisition of Surgical Biologics.

Due to the material amount of non-cash related items included in the Company results of operations, the Company has developed an Adjusted EBITDA metric which provides management with a clearer view of operational cash burn (see the table below). The adjusted EBITDA loss for the quarter was approximately $934,000 which is a reduction of approximately $489,000 or 34% as compared to the previous quarter. This improvement was the result of increased revenue combined with reduced spending.

We use various numerical measures in conference calls, investor meetings and other forums which are or may be considered “Non-GAAP financial measures” under Regulation G. We have provided below for your reference, supplemental financial disclosure for these measures, including the most directly comparable GAAP measure and an associated reconciliation. The following table provides reconciliation of reported Net Loss on a GAAP basis to Adjusted EBITDA defined as Earnings before Interest, Taxes, Depreciation, Amortization and Share Based Compensation:

	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended June 30,
	2011			2010			2011			2010			2011

Net Loss (Per GAAP)	$	(1,765,723	)	$	(2,854,442	)	$	(7,616,791	)	$	(8,693,096	)	$	(2,503,505	)

Add back:
Income Taxes		-			-			-			-			-

Financing (expense) associated with warrants issued in connection with convertible promissory note		-			-			-			(595,679	)		-

Financing (expense) associated with beneficial conversion of note payable issued in conjunction with acquisition		(85,989	)		-			(219,506	)		-			(60,599	)

Other interest (exp)/inc., net		(27,377	)		(584	)		(72,145	)		2,813			(26,471	)

Depreciation Expense		98,989			114,332			330,851			337,592			115,682
Amortization Expense		333,977			166,983			1,001,931			500,949			333,977
Employee Share Based Compensation		222,792			269,477			1,032,261			731,216			429,096
Other Share Based Compensation		62,946			63,490			285,154			105,062			114,648

Loss Before Interest, Taxes, Depreciation,Amortization and Share Based Compensation	$	(933,653	)	$	(2,239,576	)	$	(4,674,943	)	$	(6,425,411	)	$	(1,423,032	)

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Contractual Obligations

Contractual obligations associated with our ongoing business activities are expected to result in cash payments in future periods. The table below summarizes the amounts and estimated timing of these future cash payments as of September 30, 2011:

	Payments due by period
				less than						More than
Contractual Obligations		TOTAL		1 year		1-3 years		3-5 years		5 years
Convertible debt, line of credit with related party		$	1,268,344		—		1,268,344		—		—
Convertible debt, note related to acquisition of SB			1,041,416		1,041,416		—		—		—
Employment agreements			586,537		488,537		98,000		—		—
Operating lease obligations			1,018,922		490,863		528,059		—		—
Royalty payments			130,000		35,000		95,000		—		—
Notes payable			38,568		38,568		—		—		—
		$	4,083,788		2,094,384		1,989,403		—		—

Critical Accounting Policies

In preparing our financial statements we follow accounting principles generally accepted in the United States, 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 December 31, 2010. During the first nine months of fiscal 2011, there were no material changes to the accounting policies and assumptions previously disclosed.

Recent Accounting Pronouncements

Recently issued accounting pronouncements not yet adopted:

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In May 2011, the FASB issued ASU 2011-04, Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IRFS. The amendments to the Codification in this ASU will provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and IFRS. ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This guidance is effective for the Company beginning on January 1, 2012. Its adoption is not expected to significantly impact the Company’s consolidated financial statements.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s business is anticipated to be directly dependent on foreign operations as the Company’s sales to customers outside the U.S. become significant. A portion of the Company’s total revenue is anticipated to be dependent on selling to distributors outside the U.S., some of which will be invoiced in foreign currencies, primarily the EURO. There is also risk related to the changes in foreign currency exchange rates as it relates to sales operating expenses paid in EURO’s. We are currently considering taking affirmative steps to hedge the risk of fluctuations in foreign currency exchange rates as revenues continue to increase. We do not expect our financial position, results of operations or cash flows to be materially impacted due to a sudden change in foreign currency exchange rate fluctuations relative to the U.S. Dollar over the next three months.

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.

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Item 4. Controls and Procedures

Disclosure Controls and Procedures

As required by Rule 13a-15(b) 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 SEC's 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 and Principal Financial Officer, as appropriate, to allow timely decisions regarding disclosures.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the three and nine months ended September 30, 2011, 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.

