UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-KþANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2015oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the transition period from __________to __________Commission file number 001-35887MIMEDX 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) 1775 West Oak Commons Court, NE Marietta, GA 30062(Address of principal executive offices) (Zip Code)(770) 651-9100(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.001 per shareSecurities registered pursuant to Section 12(g) of the Act: None(Title of class)Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þIndicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þIndicate 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 1934during 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 filingrequirements for the past 90 days. Yes þ No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T (§229,405 of this chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes þ No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the bestof the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. þIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):Large accelerated filer þAccelerated filer oNon-accelerated filer oSmaller reporting Company o (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 ¨ No þThe aggregate market value of Common Stock held by non-affiliates on June 30, 2015, based upon the last sale price of the shares as reported on theNASDAQ on such date, was approximately $1,135,614,000.There were 107,810,490 shares of Common Stock outstanding as of February 10, 2016.Documents Incorporated by ReferencePortions of the proxy statement relating to the 2016 Annual Meeting of Shareholders, to be filed within 120 days after the end of the fiscal year to whichthis report relates, are incorporated by reference in Part III of this Report.1 Table of ContentsPart IItemDescriptionPageItem 1.Business2Item 1A.Risk Factors15Item 1B.Unresolved Staff comments26Item 2.Properties27Item 3.Legal Proceedings27Item 4.Mine Safety Disclosures29 Part IIItem 5.Market for Registrants' Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities30Item 6.Selected Financial Data33Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations34Item 7A.Quantitative and Qualitative Disclosures About Market Risk41Item 8.Financial Statements and Supplementary Data42Item 9.Changes in Disagreements with Accountants on Accounting and Financial Disclosure70Item 9A.Controls and Procedures70Item 9B.Other Information70 Part IIIItem 10.Directors, Executive Officers and Corporate Governance71Item 11.Executive Compensation71Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters71Item 13.Certain Relationships and Related Transactions, and Director Independence71Item 14.Principal Accounting Fees and Services71 Part IVItem 15.Exhibits, Financial Statement Schedules72Signatures 77PART IThis Form 10-K and certain information incorporated herein by reference contain forward-looking statements and information within the “safeharbor” provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the SecuritiesExchange Act of 1934. This information includes assumptions made by, and information currently available to management, including statements regardingfuture economic performance and financial condition, liquidity and capital resources, acceptance of our products by the market, and management’s plans andobjectives. In addition, certain statements included in this and our future filings with the Securities and Exchange Commission (“SEC”), in press releases, andin 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,” “expectation,” “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 thedocuments incorporated herein by reference. These statements are based on our current expectations about future events or results and information that iscurrently available to us, involve assumptions, risks, and uncertainties, and speak only as of the date on which such statements are made.Forward-looking statements include, but are not limited to, the following:2 •the advantages of our products;•the regulatory pathway for our products;•our belief regarding the growth of our direct sales force resulting in increased revenues;•expectations regarding Government and other third-party reimbursement for our products;•our beliefs regarding our relationships with significant distributors;•expectations regarding future revenue growth;•our ability to procure sufficient supplies of human tissue to manufacture and process our products;•market opportunities for our products and future products;•prospects for obtaining additional patents covering our proprietary technology as well as successfully defending our existing patents andprohibiting infringement thereof by third-parties;•the outcome of pending litigation and investigations; and•our ability to compete effectively. Actual results and outcomes may differ materially from those expressed or implied in these forward-looking statements. Factors that may cause sucha difference include, but are not limited to, those discussed in Part I, Item 1A, “Risk Factors,” below. Except as expressly required by the federal securitieslaws, we undertake no obligation to update any such factors, or to publicly announce the results of, or changes to any of the forward-looking statementscontained herein to reflect future events, developments, changed circumstances, or for any other reason.As used herein, the terms “MiMedx,” “the Company,” “we,” “our” and “us” refer to MiMedx Group, Inc., a Florida corporation, and its consolidatedsubsidiaries as a combined entity, except where it is clear that the terms mean only MiMedx Group, Inc.Item 1. BusinessOverviewMiMedx® is an integrated developer, processor and marketer of patent protected and proprietary regenerative biomaterial products and bioimplantsprocessed from human amniotic membrane and other birth tissues and human skin and bone. "Innovations in Regenerative Biomaterials" is the frameworkbehind our mission to give physicians products and tissues to help the body heal itself. Our biomaterial platform technologies are AmnioFix®, EpiFix®,OrthoFlo, Physio™, AlloBurn™, and CollaFix™. AmnioFix and EpiFix are our tissue technologies processed from human amniotic membrane derived fromdonated placentas. Elected in advance of delivery through our donor program, a mother delivering a healthy baby via scheduled full-term Caesarean sectionbirth may donate the placenta in lieu of having it discarded as medical waste. We process the human amniotic membrane utilizing our proprietary PURION®Process, to produce a safe and effective implant. MiMedx is the leading supplier of amniotic tissue, having supplied over 500,000 allografts to date forapplication in the Wound Care, Burn, Surgical, Orthopedic, Spine, Sports Medicine, Ophthalmic and Dental sectors of healthcare. We recently introducedOrthoFlo, an amniotic fluid derived allograft for homologous use. Amniotic fluid is donated by a consenting mother delivering a full-term healthy baby byscheduled Caesarean section. Through the recent acquisition of Stability Biologics, our newest proprietary platforms include Physio, a unique bone graftingmaterial comprised of 100% bone tissue with no added carrier, a demineralized bone matrix (DBM) to complement our product portfolio offerings within theOrthopedic market and AlloBurn, a skin product for burns. CollaFix, our next technology platform we plan to commercialize, is our collagen fibertechnology designed to mimic the natural composition, structure and mechanical properties of musculoskeletal tissues in order to augment their repair. CollaFix is the only known biological, biodegradable, biomimetic technology that matches human tendon in strength and stiffness. Our HistoryOur current business began on February 8, 2008, when Alynx, Co., our predecessor company, acquired MiMedx, Inc., a Florida-based, privately-held, development-stage medical device company, the assets of which included licenses to two development-stage medical device technology platforms-HydroFix® and CollaFix. On March 31, 2008, Alynx, Co. merged2 into MiMedx Group, Inc., a Florida corporation and wholly-owned subsidiary that had been formed on February 28, 2008, for purposes of themerger. MiMedx Group, Inc. was the surviving corporation in the merger. In 2010, we commercialized the first medical device product using our HydroFixtechnology. In 2011 and 2012, we launched additional versions of our HydroFix® product line. In January 2011, the Company acquired all of theoutstanding equity interests of Surgical Biologics, LLC (“Surgical Biologics”). The acquisition of Surgical Biologics expanded our business by addingallografts and other products processed from human amniotic membrane to our existing medical device product lines based on our HydroFix technology. In2013, we changed the name of Surgical Biologics to MiMedx Tissue Services, LLC. Due to the relatively small size of the addressable market for ourHydroFix product line, we decided to discontinue that product line in the fourth quarter of 2013. Although we have yet to commercialize any products usingour CollaFix technology, we continue to believe that technology presents a significant opportunity in the orthopedic and sports medicine markets.On January 13, 2016, we acquired all of the outstanding common stock of Stability Inc. d/b/a Stability Biologics. During its five year history,Stability Biologics evolved from its initial focus as a distributor of allografts, to its current position as an integrated provider in the surgical, spine andorthopedics sectors of healthcare specializing in human