Item 1A. Risk Factors

As of the date of this report, there have been no material changes to the risk factors included in Item 1A to our Annual Report on Form 10-K for the year ended December 31, 2010, except for the following:

Market Concentrations and Credit Risk

Distribution – The Company’s principal concentration of risk is related to its limited distribution channels. Two customers accounted for approximately 33% of revenues for the three months ended September 30, 2011, including one customer who represented 19% and another customer which represented 15% of total revenue.

The Company’s accounts receivable are derived from customers primarily located in the United States of America. Two customers accounted for 26% of the total accounts receivable as of September 30, 2011. Each customer represented approximately 13% of total receivables as of the end of the most recent quarter.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

From January 1, 2011, through September 30, 2011, the Company sold an additional 3,778,321 shares of Common Stock and issued an additional 1,889,161 warrants and received net cash proceeds of approximately $3,744,000. See Notes 8 and 9 of “Notes to the Unaudited Condensed Consolidated Financial Statements” for the terms of the Warrants. These sales were made in conjunction with the Company’s most recent private placement, which commenced in October 2010 (“October 2010 Private Placement”).

The Company relied on Section 4(2) of the Securities Act of 1933 (the “Securities Act”) and Rule 506 of Regulation D under the Securities Act, as amended, to issue the securities described above because they were offered to accredited investors and a limited number of unaccredited investors who purchased for investment in transactions that did not involve a general solicitation.

Form 10-K for the twelve months ended December 31, 2010 filed March 31, 2011, and Form D dated November 29, 2010, also provide information related to unregistered sales of equity securities during the twelve months ended December 31, 2010.

We did not repurchase any shares during the three and nine months ended September 30, 2011, and currently have no share repurchase plans or programs.

Item 3. De fault Upon Senior Securities

None.

Item 4. Su bmis sion of Matters to a Vote of Security Holders

None.

Item 5. Ot her Information

None.

Item 6. E xhib its

Exhibit Number	Reference	Description

10.91	#	Change In Control Severance Compensation and Restrictive Covenant Agreement between MiMedx Group Inc and Parker H Petit dated November 11, 2011

10.92	#	Change In Control Severance Compensation and Restrictive Covenant Agreement between MiMedx Group Inc and William C Taylor dated November 11, 2011

10.93	#	Change In Control Severance Compensation and Restrictive Covenant Agreement between MiMedx Group Inc and Michael J Senken dated November 11, 2011

10.94	#	5% Convertible Senior Secured Promissory Notes (Series $2.5 Million 2011) dated November 14, 2011

31.1	#	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	#	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	#	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2	#	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

#	Filed herewith

Table of Contents

SIG NATUR ES

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.

November 14, 2011	By:	/s/ Michael J. Senken
		Michael J. Senken
		Chief Financial Officer

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (the “ Agreement ”) made effective as of ______________ __, 2011 is entered into by and among MiMedx Group, Inc., a Florida corporation (the “ Company ”), and ________________________ (“ Lender ”).

WHEREAS, the Company has issued to Lender that certain 5% Convertible Senior Secured Promissory Note (Series $2.5 Million 2011) of even date herewith (the “ Note ”), in connection with which the Company wishes to grant certain registration rights to the Lender;

NOW, THEREFORE, in consideration of the covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, the parties hereto covenant and agree as follows:

Section 1. Certain Definitions . As used in this Agreement, the following terms shall have the following respective meanings:

“ Affiliate ” means any Person that directly or indirectly is controlled by or is under common control with the Lender.

“ Articles of Incorporation ” means the Company’s Articles of Incorporation in effect on the date hereof and as amended, modified or restated from time to time.

“ Blue Sky Application ” has the meaning ascribed to such term in Section 4(a) hereof.

“ Commission ” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act and the Exchange Act.

“ Common Stock ” means the common stock of the Company and any other securities into which or for which any of the common stock of the Company may be converted or exchanged pursuant to a stock split, stock dividend, plan of recapitalization, reorganization, merger, consolidation, sale of assets or other similar transaction.

“ Exchange Act ” means the Securities Exchange Act of 1934, or any similar or successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time.

“ Forms S-1 and S-3 ” means Forms S-1 and S-3, as the case may be, promulgated under the Securities Act and as in effect on the date hereof or any similar or successor forms promulgated under the Securities Act or adopted by the Commission.

“ Offering ” has the meaning ascribed to such term in the Preamble hereto.

“ Person ” means an individual, corporation, limited liability company, partnership, joint venture, trust, or unincorporated organization, or a government or any agency or political subdivision thereof.

“ Registrable Shares ” means the Common Stock issuable to the Lender upon a Voluntary Conversion (as defined in the Note).

“ Registration Expenses ” has the meaning ascribed to such term in Section 7 hereof.

“ Rule 144 ” means Rule 144 promulgated under the Securities Act or any similar or successor rule, as the same shall be in effect from time to time.

“ Rule 145 ” means Rule 145 promulgated under the Securities Act or any similar or successor rule, as the same shall be in effect from time to time.

“ Securities Act ” means the Securities Act of 1933, or any similar or successor federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time.

“ Selling Expenses ” has the meaning ascribed to such term in Section 7 hereof.

Section 2. “Piggy-Back” Registrations .

(a) If the Company at any time after, and no earlier than, the occurrence of a Voluntary Conversion (as defined in the Note) at a time when its equity securities are registered under Section 12 of the Exchange Act, proposes to register under the Securities Act any of its securities, whether for its own account or for the account of other security holders or both (except with respect to registration statements on Forms S-4, S-8 or any successor to such forms or another form not available for registering the Registrable Shares for sale to the public or any registration statement including only securities issued pursuant to a dividend reinvestment plan), each such time it will promptly give written notice to all holders of Registrable Shares of its intention so to do. Upon the written request of any such holder, received by the Company within 20 days after the giving of any such notice by the Company, to register any or all of its Registrable Shares, the Company will use its commercially reasonable efforts to cause the Registrable Shares as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or other disposition by the holder (in accordance with its written request) of such Registrable Shares so registered. The Company shall be obligated to include in such registration statement only such limited portion of Registrable Shares with respect to which such holder has requested inclusion hereunder.

(b) If the registration of which the Company gives notice as provided above is for a registered public offering involving an underwriting, the Company shall so advise the holders of Registrable Shares as a part of the written notice given pursuant to this Section 2. In such event the right of any holder of Registrable Shares to registration pursuant to this Section 2 shall be conditioned upon such holder’s participation in such underwriting to the extent provided herein. All holders of Registrable Shares proposing to distribute their securities through such underwriting shall (together with the shares of Common Stock to be registered by the Company and shares of Common Stock held by Persons who by virtue of agreements with the Company are entitled to include shares in such registration) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for underwriting by the Company. If any holder of Registrable Shares disapproves of the terms of any such underwriting, that holder may elect to withdraw therefrom by timely written notice to the Company and the underwriter. Any Registrable Shares or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration.

(c) Notwithstanding any other provision of this Section 2, if the underwriter determines that marketing factors require a limitation on the number of shares to be underwritten or if the Commission imposes such a limitation, such limitation will be imposed pro rata with respect to all securities whose holders have a contractual, incidental (“ Piggy-Back ”) right to include such securities in the registration statement and as to which inclusion has been requested pursuant to such right, provided, however, that no such reduction shall reduce the number of securities held by holders of Registrable Shares proposing to distribute their securities through such underwriting if any securities are to be included in such underwriting for the account of any Person other than the Company or holders of Registrable Shares other than a holder exercising a demand or required registration right.

(d) Notwithstanding the foregoing provisions, the Company may withdraw any registration statement referred to in this Section 2 without thereby incurring any liability to the holders of Registrable Shares.

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Section 3. Expiration of Obligations . The obligations of the Company to register Registrable Shares pursuant to Section 2 of this Agreement shall expire on the first to occur of (i) the date when the holder of such shares shall be able to sell its Registrable Shares under Rule 144, or (ii) when no Registrable Shares are outstanding.

Section 4. Indemnification; Procedures; Contribution .