tissue and bone product design and development, tissue processing and sales and distribution. Theacquisition of Stability was effected by the merger of Stability Inc. into a newly created wholly owned subsidiary of the Company. The new subsidiary wasthe surviving company in the merger and was subsequently renamed Stability Biologics, LLC ("Stability"). The Company is working to integrate Stability'sproduct offerings with the Company's existing surgical, spine and orthopedics portfolio.For financial information concerning our operating performance, please refer to Management’s Discussion and Analysis of Financial Condition andResults of Operations in Part II, Item 7 of this report and our Consolidated Financial Statements in Part II, Item 8 of this report.Our Technology and ProductsAmnioFix, EpiFix and other Tissue-Based AllograftsThe Company is the leading supplier of allografts processed from amniotic tissue, having supplied over 500,000 allografts to date for application inthe Wound Care, Surgical, Sports Medicine, Ophthalmic, and Dental sectors of healthcare. Our amniotic membrane products include our own brands,AmnioFix and EpiFix, as well as products that we supply on a private label or “OEM” basis. We continue to research new opportunities for amniotic tissue,and currently have several additional offerings in various stages of conceptualization and development.Amniotic membrane is considered immunoprivileged and does not elicit an immune response. Natural human amniotic membrane is composed ofmultiple layers that contain: •Structural proteins; including:◦Collagen types I, III, IV, V, and VII◦Elastin •Specialized extracellular matrix proteins; including:◦Fibrillin◦Fibronectin◦Laminins•TIMPs 1,2,4, Tissue Inhibitor of Metalloproteinase 1, 2, 4 •At least 226 Growth Factors; including but not limited to:◦Epidermal Growth Factor (EGF)◦Transforming Growth Factor Beta (TGF-B)◦Fibroblast Growth Factor (FGF)◦Platelet Derived Growth Factors AA & BB (PDGF AA&BB)We believe our proprietary technique for processing allografts from amniotic tissue preserves more of the natural characteristics of the tissue than theprocesses used by our competitors. We operate a licensed tissue bank that is registered as a tissue establishment with the United States Food and DrugAdministration ("FDA"). We are an accredited member of the American Association of Tissue Banks (“AATB”). We partner with physicians and hospitals torecover donated placental tissue. After consent for donation is obtained, donors are screened for eligibility and the donated tissue is tested for safety in3 compliance with federal regulations and AATB standards on communicable disease transmission. All donor records and test results are reviewed by ourMedical Director prior to the release of the tissue for processing.Over several years, we have developed a unique and proprietary technique for processing allografts from the donated placental tissue. The PURIONProcess produces an allograft that is easy to use and effective. This unique processing technique specifically focuses on preserving the tissue’s bioactivegrowth factor content, and maintaining the structure and collagen matrix of the tissue. The PURION Process also allows the allograft to be stored at roomtemperature and have a five-year shelf life. Additionally, each sheet allograft incorporates specialized visual embossments that assist the health carepractitioner with proper allograft placement and orientation.Our management team is dedicated to providing easy to use, effective allografts that exceed customer expectations. To better satisfy therequirements and expectations of our customers, we maintain strict controls on quality at each step of the process beginning at the time of procurement. Wehave developed and implemented a Quality Management System in compliance with both FDA regulations and AATB standards. EpiFixOur EpiFix allograft is configured for external use. It is used to enhance healing as well as to modulate inflammation. The EpiFix platform has beenused to treat chronic wounds, including diabetic foot ulcers, venous stasis ulcers, arterial ulcers and pressure ulcers, burns and surgical wounds. We offerEpiFix in a sheet form as well as a micronized powder form. The powder can be packed into wounds and is particularly useful for tunneling wounds. Somephysicians also choose to mix the powder with saline to inject it into the wound bed and wound margins.AmnioFixOur AmnioFix allografts are configured for internal use. Currently, our AmnioFix product line consists of three main configurations, AmnioFix,AmnioFix Wrap and AmnioFix Injectable:•AmnioFix is provided in a sheet form. It is used to modulate inflammation, enhance healing and to minimize scar tissue formation. It has beenused in spine, urology and general surgeries.•AmnioFix Wrap also is supplied in a sheet form and is configured for the same purposes as AmnioFix®, but is optimized for use as a “wrap” fornerves, tendons or ligaments.•AmnioFix Injectable is supplied in micronized powder form used to reduce inflammation while enhancing healing. AmnioFix Injectable hasbeen used to treat conditions such as tendonitis, including plantar fasciitis, lateral epicondylitis, and medial epicondylitis, bursitis, strains andsprains.OEM ProductsCurrently, allografts for ophthalmic surgery and dental applications are sold on an OEM basis pursuant to agreements whereby we have granted thirdparties exclusive licenses to some of our technology for use in those fields in specified markets. As further discussed below, the Company also sells productson a non-exclusive OEM basis to Medtronic for spinal procedures and Zimmer Biomet for spine and orthopedic procedures.OrthoFloOrthoFlo is a unique human tissue allograft that is derived from amniotic fluid, donated by mothers delivering healthy babies by scheduledCaesarean section. It is for homologous use to (a) protect and cushion, (b) provide lubrication, and (c) reduce inflammation. Amniotic fluid, in utero, naturallyfunctions to protect, cushion and enhance mobility. Key elements of amniotic fluid include growth factors, carbohydrates, proteins, lipids, electrolytes, andother nutrients, as well as hyaluronic acid (HA), a principal component of viscosity and lubrication in synovial fluid. A multitude of regulatory factors havebeen identified in amniotic fluid and synovial fluid, including the following which are some of the most notable:•Interleukin 1 Receptor Antagonist (IL-1ra): Antagonist of IL-1 signaling which is known to be involved in cartilage degeneration•Tissue Inhibitor of Metalloproteinases (TIMPs): inactivates a number of matrix metalloproteinases responsible for cartilage degradation4 Medical Device TechnologiesOur CollaFix technology combines an innovative means of creating fibers from soluble collagen and a specialized cross-linking process. Initiallaboratory and animal testing shows that the cross-linked collagen fibers produce a very strong, biocompatible, and durable construct that can be transformedinto biomechanical constructs intended to treat a number of orthopedic soft-tissue trauma and disease disorders. The technology is licensed from ShrinersHospitals for Children and University of South Florida Research Foundation, Inc. pursuant to an exclusive, world-wide license to practice and use thetechnology and to manufacture, have manufactured, market, offer for sale and sell products incorporating the technology. The license of the technology isperpetual, except that the license terminates on a country-by-country basis as to any patent or portion thereof included in the licensed technology upon theexpiration of such patent or portion thereof in the applicable country. We are currently working to develop and commercialize products using our CollaFixtechnology and continue to evaluate how best to exploit this technology. We may license rights to specific aspects of our collagen technology to thirdparties for use in applications and indications that we choose not to exploit ourselves.We are required to pay a royalty of 3% on all commercial sales revenue from the sale of products incorporating the licensed technology. We also areobligated to pay a $50,000 minimum annual royalty payment over the life of the license. Intellectual PropertyOur intellectual property includes owned and licensed patents, owned and licensed patent applications and patents pending, proprietarymanufacturing processes and trade secrets, and trademarks associated with our technology. Furthermore, we require employees, consultants and advisors tosign Proprietary Information and Inventions Agreements, as well as Nondisclosure Agreements that assign to us and protect the intellectual property existingand generated from their work or that we may otherwise use or own. We believe that our patents, proprietary manufacturing processes, trade secrets,trademarks, and technology licensing rights provide us with important competitive advantages.Patents and Patent ApplicationsBecause of the substantial expertise and investment of time, effort and financial resources required to bring new regenerative biomaterial productsand implants to the market, the importance of obtaining and maintaining patent protection for significant new technologies, products and processes cannotbe underestimated. As of the date of this Form 10-K, we own 20 U.S. patents related to our amniotic tissue technology and products. Over 80 additionalpatent applications covering aspects of this technology are pending at the United States Patent and Trademark Office and with various internationalpatenting agencies.Worldwide, our CollaFix and HydroFix technologies are