(a) In the event that the Company registers any of the Registrable Shares under the Securities Act in accordance with this Agreement, the Company will, to the extent permitted by law, indemnify and hold harmless each holder and each underwriter of the Registrable Shares (including their officers, directors, affiliates and partners) so registered (including any broker or dealer through whom such shares may be sold) and each Person, if any, who controls such holder or any such underwriter within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages, expenses or liabilities, joint or several, to which they or any of them become subject under the Securities Act or under any other statute or at common law or otherwise, and, except as hereinafter provided, will reimburse each such holder, each such underwriter and each such controlling Person, if any, for any legal or other expenses reasonably incurred by them or any of them in connection with investigating or defending any actions whether or not resulting in any liability, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the registration statement, any filing with any state or federal securities commission or agency or any prospectus, offering circular or other document created or approved by the Company incident to such registration (including any related notification, registration statement under which such Registrable Shares were registered under the Securities Act pursuant to Section 2 of this Agreement, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof), (ii) any blue sky application or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company filed in any state or other jurisdiction in order to qualify any or all of the Registrable Shares under the securities laws thereof (any such application, document or information herein called a “ Blue Sky Application ”), (iii) any omission or alleged omission to state in any such registration statement, prospectus, amendment or supplement or in any Blue Sky Application executed or filed by the Company, a material fact required to be stated therein or necessary to make the statements therein not misleading, (iv) any violation by the Company or its agents of the Securities Act or any rule or regulation promulgated under the Securities Act applicable to the Company or its agents and relating to action or inaction required of the Company in connection with such registration, or (v) any failure to register or qualify the Registrable Shares in any state where the Company or its agents has affirmatively undertaken or agreed in writing that the Company (the undertaking of any underwriter chosen by the Company being attributed to the Company) will undertake such registration or qualification (provided that in such instance the Company shall not be so liable if it has used its commercially reasonable efforts to so register or qualify the Registrable Shares) and will reimburse each such holder, and such officer, director and partner, each such underwriter and each such controlling Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, promptly after being so incurred, provided, however, that the Company will not be liable in any such case (i) if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with written information furnished by any holder, any underwriter or any controlling Person in writing specifically for use in such registration statement or prospectus, or (ii) in the case of a sale directly by such holder of Registrable Shares (including a sale of such Registrable Shares through any underwriter retained by such holder of Registrable Shares to engage in a distribution solely on behalf of such holder of Registrable Shares), such untrue statement or alleged untrue statement or omission or alleged omission was contained in a preliminary prospectus and corrected in a final or amended prospectus, and such holder of Registrable Shares failed to deliver a copy of the final or amended prospectus at or prior to the confirmation of the sale of Registrable Shares to the Person asserting any such loss, claim, damage or liability in any case where such delivery is required by the Securities Act or any state securities laws.

(b) In the event of a registration of any of the Registrable Shares under the Securities Act pursuant to Section 2 of this Agreement, each seller of such Registrable Shares thereunder, severally and not jointly, will indemnify and hold harmless the Company, each Person, if any, who controls the Company within the meaning of the Securities Act, each officer of the Company who signs the registration statement, each director of the Company, each other seller of Registrable Shares, each underwriter and each Person who controls any underwriter within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such officer, director, other seller, underwriter or controlling Person may become subject under the Securities Act or otherwise, solely insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any prospectus offering circular or other document incident to such registration (including any related notification, registration statement under which such Registrable Shares were registered under the Securities Act pursuant to Section 2, any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereof), or any Blue Sky Application or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such officer, director, other seller, underwriter and controlling Person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action, promptly after being so incurred, provided, however, that such seller will be liable hereunder in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with information pertaining to such seller, as such, furnished in writing to the Company by such seller specifically for use in such registration statement or prospectus; and provided, further, that the liability of each seller hereunder shall be limited to the proportion of any such loss, claim, damage, liability or expense which is equal to the proportion that the public offering price of all securities sold by such seller under such registration statement bears to the total public offering price of all securities sold thereunder, but not in any event to exceed the net proceeds received by such seller from the sale of Registrable Shares covered by such registration statement. Not in limitation of the foregoing, it is understood and agreed that, except as set forth in Section 4(e), the indemnification obligations of any seller hereunder pursuant to any underwriting agreement entered into in connection herewith shall be limited to the obligations contained in this subparagraph (b).

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(c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying party in writing thereof, but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to such indemnified party other than under this Section 4 and shall only relieve it from any liability which it may have to such indemnified party under this Section 4 if and to the extent the indemnifying party is prejudiced by such omission. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume and undertake the defense thereof, the indemnifying party shall not be liable to such indemnified party under this Section 4 for any legal expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation and of liaison with counsel so selected, provided, however, that, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the indemnifying party or that the interests of the indemnified party reasonably may be deemed to conflict with the interests of the indemnifying party, the indemnified party shall have the right to select one separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the indemnifying party as incurred. No indemnifying party, in the defense of any such claim or action, shall, except with the consent of each indemnified party, which consent shall not be unreasonably withheld or delayed, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or action, and the indemnification agreements contained in Sections 6(a) and 6(b) shall not apply to any settlement entered into in violation of this sentence. Each indemnified party shall furnish such information regarding itself or the claim in question as an indemnifying party may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom.

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(d) In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any holder of Registrable Shares exercising rights under this Agreement, or any controlling Person of any such holder, makes a claim for indemnification pursuant to this Section 4 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 4 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any such selling holder or any such controlling Person in circumstances for which indemnification is provided under this Section 4, then, and in each such case, the Company and such holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that such holder is responsible for the portion represented by the percentage that the public offering price of its Registrable Shares offered by the registration statement bears to the public offering price of all securities offered by such registration statement, and the Company is responsible for the remaining portion, provided, however, that, in any such case, (A) no such holder of Registrable Shares will be required to contribute any amount in excess of the proceeds received from the sale of all such Registrable Shares offered by it pursuant to such registration statement and (B) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with an underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.

(f) The indemnities and obligations provided in this Section 4 shall survive the completion of any offering of Registrable Shares and the transfer of any Registrable Shares by such holder.

Section 5. Exchange Act Registration and Rule 144 Reporting . With a view to making available the benefits of certain rules and regulations of the Commission which may at any time permit the sale of the Registrable Shares to the public without registration, at all times after 180 days after (i) any registration statement covering a public offering of securities of the Company under the Securities Act shall have become effective, or (ii) the Company’s equity securities shall have been registered pursuant to Section 12 of the Exchange Act, the Company agrees that it will use its commercially reasonable efforts to:

(a) Make and keep public information available, as those terms are understood and defined in Rule 144, at all times after the date the Company becomes subject to the reporting requirements of either Section 13 or Section 15(d) of the Exchange Act;

(b) File with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act;

(c) Furnish to each holder of Registrable Shares forthwith upon request (A) a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and, at any time after it has become subject to such reporting requirements, of the Securities Act and the Exchange Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies), (B) a copy of the most recent annual or quarterly report of the Company and (C) such other information, reports and documents so filed by the Company as such holder may reasonably request in availing itself of any rule or regulation of the Commission allowing such holder to sell any Registrable Shares without registration; and

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(d) Make available to the Lender the same services with regard to customary Rule 144 legal opinions as it provides to its affiliates.

Section 6. Registration Procedures .

(a) If and whenever the Company is required by the provisions of Section 2 of this Agreement to use its commercially reasonable efforts to effect the registration of any Registrable Shares under the Securities Act, the Company will, as expeditiously as possible:

(i) Prepare and file with the Commission a registration statement with respect to such securities including executing an undertaking to file post-effective amendments and use its commercially reasonable efforts to cause such registration statement to become and remain effective for the period of the distribution contemplated thereby;

(ii) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for the period specified herein and comply with the provisions of the Securities Act with respect to the disposition of all Registrable Shares covered by such registration statement in accordance with the sellers’ intended method of disposition set forth in such registration statement for such period;

(iii) Furnish to each seller of Registrable Shares and to each underwriter such number of copies of the registration statement and each such amendment and supplement thereto (in each case including all exhibits) and the prospectus included therein (including each preliminary prospectus) as such Persons reasonably may request in order to facilitate the public sale or other disposition of the Registrable Shares covered by such registration statement;

(iv) Use its commercially reasonable efforts to register or qualify the Registrable Shares covered by such registration statement under the securities or “blue sky” laws of such jurisdictions as the sellers of Registrable Shares or, in the case of an underwritten public offering, the managing underwriter reasonably shall request, provided that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction, unless the Company is already subject to service in such jurisdiction;

(v) Use its commercially reasonable efforts to list the Registrable Shares covered by such registration statement with any securities exchange or quotation system on which the Common Stock of the Company is then listed;

(vi) Use its commercially reasonable efforts to comply with all applicable rules and regulations under the Securities Act and Exchange Act;

(vii) Immediately notify each seller of Registrable Shares and each underwriter under such registration statement, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event of which the Company has knowledge as a result of which the prospectus contained in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly prepare and furnish to such seller a reasonable number of copies of a prospectus supplemented or amended so that, as thereafter delivered to the purchasers of such Registrable Shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing;

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(viii) If the offering is underwritten and at the request of any seller of Registrable Shares, furnish on the date that Registrable Shares are delivered to the underwriters for sale pursuant to such registration (i) an opinion, in customary form and dated the effective date of the registration statement, of counsel representing the Company for the purposes of such registration, addressed to the underwriters to such effect as reasonably may be requested by counsel for the underwriters and copies of such opinion addressed to the sellers of Registrable Shares and (ii) a letter dated such date from the independent public accountants retained by the Company, addressed to the underwriters stating that they are independent public accountants within the meaning of the Securities Act and that, in the opinion of such accountants, the financial statements of the Company included in the registration statement or the prospectus, or any amendment or supplement thereof, comply as to form in all material respects with the applicable accounting requirements of the Securities Act and such letter shall additionally cover such other financial matters (including information as to the period ending no more than five business days prior to the date of such letter) with respect to such registration as such underwriters reasonably may request;