protected with 34 and 14 issued patents, respectively. Additionally, in the U.S. andinternationally, there are 30 patent applications pending covering our CollaFix technology.See discussion below- “Risk Factors” under the heading “Risks Related to Our Intellectual Property.”Market OverviewWe currently are focused primarily on the U.S. market, but we are actively working towards international expansion opportunities. In the U.S., thekey areas of focus for the products we market currently are (a) Would Care; and (b) Surgical, Sports Medicine and Orthopedics (SSO). We believe Stability'sspine and orthopedic related product line is a perfect complement to the Company's existing SSO products, and will serve to expedite the growth of our SSOproduct offerings.Wound CareThe number of chronic and acute wounds in the United States is estimated at 8.1 million, with hard to heal wounds (applicable for advanced woundcare allografts) estimated at 2.9 million1. Our placental tissue-based allografts help heal acute and chronic wounds. Chronic wounds are defined as woundsthat are delayed in closing compared to healing in an otherwise healthy individual. Some of the most common types of chronic wounds are diabetic footulcers, venous leg ulcers, pressure ulcers, arterial ulcers, and surgical wounds that become infected. Acute wounds can be caused by surgical intervention,trauma or burns. Our amniotic tissue platforms have the potential to reduce scar tissue formation in a variety of applications, including the chronic woundtypes listed above and acute wounds such as those occurring in the estimated 1.6 million patients annually undergoing elective aesthetic plastic surgery2, aswell the estimated 1.3 million patients annually undergoing Cesarean section births3, where scarring can limit flexibility, generate post-operative pain andcan be unattractive. In both acute and chronic wounds, the physician’s goal during treatment is to heal the wound while allowing the patient to retain naturalfunction in the area of the wound with minimal scarring and infection. If a wound becomes infected, it can lead to a loss of limb or life,5 and physicians want to close the wound as quickly as possible to minimize this risk. Patients with chronic wounds likely have comorbidities, such as diabetesor poor circulation, that complicate or delay the healing cascade. According to BioMedGPS, LLC SmartTRAK Business Intelligence, the 2014 U.S. WoundBiologics segment (comprised of skin/dermal substitutes (which includes the Company's allografts), topical delivery/drugs and collagen/active dressings) ofthe Advanced Wound Care Market reached approximately $865 million and is expected to increase to approximately $1.38 billion in 2019, a compoundedannual growth rate of 9.8%.Our EpiFix allografts are used for the treatment of chronic and acute, partial and full-thickness wounds. EpiFix contains essential wound healingfactors, extracellular matrix proteins and inflammatory mediators to help modulate inflammation, enhance healing, and reduce scar tissue formation. Unlikesome competing technologies, the use of EpiFix is not limited to a specific wound type. EpiFix stores at ambient temperature for up to five years. Certaincultured skin substitutes currently on the market require cryogenic freezer storage and expire only six months from time of processing. Another leading skinsubstitute is delivered on demand and has strict temperature controls between 20° and 23° Celsius with a ten-day shelf-life. We believe the complicatedlogistics associated with the use of those products highlight the distinct advantages of EpiFix.In addition, the Company markets multiple sizes of allografts (from 1.5cm2 to 49cm2) which minimizes product waste. Two former market leadingcompetitor products come in only one size each, 2 inch x 3 inch (38 cm2) and a 75 mm disc (44 cm2). Since the majority of diabetic foot ulcers are less than5cm2, using either one of these products results in significant waste on average.Surgical, Sports Medicine and OrthopedicsOur AmnioFix tissue allografts have been used to enhance healing in patients undergoing surgical procedures to help to reduce scar tissue formationin a variety of applications including, but not limited to, plastic surgery, general surgery, gynecological, urology, orthopedics, spine, and sports medicine.AmnioFix is used as a barrier membrane in procedures where scar tissue formation may be problematic. AmnioFix Wrap is applied by wrappingtarget tissues (ligaments, tendons, and or nerves) to create a barrier, which performs two functions: it acts as a neo-sheath to protect the target tissue andprovides extracellular matrix proteins, cytokines and chemokines to enhance the wound healing process. AmnioFix provides additional benefits, includinganti-inflammatory agents and growth factors that may assist with healing. Spine/OrthopedicsThere are approximately 1.47 million spinal surgeries per year4 and most of them potentially could use AmnioFix to reduce scarring and modulateinflammation during the primary procedure, which may reduce time during revisions or follow-up surgeries. A reduction of scar tissue is beneficial if thepatient needs to have an additional surgical procedure in the future, as it may facilitate the re-access to the surgical site, as well as help with minimizing scarattachment to the spinal dura in spine surgery. In addition to spinal surgeries, the AmnioFix offerings have been used in Arthoplasty (total joint replacement)of the knee, hip, shoulder, ankle, hand and elbow.Sports Medicine There are an estimated 90,0005 peripheral nerve injuries which require repair each year and an estimated 8.46 million patients who have tendinopathyassociated with inflammation that potentially could benefit from our AmnioFix products.AmnioFix Wrap is a surgical implant that has multiple featuresdesired by surgeons to support the repair and replacement of ligaments, tendons grafts and repaired nerves. AmnioFix Injectable and AmnioFix Sports Medaddress the chronic sports/work soft tissue injury market, including but not limited to tennis elbow, golfers elbow, plantar fasciitis, tendonitis, bursitis andsprains. Soft tissue injuries are often caused by either trauma or overuse of the affected area. Micro-tears in the tissue form and become inflamed. Scar tissuemay form and impede a full recovery. Steroids are often used as a first line to help the patient cope with the pain and assist with recovery. There are a numberof patients who do not get relief with steroids or do not want to use steroids, and over-use of steroids can cause long-term damage to the tissue. AmnioFixInjectable and AmnioFix Sports Med modulate inflammation and reduce scar tissue formation, while enhancing healing. Additionally, OrthoFlo has recentlybeen launched to address an estimated 26.9 million U.S. adults faced with Osteroarthritis of the joints.7 Market overview numbers derived from the following sources:1.BioMedGPS SmartTRAK Business Intelligence6 2.American Society of Plastic Surgeons “2012 Plastic Surgery Statistics Report” http://www.plasticsurgery.org/news-and-resources/2012-plastic-surgery-statistics.html3.CDC Report - National Hospital Discharge Surgery: 2010 Table, Procedures by Selected patient characteristic - Number by procedure category andage (/nchs/data/nhds/4procedures/2010pro4_numberprocedureage.pdf)4.iData 2012, U.S. Market for Spinal Implants5.Stabenfeldt, SE, Garcia, AJ, LaPlaca, MC. Thermoreversible laminin-functionalized hydrogel for neural tissue engineering. J of Bio MaterialsResearch. Part A, 2006. 77: p. 718-7256.Millenium 2013, clinical articles and management internal estimates7.Lawrence RC, Felson DT, Helmick CG, et al. Estimates of the prevalence of arthritis and other rheumatic conditions in the United States. Part II.Arthritis Rheum. 2008;58(1):26-35.Marketing and SalesAs of February 2016, our field sales force is comprised of over 230 sales professionals who call on hospitals, wound care clinics, physician officesand federal health care facilities such as Department of Veterans Affairs and Department of Defense Hospitals. Our direct sales force focuses on the WoundCare market and the SSO market, though, on the SSO side, we have continued to maintain a network of independent sales agents and distributors to sell sportsmedicine and orthopedic spine specialties lines. In addition, Stability's sales distribution organization consists of about 100 independent salesrepresentatives that are focused in specific orthopedic/spine areas.We continue to pursue private label or “OEM” relationship, to date the most notable of which are Medtronic and Zimmer Biomet. In September2013, we entered into a non-exclusive distribution agreement with Medtronic, Inc. and its wholly-owned subsidiary, SpinalGraft Technologies, LLC (SGT).Under the agreement, MiMedx provides our PURION Processed grafts to Medtronic to be marketed by SGT under the RDX2® brand name for spinalapplications throughout the United States. In September 2014, we entered into a non-exclusive distribution agreement with Zimmer Biomet to distribute AmnioFix under its private label brand,AmnioRepair®. Under the agreement, Zimmer markets AmnioRepair for reconstructive, sports medicine, trauma, extremities and spine applications in theU.S. These partnerships allow us to leverage the sales and distribution resources of significant industry companies. In the ophthalmic and dental markets, ourproducts are still marketed exclusively through licensee companies in each such field.ReimbursementIn 2015, approximately 26% of our products were purchased for U.S. Government accounts, which do not depend on reimbursement