(ix) Upon reasonable notice and at reasonable times during normal business hours, make available for inspection by each seller of Registrable Shares, any underwriter participating in any distribution pursuant to such registration statement, and any attorney, accountant or other agent retained by such seller or underwriter, reasonable access to all financial and other records, pertinent corporate documents and properties of the Company, as such parties may reasonably request, and cause the Company’s officers, directors and employees to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement;

(x) Cooperate with the selling holders of Registrable Shares and the managing underwriter, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Shares to be sold, such certificates to be in such denominations and registered in such names as such holders or the managing underwriter may request at least two business days prior to any sale of Registrable Shares; and

(xi) Permit any holder of Registrable Shares which holder, in the sole and exclusive judgment, exercised in good faith, of such holder, might be deemed to be a controlling Person of the Company, to participate in good faith in the preparation of such registration or comparable statement and to require the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of such holder and its counsel should be included.

(b) For purposes of this Agreement, the period of distribution of Registrable Shares in a firm commitment underwritten public offering shall be deemed to extend until each underwriter has completed the distribution of all securities purchased by it, and the period of distribution of Registrable Shares in any other registration shall be deemed to extend until the earlier of the sale of all Registrable Shares covered thereby or 180 days after the effective date thereof, provided, however, in the case of any registration of Registrable Shares on Form S-3 or a comparable or successor form which are intended to be offered on a continuous or delayed basis, such 180 day-period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Shares are sold, provided that Rule 415, or any successor or similar rule promulgated under the Securities Act, permits the offering to be conducted on a continuous or delayed basis, and provided further that applicable rules under the Securities Act governing the obligation to file a post-effective amendment, permit, in lieu of filing a post-effective amendment which (y) includes any prospectus required by Section 10(a)(3) of the Securities Act or (z) reflects facts or events representing a material or fundamental change in the information set forth in the registration statement, the incorporation by reference of information required to be included in (y) and (z) above contained in periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act in the registration statement.

(c) Whenever under the preceding Sections of this Agreement the holders of Registrable Shares are registering such shares pursuant to any registration statement, each such holder agrees to (i) timely provide in writing to the Company, at its request, such information and materials as the Company may reasonably request in order to effect the registration of such Registrable Shares in compliance with federal and applicable state securities laws, and (ii) provide the Company with appropriate representations with respect to the accuracy of such information provided by such Sellers pursuant to subsection (i).

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Section 7. Expenses . In the case of any registration statement under Section 2 of this Agreement, the Company shall bear all costs and expenses of each such registration, including, but not limited to, all registration and filing fees, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or “blue sky” laws, fees of the National Association of Securities Dealers, Inc. (as any successor thereto), transfer taxes, fees of transfer agents and registrars, costs of any insurance which might be obtained by the Company with respect to the offering by the Company and the reasonable fees and disbursements of one counsel selected by a majority in interest of the sellers of Registrable Shares (collectively, “ Registration Expenses ”). The Company shall have no obligation to pay or otherwise bear any portion of the underwriters’ commissions or discounts attributable to the Registrable Shares (“ Selling Expenses ”). All Selling Expenses in connection with each registration statement under Section 2 of this Agreement shall be borne by the participating sellers (including the Company, where applicable) in proportion to the number of shares registered by each, or by such participating sellers other than the Company (to the extent the Company shall be a seller) as they may agree.

Section 8. Delay of Registration . For a period not to exceed 180 days, the Company shall not be obligated to prepare and file, or be prevented from delaying or abandoning, a registration statement pursuant to this Agreement at any time when the Company furnishes to holders of Registrable Shares that have requested to have such Registrable Shares included in a registration statement covered by the terms of this Agreement a certificate signed by the President of the Company stating that in the good faith judgment of the Board of Directors of the Company the filing thereof at the time requested, or the offering of Registrable Shares pursuant thereto, would be seriously detrimental to the Company or its stockholders, or materially and adversely affect (a) a pending or scheduled public offering of the Company’s securities, (b) an acquisition, merger, recapitalization, consolidation, reorganization or similar transaction by or of the Company, (c) pre-existing and continuing negotiations, discussions or pending proposals with respect to any of the foregoing transactions, or (d) the financial condition of the Company in view of the disclosure of any pending or threatened litigation, claim, assessment or governmental investigation which may be required thereby, and that the failure to disclose any material information with respect to the foregoing would cause a violation of the Securities Act or the Exchange Act.