from thirdparties. With the exception of Government accounts, most users of our products are doctors, hospitals or ambulatory surgery centers that rely onreimbursement by third-party payers. Accordingly, our growth substantially depends on adequate levels of third-party reimbursement for our products fromthese payers. In the U.S., such payers include U.S. Governmental programs (e.g., Medicare and Medicaid), private insurance plans, managed care programsand workers’ compensation plans. Governmental payment programs have prescribed coverage criteria and reimbursement rates for medical products, servicesand procedures. Similarly, private third-party payers have their own coverage criteria and often have negotiated payment levels for medical products, servicesand procedures. In addition, in the U.S., an increasing percentage of insured individuals are receiving their medical care through managed care programs,which monitor and may require pre-approval of the products and services that a member will receive.EpiFix Sheet ProductsMedicare CoverageBy far, the largest third party payer in the United States is the Medicare program, which is a federally-funded program that provides healthcarecoverage for senior citizens and the disabled. The Medicare program is administered by the Centers for Medicare and Medicaid Services (CMS). CMS hasappointed eight Medicare Administrative Contractors (MACs), which are private insurance companies that serve as agents of CMS in the administration ofthe Medicare program, including paying claims and making coverage decisions for the Medicare-assigned jurisdiction for which they are responsible. EachMAC has its own process and standards for determining whether it will cover and reimburse a procedure or particular product. Private payers often follow thelead of Governmental payers in making coverage and reimbursement determinations. Therefore,7 achieving favorable Medicare coverage and reimbursement is usually a significant gating factor for successful reimbursement coverage for a new product.The coverage and reimbursement framework for products under Medicare is determined in accordance with the Social Security Act and pursuant toregulations promulgated by CMS, as well as the agency’s sub regulatory coverage and reimbursement determinations. Ultimately, however, each of theMACs determines whether and on what conditions they will provide coverage for the product. Such decisions are based on their assessments of the efficacyand cost effectiveness of the applicable product. As noted below under the heading “Research and Development,” we have devoted significant resources toclinical studies to be able to provide data to the MACs, as well as other payers, in order to demonstrate the efficacy and clinical effectiveness of our EpiFixsheet products. As of the date of this report, our EpiFix sheet products are eligible for coverage by all eight of the Medicare intermediaries.For Medicare reimbursement purposes, our EpiFix sheet products are classified as “skin substitutes.” Prior to 2014, providers that administeredEpiFix allografts and other skin substitutes were reimbursed for the products based on the size of the graft, computed on a per square centimeter basis. Thepayment rate was calculated using the manufacturer’s average sales price (“ASP”) information. This payment methodology applied to physician offices,hospital outpatient and ambulatory surgery centers. We and other manufacturers of skin substitutes are required to provide ASP information to CMS on aquarterly basis. The Medicare payment rates are updated quarterly based on this ASP information. The skin substitutes Medicare payment rate, which isestablished by statute, was ASP plus 6%.Beginning on April 1, 2013 and continuing through 2016, Medicare payments for all items and services, including EpiFix sheet products, werereduced by 2% under the sequestration required by the Budget Control Act of 2011, Pub. L. No. 112-25, as amended by the American Taxpayer Relief Act of2012, Pub. L. 112-240.Our EpiFix sheet allografts come in many sizes that are appropriate to the size of the wounds they are used to treat. Some competitive products comein only one size that is, on average, significantly larger than the wounds they are used to treat. The provider has to cut these products to size and the rest ofthe product is discarded, and, therefore, wasted. Because reimbursement for these products was based on the size of the graft, the Medicare payment for thesegrafts was costly. In part to combat this wastage, in November 2013, CMS announced a new reimbursement methodology for skin substitutes in the hospitaloutpatient and ambulatory surgical center setting effective in 2014. Under the new Hospital Outpatient Prospective Payment System (“OPPS”) Final Rule,skin substitutes are no longer reimbursed based on the size of the graft. Rather the new rule "bundles" or “packages" the reimbursement for skin caresubstitutes, including EpiFix, with the reimbursement for the related medical procedure under a two-tier payment system. Thus, in the OPPS setting providersreceive a single payment that covers the application of the product as well as the product itself. In 2014, skin substitutes with an average sales price above theweighted average mean unit cost of $32 per sq. cm. were classified in the high cost group and were reimbursed at a higher packaged rate; those at or below theweighted average per sq. cm. were classified in the low cost group and are reimbursed at a lower packaged rate. In 2015, the weighted average mean unit costto determine the high and low cost group was $27 per sq. cm. The national average packaged rate was $1,371 in 2014, $1,407 in 2015 and $1,411 in 2016.All skin substitutes products administered in the OPPS setting are bundled except for those that have been approved by CMS for pass-through status. This"bundled" payment structure only applies to the hospital outpatient and ambulatory surgery settings. Physician office payment structure remains at ASP plus6%.Section 1833(t)(6) of the Social Security Act provides for temporary additional payments or “transitional pass-through payments” for certain “new”drugs, devices and biological agents. Under the statute, transitional pass-through payments can be made for at least 2 years but not more than 3 years.During the pass-through period, biologicals are eligible for separate payment computed as ASP plus 6%, less an offset(reduction) equal to theportion of the packaged payment determined to be attributed to the cost of the product (as opposed to the related procedure). The offset is designed to ensurethat the total payment for the grafts does not exceed ASP plus 6%. In 2014, CMS determined that approximately 56% of the packaged payment is associatedwith the product and that is the amount reduced from the total product payment. The effect of the offset was that only larger size grafts were eligible foradditional payments.Our EpiFix sheet allografts were granted pass-through status through the end of 2014, allowing separate reimbursement for EpiFix sheet allograftsadministered in hospital outpatient departments and ambulatory surgery centers at ASP plus 6%, subject to the offset. The pass-through status for EpiFixexpired in 2014. The Company prepared for this change by offering additional sizes of its grafts at prices below the bundled rate beginning in 2015. The newCMS reimbursement packaged policy does not apply to products applied in physician offices, which will continue to be reimbursed using the ASP plus 6%payment methodology. CMS has not changed the payment methodology as it relates to MiMedx products for calendar year 2016. The methodology underwhich CMS establishes reimbursement rates is subject to further change.8 As discussed below under the heading "Competition," management believes this methodology will provide us with opportunities to increase marketshare.Private PayersWe continue to devote considerable resources to clinical trials to support coverage and reimbursement of our products and we are aware of anincreasing number of private payers that are reimbursing for EpiFix administered in the physician office or the hospital outpatient and ambulatory surgerycenter settings. Even when a payer is convinced of the clinical and cost-effectiveness of our product, coverage and reimbursement varies according to theindividual or group plan or policy under which the patient has coverage. More than 180 health plans currently provide coverage for EpiFix for the treatmentof Diabetic Foot Ulcers (DFU) and Venus Leg Ulcer (VLU) wounds. We have established and continue to grow a reimbursement support group to educate andassist providers and patients with regard to reimbursement for our products.Hospital UseEpiFix products administered in the hospital setting generally are bundled as part of the hospital’s bill for a diagnosis-related group (DRG). In thesecases, we continue to educate the hospital that the product is both efficacious and cost-effective.AmnioFix Sheet ProductsOur AmnioFix surgical products generally are bundled as part of a hospital’s bill for a DRG. As noted above with respect to EpiFix, the ability tosell products to the hospital market is dependent upon demonstrating to the hospital that the product is both efficacious and cost-effective.EpiFix and AmnioFix Micronized ProductsCurrently, our micronized products are available for coverage by only a limited number of commercial and state Medicaid plans.Other ProductsThere is currently no third-party reimbursement available for OrthoFlo or any of the products manufactured and processed by Stability, except to theextent such products are bundled as part of a hospital’s bill for a DRG. However, the Company is actively investigating all reimbursement options from third-party payers with respect to these products.See discussion below- “Risk Factors” under the heading “Our revenues depend on adequate reimbursement from public and private insurers andhealth systems.”Customer ConcentrationThe Company provides products to Government accounts, including the Department of Veteran's Affairs, through a distributor relationship withAvKARE, Inc. ("AvKARE"), which is a veteran-owned General Services Administration Federal Supply Schedule (FSS) Contractor. In addition, in 2014, theCompany applied for, and in early 2015 received, its own FSS contract with a term through 2020, which allows the Company to sell directly to Governmentaccounts. The initial term of the distribution agreement with AvKARE was due to expire in April 2015 but it has been extended via amendment through June30, 2017, with the ability to further extend under certain circumstances. The agreement with AvKARE, as amended, allows the Company to sell its productsdirectly on the FSS. Ultimately, the Company intends to transition all of its Government sales to sales sold directly to Government accounts on the FSS. In2015, sales to AvKARE represented approximately 24% of total revenue.See discussion below- “Risk Factors” under the heading “A significant portion of our revenues and accounts receivable come from Governmentaccounts”.CompetitionCompetition in the regenerative medicine field is intense and subject to rapid technological change. Companies within the industry compete on thebasis of product efficacy, pricing, and ease of handling/logistics. However, the most important factor is third-party reimbursement, which is difficult to obtainas it is a time-consuming and expensive process. We believe our success in obtaining third-party reimbursement for our products is a significant competitiveadvantage.9 The Company competes in multiple areas of clinical treatment where regenerative biomaterials may be employed to modulate inflammation,enhance healing and reduce scar tissue formation: advanced wound care treatment, spine, orthopedic, surgery and sports medicine. The EpiFix product line ispromoted primarily for external use such as advanced wound healing, while the AmnioFix products are positioned for healing of surgical wounds and havebeen used in spine, orthopedics, surgical and sports medicine applications. Advanced wound care therapies employ technologies to aid in wound healing in cases where the healing has stalled or stopped. The primarycompetitive products in this space include other amniotic membrane allografts, tissue-engineered living skin equivalents, and porcine- or bovine-derivedcollagen matrix products, among others. In 2015, our main competitor was Organogenesis, Inc., the manufacturer of Dermagraft® and Apligraf®. Theseproducts are tissue-engineered living skin equivalents that require special shipping and/or storage in freezers. The Organogenesis products also come in onlyone large size, which is significantly larger than the median wound size for the wounds they are used to treat, resulting in a high cost product, much of whichis wasted. We have competed effectively against Dermagraft® and Apligraf® based on clinical efficacy, cost effectiveness, ease of use and storage of ourproducts. Other smaller competitors include the Osiris Therapeutics, Inc. product Grafix® and other single-layer amnion products.Smith & Nephew’s Oasis® is the primary competitive product among the porcine- or bovine- derived collagen matrix products. As a collagen it canhelp with providing a matrix in the wound; however, it offers limited growth factors to enhance healing and due to the porcine origin may cause an immuneresponse in the patient.The primary competitive products in the SSO market are other amniotic membrane allografts and injectable solutions.See discussion below- “Risk Factors” under the heading “We are in a highly competitive and evolving field and face competition from well-establishedtissue processors and medical device manufacturers, as well as new market entrants.”Government RegulationFDA Premarket Clearance and Approval RequirementsTissue ProductsThe products manufactured and processed by the Company are derived from human tissue. As discussed below, some tissue-based products areregulated solely under Section 361 of the Public Health Service Act as human cells, tissues and cellular and tissue-based products, or HCT/Ps, which do notrequire premarket clearance or approval by the FDA. Other tissue products are regulated as biologics and, in order to be lawfully marketed in the UnitedStates, require an FDA-approved biologics application (BLA).Products Regulated as HCT/Ps The FDA has specific regulations governing human cells, tissues and cellular and tissue-based products, or HCT/Ps. An HCT/P is a product containingor consisting of human cells or tissue intended for transplantation into a human patient. HCT/Ps that meet the criteria for regulation solely under Section 361of the Public Health Service Act (so-called “361 HCT/Ps”) are not subject to any premarket clearance or approval requirements but are subject to post-marketregulatory requirements.To be a 361 HCT/P, a product generally must meet all four of the following criteria:•It must be minimally manipulated;•It must be intended for homologous use;•Its manufacture must not involve combination with another article, except for water, crystalloids or a sterilizing, preserving or storage agent;and•It must not have a systemic effect and must not be dependent upon the metabolic activity of living cells for its primary function.If an HCT/P meets all the above criteria, no FDA review for safety and effectiveness under a drug, device, or biological product marketingapplication is required. MiMedx believes that its amniotic tissue allografts are 361 HCT/Ps, including the micronized versions of EpiFix and AmnioFix.10 However, on August 28, 2013, the FDA issued an Untitled Letter alleging that the Company's micronized amniotic tissue allografts do not meet thecriteria for regulation solely under Section 361 of the Public Health Service Act and that, as a result, MiMedx would need a biologics license to lawfullymarket those micronized products. Since the issuance of the Untitled Letter, the Company has been in discussions with the FDA to communicate itsdisagreement with the FDA's assertion that the Company's allografts are more than minimally manipulated. To date, the FDA has not changed its position thatthe Company's micronized products are not eligible for marketing solely under Section 361 of the Public Health Service Act, but discussions are continuing.The Company continues to market its micronized products but is also pursuing the Biologics License Application (“BLA”) process for certain of itsmicronized products.On December 22, 2014, the FDA issued for comment “Draft Guidance for Industry and FDA Staff: Minimal Manipulation of Human Cells, Tissues,and Cellular and Tissue-Based Products.” Essentially the Minimal Manipulation draft guidance takes the same position with respect to micronized amniotictissue that it took in the Untitled Letter to MiMedx 16 months earlier. The Company submitted comments asserting that the Minimal Manipulation draftguidance represents agency action that goes far beyond the FDA’s statutory authority, is inconsistent with existing HCT/ P regulations and the FDA’s priorpositions, and is internally inconsistent and scientifically unsound.On October 28, 2015, the FDA issued for comment, "Draft Guidance for Industry and FDA Staff: Homologous Use of Human Cells, Tissues, andCellular and Tissue-Based Products." The Company submitted comments on this Homologous Use draft guidance. The FDA has also indicated that it willhold a public hearing on a date in 2016 to be determined to obtain input on the Homologous Use draft guidance and the previously released MinimalManipulation draft guidance, as well as other recently issued guidance documents on HCT/Ps. The Company has requested and been granted an opportunityto speak at this hearing.See discussion below- “Risk Factors” under the heading “To the extent our products do not qualify for regulation as human cells, tissues andcellular and tissue-based products under Section 361 of the Public Health Service Act, this could result in removal of the applicable products from themarket, would make the introduction of new tissue products more expensive and significantly delay the expansion of our tissue product offerings andsubject us to additional post-market regulatory requirements.”Products Regulated as Biologics- The Biologics License Application (BLA) PathwayThe typical steps for obtaining FDA approval of a BLA to market a biologic product in the U.S. include:•Completion of preclinical laboratory tests, animal studies and formulations studies under the FDA’s good laboratory practices regulations;•Submission to the FDA of an Investigational New Drug Application (IND) for human clinical testing, which must become effective beforehuman clinical trials may begin and which must include independent Institutional Review Board (IRB) approval at each clinical site beforethe trials may be initiated;•Performance of adequate and well-controlled clinical trials in accordance with Good Clinical Practices to establish the safety and efficacy ofthe product for each indication;•Submission to the FDA of a BLA for marketing the product, which includes, among other things, reports of the outcomes and full data sets ofthe clinical trials, and proposed labeling and packaging for the product;•Satisfactory