Section 9. Conditions to Registration Obligations . The Company shall not be obligated to effect the registration of Registrable Shares pursuant to Section 2 of this Agreement unless all holders of shares being registered consent to reasonable conditions imposed by the Company as the Company shall determine with the advice of counsel to be required by law including, without limitation:

(a) Conditions prohibiting the sale of shares by such holders until the registration shall have been effective for a specified period of time;

(b) Conditions requiring such holder to comply with all prospectus delivery requirements of the Securities Act and with all anti-stabilization, anti-manipulation and similar provisions of Section 10 of the Exchange Act and any rules issued thereunder by the Commission, and to furnish to the Company information about sales made in such public offering;

(c) Conditions prohibiting such holders upon receipt of telegraphic or written notice from the Company (until further notice) from effecting sales of shares, such notice being given to permit the Company to correct or update a registration statement or prospectus;

(d) Conditions requiring that at the end of the period during which the Company is obligated to keep the registration statement effective, the holders of shares included in the registration statement shall discontinue sales of shares pursuant to such registration statement upon receipt of notice form the Company of its intention to remove from registration the shares covered by such registration statement that remain unsold, and requiring such holders to notify the Company of the number of shares registered that remain unsold immediately upon receipt of notice from the Company; and

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(e) Conditions requiring the holders of Registrable Shares to enter into an underwriting agreement in form and substance reasonably satisfactory to the Company and the holders of Registrable Shares.

Section 10. Miscellaneous .

(a) No failure or delay on the part of any party to this Agreement in exercising any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

(b) Except as hereinafter provided, amendments or additions to this Agreement may be made, this Agreement may be terminated, and compliance with any covenant or provision set forth herein may be omitted or waived, only with the written consent of the Company and the holder or holders of at least a majority in interest of the Registrable Shares; provided, however, that any modification or amendment that affects any such holder in a manner different from the effect on the other holders of Registrable Shares shall require the affirmative approval of such holder. Any waiver or consent may be given subject to satisfaction of conditions stated therein and any waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Notwithstanding the foregoing, this Agreement may be amended to add new parties and/or Registrable Shares the Company consents thereto and any new party executes and delivers to the Company a copy of the signature page hereto.

(c) All notices, requests, consents and other communications hereunder shall be in writing, shall be addressed to the receiving party’s address set forth below or to such other address as a party may designate by notice hereunder, and shall be either (i) delivered by hand, (ii) made by telecopy or facsimile transmission, (iii) sent by overnight courier, or (iv) sent by registered or certified mail, return receipt requested, postage prepaid:

If to the Company to:

MiMedx Group, Inc.

60 Chastain Center Blvd., Suite 60

Kennesaw, GA 30144

Attn: General Counsel

Fax No: (678) 384-6741

If to the Lender to:

The address of the Lender as set forth in the records of the Company

All notices, requests, consents and other communications hereunder shall be deemed to have been given either (i) if by hand, at the time of the delivery thereof to the receiving party at the address of such party set forth above, (ii) if made by telecopy or facsimile transmission, at the time that receipt thereof has been acknowledged by electronic confirmation or otherwise, (iii) if sent by overnight courier, on the next business day following the day such notice is delivered to the courier service, or (iv) if sent by registered or certified mail, on the fifth business day following the day such mailing is made.

(d) This Agreement constitutes the entire agreement between the parties and supersede any prior understandings or agreements concerning the subject matter hereof.

(e) In the event that any court of competent jurisdiction shall determine that any provision, or any portion thereof, contained in this Agreement shall be unenforceable in any respect, then such provision shall be deemed limited to the extent that such court deems it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall deem any such provision, or portion thereof, wholly unenforceable, the remaining provisions of this Agreement shall nevertheless remain in full force and effect.

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(f) The parties hereto acknowledge and agree that (i) each party and its counsel, if so represented, reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision and (ii) the rule of construction to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Agreement.

(g) All statements, representations, warranties, covenants and agreements in this Agreement shall be binding on the parties hereto and shall inure to the benefit of the respective successors and permitted assigns of each party hereto.