review of the contents of the BLA by the FDA, including the satisfactory resolution of any questions raised during the review;•Satisfactory completion of an FDA Advisory Committee review, if applicable;•Satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliancewith Current Good Manufacturing Practices (cGMP) regulations, to assure that the facilities, methods and controls are adequate to ensure theproduct’s identity, strength, quality and purity; and•FDA approval of the BLA, including agreement on post-marketing commitments, if applicable.Generally, clinical trials are conducted in three phases, though the phases may overlap or be combined. Phase I trials typically involve a smallnumber of healthy volunteers and are designed to provide information about the product safety and to evaluate the pattern of drug distribution andmetabolism within the body. Phase II trials are conducted in a larger but limited11 group of patients afflicted with a particular disease or condition in order to determine preliminary efficacy, dosage tolerance and optimal dosing and toidentify possible adverse effects and safety risks. Dosage studies are designated as Phase IIA and efficacy studies are designated as Phase IIB. Phase III clinicaltrials are generally large-scale, multi-center, comparative trials conducted with patients who have a particular disease or condition in order to providestatistically valid proof of efficacy, as well as safety and potency. In some cases, the FDA will require Phase IV, or post-marketing trials, to collect additionaldata after a product is on the market. All phases of clinical trials are subject to extensive record keeping, monitoring, auditing, and reporting requirements. Asindicated above, the Company is pursuing the Biologics License Application (“BLA”) process for certain of its micronized products. On July 22, 2014, theCompany filed its first IND application with the FDA. In response to the IND application, the FDA agreed the Company had sufficient data to begin a PhaseIIB clinical trial of its micronized product for a specified indication of use in anticipation of a BLA, which the Company expects to submit at a future date. The clinical trial is expected to enroll approximately 150 patients in 10 - 20 clinical sites in the U.S. The Company initiated the trial in March of 2015.The process of obtaining an approved BLA requires the expenditure of substantial time, effort and financial resources and may take years tocomplete. The fee for filing a BLA and the annual user fees payable with respect to any establishment that manufactures biologics and with respect to eachapproved product are substantial.See discussion below- “Risk Factors” under the heading “Obtaining and maintaining the necessary regulatory approvals for certain products willbe expensive and time-consuming and may impede our ability to fully exploit our technologies.”Medical DevicesProducts from our CollaFix product platform are likely to be classified by the FDA as medical devices. Medical Devices are classified as I, II and IIIin the U.S., with Class II and III requiring either a 510(k) clearance or Premarket Approval (“PMA”) from the FDA prior to marketing. Devices deemedsubstantially equivalent to legally marketed devices are deemed to pose relatively less risk and are deemed Class I and II. Manufacturers are required tosubmit a premarket notification requesting clearance for commercial distribution. This is known as 510(k) clearance, which indicates that the device issubstantially equivalent to devices already legally on the market. Most Class I devices are considered very low risk and are exempted from thisrequirement. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or devices deemed not substantially equivalent toa previously 510(k) cleared device or a pre-amendment Class III device for which PMA applications have not been required, are placed in Class III, requiringPMA. Although we may be able to obtain approval for some products through the 510(k) clearance process, in order to fully exploit the CollaFix technology,one or more PMA applications would likely be required.Like the process of obtaining an approved BLA, the process of obtaining a PMA requires the expenditure of substantial time, effort and financialresources and may take years to complete.FDA Post Market RegulationTissue processors are required to register as an establishment with the FDA. As a registered establishment, we are required to comply with regulationsregarding labeling, record keeping, donor eligibility, and screening and testing, process the tissue in accordance with established Good Tissue Practices, andreport any adverse reactions attributed to our tissue. Our facilities are also subject to periodic inspections to assess our compliance with the regulations.Products covered by a BLA, 510(k) clearance, or a PMA are subject to numerous additional regulatory requirements, which include, among others,compliance with cGMP, which imposes certain procedural, substantive and record keeping requirements, labeling regulations, the FDA’s general prohibitionagainst promoting products for unapproved or “off-label” uses, and additional adverse event reporting.Other Regulation Specific to Tissue ProductsWe are accredited by the American Association of Tissue Banks (AATB), which has issued operating standards for tissue banking. Compliance withthese standards is a requirement in order to become a licensed tissue bank. In addition, some states have their own tissue banking regulations.In addition, procurement of certain human organs and tissue for transplantation is subject to the restrictions of the National Organ Transplant Act(“NOTA”), which prohibits the transfer of certain human organs, including skin and related tissue, for valuable consideration, but permits reasonable paymentassociated with the removal, transportation, implantation,12 processing, preservation, quality control and storage of human tissue and skin. We reimburse tissue banks, hospitals and physicians for their servicesassociated with the recovery, storage and transportation of donated human tissue. See discussion below- “Risk Factors” under the heading "Our business is subject to continuing regulatory compliance by the FDA and otherauthorities, which is costly and our failure to comply could result in negative effects on our business".Fraud, Abuse and False ClaimsWe are directly and indirectly subject to various federal and state laws governing relationships with healthcare providers and pertaining tohealthcare fraud and abuse, including anti-kickback laws. In particular, the federal healthcare program Anti-Kickback Statute prohibits persons fromknowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of anindividual, or the furnishing, arranging for or recommending a good or service for which payment may be made in whole or part under federal healthcareprograms, such as the Medicare and Medicaid programs. Penalties for violations include criminal penalties and civil sanctions such as fines, imprisonmentand possible exclusion from Medicare, Medicaid and other federal healthcare programs. The Anti-Kickback Statute is broad and prohibits manyarrangements and practices that are lawful in businesses outside of the healthcare industry. In implementing the statute, the Office of Inspector General of theU.S. Department of Health and Human Services (“OIG”) has issued a series of regulations, known as the “safe harbors.” These safe harbors set forth provisionsthat, if all their applicable requirements are met, will assure healthcare providers and other parties that they will not be prosecuted under the Anti-KickbackStatute. The failure of a transaction or arrangement to fit precisely within one or more safe harbors does not necessarily mean that it is illegal or thatprosecution will be pursued. However, conduct and business arrangements that do not fully satisfy each applicable element of a safe harbor may result inincreased scrutiny by Government enforcement authorities, such as the OIG. Many states have laws similar to the federal law.AdvaMed is one of the primary voluntary U.S. trade associations for medical device manufacturers. This association has established guidelines andprotocols for medical device manufacturers in their relationships with healthcare professionals on matters including research and development, producttraining and education, grants and charitable contributions, support of third-party educational conferences, and consulting arrangements. Adoption of theAdvaMed Code by a medical device manufacturer is voluntary, and while the OIG and other federal and state healthcare regulatory agencies encourage itsadoption and may look to the AdvaMed Code, they do not view adoption of the AdvaMed Code as proof of compliance with applicable laws. As part of aCompany-wide compliance plan, we have incorporated the principles of the AdvaMed Code in our standard operating procedures, sales force trainingprograms, and relationships with health care professionals. Key to the underlying principles of the AdvaMed Code is the need to focus the relationshipsbetween manufacturers and healthcare professionals on matters of training, education and scientific research, and limit payments between manufacturers andhealthcare professionals to fair market value for legitimate services provided and payment of modest meal, travel and other expenses for a healthcareprofessional under limited circumstances. We have incorporated these principles into our relationships with healthcare professionals under our consultingagreements, and our policies regarding payment of travel and lodging expenses, research and educational grant procedures and sponsorship of third-partyconferences. See discussion below- “Risk Factors” under the heading “We and our sales representatives, whether employees or independent contractors, must complywith various federal and state anti-kickback, self-referral, false claims and similar laws, any breach of which could cause a material adverse effect on ourbusiness, financial condition and results of operations.”Manufacturing (Processing)In early 2014, we expanded our production capacity from one location in Kennesaw, Georgia, by adding a second and significantly larger,manufacturing facility within our headquarters building in Marietta, Georgia. Effective January 2014, our main processing operations were relocated to theMarietta, Georgia facility. The Kennesaw facility serves as a secondary processing site. We also perform research and early stage product and processdevelopment activities in our Marietta and Kennesaw, Georgia, locations. Stability maintains a facility in San Antonio, Texas for tissue processing.We are registered with the FDA as a tissue establishment and are subject to the FDA’s quality system regulations, state regulations, and regulationspromulgated by the European Union. Our facilities are subject to periodic unannounced inspections by regulatory authorities, and may undergo complianceinspections conducted by the FDA and corresponding state and foreign agencies.Placental Donation Program13 We have a comprehensive network of hospitals that participate in our placenta donation program. We have a dedicated staff that works at thesehospitals, collecting donated placentas from mothers who undergo Cesarean section births and consent to donation. We believe that we will be able toprocure an adequate supply of tissue to meet anticipated demand. However, see discussion below- “Risk Factors” under the heading “Our products aredependent on the availability of sufficient quantities of tissue from human donors, and any disruption in supply could adversely affect our business."Research and DevelopmentOur research and development group has extensive experience in developing products related to our field of interest, and works to design productsthat are intended to improve patient outcomes, simplify techniques, shorten procedures, reduce hospitalization and rehabilitation times and, as a result,reduce costs. Clinical trials that demonstrate the safety, efficacy and cost effectiveness of our products are key to obtaining broader reimbursement for ourproducts. In addition to our internal staff, we contract with outside labs and physicians who aid us in our research and development process. See Part II, Item7 below for information regarding expenditures for research and development in each of the last three fiscal years.Environmental MattersOur tissue preservation activities generate some chemical and biomedical wastes, consisting primarily of diluted alcohols and acids, and human andanimal pathological and biological wastes, including human and animal tissue and body fluids removed during laboratory procedures. The chemical andbiomedical wastes generated by our tissue processing operations are placed in appropriately constructed and labeled containers and are segregated from otherwastes. We contract with third parties for transport, treatment, and disposal of waste. We strive to remain compliant with applicable laws and regulationspromulgated by the Resource Conservation and Recovery Act, the U.S. Environmental Protection Agency and similar state agencies.EmployeesAs of December 31, 2015, we had approximately 550 employees. We consider our relationships with our employees to be satisfactory. None of ouremployees is covered by a collective bargaining agreement.Available InformationOur website address is www.mimedx.com. We make available on this website under “Investors - SEC Filings,” free of charge, our proxy statements,annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicableafter we electronically file or furnish such materials to the SEC. In addition, we post filings of Forms 3, 4, and 5 filed by our directors, executive officers andten percent or more shareholders. We also make available on this website under the heading “Investors - Corporate Governance” our Audit Committee,Compensation Committee and Nominating and Corporate Governance Committee Charters as well as our Code of Business Conduct and Ethics.The reference to our website does not constitute incorporation by reference of any information contained at that site.14 Item 1A. Risk FactorsRisks Related to Our Business and IndustryOur operating results may fluctuate significantly as a result of a variety of factors, many of which are outside of our control.We are subject to the following factors, among others, that may negatively affect our operating results:•The announcement or introduction of new products by our competitors;•Failure of Government and private health plans to adequately and timely reimburse the users of our products;•Removal of our products from the Federal Supply Schedule or change in the prices that Government accounts will pay for our products;•Our ability to upgrade and develop our systems and infrastructure to accommodate growth;•Our ability to attract and retain key personnel in a timely and cost effective manner;•The amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations and infrastructure;•Regulation by Federal, State or Local Governments; and•General economic conditions as well as economic conditions specific to the healthcare industry.We have based our current and future expense levels largely on our investment plans and estimates of future events, although certain of our expenselevels are, to a large extent, fixed. We may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Accordingly,any significant shortfall in revenue relative to our planned expenditures would have an immediate adverse effect on our business, results of operations andfinancial condition. Further, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing, service ormarketing decisions that could have a material and adverse effect on our business, results of operations and financial condition. Due to the foregoing factors,our revenue and operating results are and will remain difficult to forecast.We are in a highly competitive and evolving field and face competition from well-established tissue processors and medical device manufacturers, as wellas new market entrants.Our business is in a very competitive and evolving field. Competition from other tissue processors, medical device companies and from research andacademic institutions is intense, expected to increase, subject to rapid change, and could be significantly affected by new product introductions. Thepresence of this competition in our market may lead to pricing pressure, which would make it more difficult to sell our products at a price that will make usprofitable or prevent us from selling our products at all. Our success will depend on our ability to perfect and protect our intellectual property rights related toour technologies as well as to develop new technologies and new applications for our technologies. Our failure to compete effectively would have a materialand adverse effect on our business, results of operations and financial condition.Rapid technological change could cause our products to become obsolete.The technologies underlying our products are subject to rapid and profound technological change. Competition intensifies as technical advances ineach field are made and become more widely known. We can give no assurance that others will not develop services, products, or processes with significantadvantages over the products, services, and processes that we offer or are seeking to develop. Any such occurrence could have a material and adverse effecton our business, results of operations and financial condition.Our products are dependent on the availability of sufficient quantities of tissue from human donors, and any disruption in supply could adversely affect ourbusiness.The success of our human tissue products depends upon, among other factors, the availability of sufficient quantities of tissue from humandonors. The availability of donated tissue could be adversely impacted by regulatory changes, public opinion of the donor process as well as our ownreputation in the industry. Any disruption in the supply of donated human tissue could restrict our growth and could have a material adverse impact on ourbusiness and financial condition. We cannot15 be sure that the supply of human tissue will continue to be available at current levels or will be sufficient to meet our future needs.The products we manufacture and process are derived from human tissue and therefore have the potential for disease transmission.The utilization of human tissue creates the potential for transmission of communicable disease, including, but not limited to, humanimmunodeficiency virus (“HIV”), viral hepatitis, syphilis and other viral, fungal or bacterial pathogens. We are required to comply with federal and stateregulations intended to prevent communicable disease transmission.Although we maintain strict quality controls over the procurement and processing of our tissue, there is no assurance that these quality controls willbe adequate. In addition, negative publicity concerning disease transmission from other companies' improperly processed donated tissue could have anegative impact on the demand for our products.We depend on key personnel.Our success will depend, in part, upon our ability to attract and retain skilled personnel, including sales, managerial and technical personnel. Therecan