(h) This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the law of the State of Florida without giving effect to the conflict of law principles thereof.

(i) Any legal action or proceeding with respect to this Agreement may be brought in the courts of the State of Florida or of the United States of America for the District of Florida. By execution and delivery of this Agreement, each of the parties hereto accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each of the parties hereto irrevocably consents to the service of process of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by certified mail, postage prepaid, to the party at its address set forth in Section 10(c) hereof.

(j) In the event of any change in the Common Stock or other securities covered hereunder, by way of a stock split, stock dividend, combination or redemption, or through merger, consolidation, reorganization or otherwise, appropriate adjustment shall be made in the provisions hereof, including, without limitation, an equitable adjustment of to the number of Registrable Shares. For purposes of determining the number of shares held by the Lender, all shares held by any Affiliate of the Lender shall be deemed to be held by the Lender.

(k) No failure or delay by a party hereto in exercising any right, power or remedy under this Agreement, and no course of dealing among the parties hereto, shall operate as a waiver of any such right, power or remedy of the party. No single or partial exercise of any right, power or remedy under this Agreement by a party hereto, nor any abandonment or discontinuance of steps to enforce any such right, power or remedy, shall preclude such party from any other or further exercise thereof or the exercise of any other right, power or remedy hereunder. The election of any remedy by a party hereto shall not constitute a waiver of the right of such party to pursue other available remedies. No notice to or demand on a party not expressly required under this Agreement shall entitle the party receiving such notice or demand to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the party giving such notice or demand to any other or further action in any circumstances without such notice or demand.

(l) The headings and captions of the various subdivisions of this Agreement are for convenience of reference only and shall in no way modify or affect the meaning or construction of any of the terms or provisions hereof.

(m) This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterparts.

[ Signatures contained on the following pages]

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IN WITNESS WHEREOF , the parties hereto have executed this Registration Rights Agreement or caused this Registration Rights Agreement to be executed by their duly authorized representatives as of the date first above written.

	COMPANY:

	MiMedx Group, Inc.


	By:
	Name:
	Title:

LENDER’S COUNTERPART SIGNATURE PAGE TO

REGISTRATION RIGHTS AGREEMENT FOLLOWS ON NEXT PAGE

LENDER’S COUNTERPART SIGNATURE PAGE TO

REGISTRATION RIGHTS AGREEMENT

LENDER:

Signature for Corporate, Partnership, or other Entity Lender:			Signature for Individual Lender:


(Print Name of Entity)			(Signature)

By:			Print Name:
Print Name:
Print Title:

	If to Company:

		MiMedx Group, Inc.
		60 Chastain Center Blvd, Suite 60
		Kennesaw, GA 30144
		Attention: General Counsel

	If to Executive:

		Parker H. Petit
		1650 Cox Road
		Roswell, GA 30075

BORROWER:

MiMedx Group, Inc.


By:
	Michael J. Senken, CFO

	[COMPANY SEAL]


LENDER:


		(SEAL)
Name:

Address:

Warrant No.:	Issuance Date: _______________, 2011
Number of Warrant Shares:	Warrant Exercise Price: USD$.01 per share

Warrant No.:	Issuance Date: _______________, 2011
Number of Warrant Shares:	Warrant Exercise Price: USD$.01 per share


Print Name(s)		Social Security Number(s)


Signature(s) of subscriber(s)		Signature(s) of subscriber(s)


Date		Address:

	MiMedx Group, Inc.

	By:
		Its Chief Financial Officer


	PARKER H. PETIT



	Executive

	MiMedx Group, Inc.


	By:
		Its Chief Executive Officer


	WILLIAM C. TAYLOR


	Executive

	MiMedx Group, Inc.


	By:
		Its Chief Executive Officer


	MICHAELJ. SENKEN


	Executive

Signature for Corporate, Partnership, or other Entity Holder:			Signature for Individual Holder:


(Print Name of Entity)			(Signature)

By:			Print Name:
Print Name:
Print Title:

	MiMedx Group, Inc.

	By:
	Name: Michael J. Senken
	Title: Chief Financial Officer

	Holder Name:

	By:
	Name:
	Title:

	[Net] Number of Warrant Shares Being
	Purchased


Name of Entity		Federal Taxpayer ID Number


By:
	Name:	State of Organization
	Title:


		Address:
Date

Date: November 14, 2011	/s/ Parker H. Petit
	Parker H. Petit
	Chief Executive Officer