be no assurance that we will be able to find and attract additional qualified employees to support our expected growth or retain any such personnel. Ourinability to hire and retain qualified personnel or the loss of services of our key personnel may have a material and adverse effect on our business and resultsof operations.A significant portion of our revenues and accounts receivable come from Government accounts.We provide products to Government accounts, including the Department of Veterans Affairs, through a distributor that has a Federal SupplySchedule (FSS) Contract. Sales through this distributor, AvKARE, represented approximately 24% of our revenue in 2015, 34% of our revenue in 2014, and56% of our revenue in 2013. In addition, in 2014, the Company applied for, and in early 2015 received, its own FSS contract with a term through 2020,which allows the Company to sell directly to Government accounts. The initial term of the distribution agreement with AvKARE was due to expire in April2015 but it has been extended via amendment through June 30, 2017, with the ability to further extend under certain circumstances. The agreement withAvKARE, as amended, allows the Company to sell its products directly on the FSS. Ultimately, the Company intends to transition all of its Government salesto sales sold directly to Government accounts on the FSS. Any disruption of our products on the Federal Supply Schedule (whether we are selling ourproducts directly to Government accounts or through our current or another distributor) or a change in the way the Government purchases products like oursor the price it is willing to pay for our products, could materially and adversely affect our business, revenues and results of operations.In order to grow revenues from certain of our products, we must expand our relationships with distributors and independent sales representatives.We derive significant revenues through our relationships with distributors and independent sales representatives, though, other than our distributorfor Government accounts as discussed above, no one distributor comprised over 5% of our revenues. If such relationships were terminated for any reason, itcould materially and adversely affect our ability to generate revenues and profits. We intend to obtain the assistance of additional distributors andindependent sales representatives to continue our sales growth with respect to certain of our products. We may not be able to find additional distributors andindependent sales representatives who will agree to market and/or distribute those products on commercially reasonable terms, if at all. If we are unable toestablish new distribution and independent sales representative relationships or renew current distribution and sales agency agreements on commerciallyacceptable terms, our business, financial condition and results of operations could be materially and adversely affected.We continue to invest significant capital in expanding our internal sales force, and there can be no assurance that these efforts will continue to result insignificant increases in sales.We are engaged in a major initiative to build and further expand our internal sales and marketing capabilities which has contributed to our increasedsales. As a result, we continue to invest in a direct sales force for certain of our products to allow us to reach new customers. These expenses impact ouroperating results, and there can be no assurance that we will continue to be successful in significantly expanding the sales of our products.Our revenues depend on adequate reimbursement from public and private insurers and health systems.Our success depends on the extent to which reimbursement for the costs of our products and related treatments will be available from third partypayers, such as public and private insurers and health systems. Government and other third-party payers attempt to contain healthcare costs by limiting bothcoverage and the level of reimbursement of new16 products. Therefore, significant uncertainty usually exists as to the reimbursement status of new healthcare products. A significant number of public andprivate insurers and health systems currently do not provide reimbursement for our products. If we are not successful in obtaining adequate reimbursementfor our products from these third party payers, the market's acceptance of our products could be adversely affected. Inadequate reimbursement levels alsolikely would create downward price pressure on our products. Even if we do succeed in obtaining widespread reimbursement for our products, future changesin reimbursement policies could have a negative impact on our business, financial condition and results of operations.Disruption of our processing could adversely affect our business, financial condition and results of operations.Our results of operations are dependent upon the continued operation of our processing facilities. Risks that could impact our ability to use thesefacilities include the occurrence of natural and other disasters, and the need to comply with the requirements of directives from Government agencies,including the FDA. We have a secondary processing facility in Kennesaw, Georgia that also serves as a disaster recovery center. However, the unavailabilityof our manufacturing and processing facilities could have a material adverse effect on our business, financial condition, and results of operations during theperiod of such unavailability.To be commercially successful, we must convince physicians that our products are safe and effective alternatives to existing treatments and that ourproducts should be used in their procedures.We believe physicians will only adopt our products if they determine, based on experience, clinical data and published peer reviewed journalarticles, that the use of our products in a particular procedure is a favorable alternative to conventional methods. Physicians may be slow to change theirmedical treatment practices for the following reasons, among others: ·Their lack of experience with prior procedures in the field using our products;·Lack of evidence supporting additional patient benefits and our products over conventional methods;·Perceived liability risks generally associated with the use of new products and procedures;·Limited availability of reimbursement from third party payers; and·The time that must be dedicated to training.In addition, we believe recommendations for and support of our products by influential physicians are essential for market acceptance andadoption. If we do not receive this support or if we are unable to demonstrate favorable long-term clinical data, physicians and hospitals may not use ourproducts, which would significantly reduce our ability to achieve expected revenue and would prevent us from sustaining profitability.We will need to expand our organization, and managing growth may be more difficult than expected.Managing our growth may be more difficult than we expect. We anticipate that a period of significant expansion will be required to penetrate andservice the market for our existing and anticipated future products and to continue to develop new products. This expansion will place a significant strain onmanagement, operational and financial resources. To manage the expected growth of our operations and personnel, we must both modify our existingoperational and financial systems, procedures and controls and implement new systems, procedures and controls. We must also expand our finance,administrative, and operations staff. Management may be unable to hire, train, retain, motivate and manage necessary personnel or to identify, manage andexploit existing and potential strategic relationships and market opportunities.We face the risk of product liability claims and may not be able to obtain or maintain adequate product liability insurance.Our business exposes us to the risk of product liability claims that are inherent in the manufacturing, processing and marketing of medical devicesand human tissue products. We may be subject to such claims if our products cause, or appear to have caused, an injury. Claims may be made by patients,healthcare providers or others selling our products. Defending a lawsuit, regardless of merit, could be costly, divert management attention and result inadverse publicity, which could result in the withdrawal of, or reduced acceptance of, our products in the market.Although we have product liability insurance that we believe is adequate, this insurance is subject to deductibles and coverage limitations and wemay not be able to maintain this insurance. Also, it is possible that claims could exceed the limits of our coverage. If we are unable to maintain productliability insurance at an acceptable cost or on acceptable terms with adequate coverage or otherwise protect ourselves against potential product liabilityclaims or we underestimate the amount of17 insurance we need, we could be exposed to significant liabilities, which may harm our business. A product liability claim or other claim with respect touninsured liabilities or for amounts in excess of insured liabilities could result in significant costs and significant harm to our business.We may implement a product recall or voluntary market withdrawal, which could significantly increase our costs, damage our reputation and disrupt ourbusiness.The manufacturing, marketing and processing of our tissue products involves an inherent risk that our tissue products or processes do not meetapplicable quality standards and requirements. In that event, we may voluntarily implement a recall or market withdrawal or may be required to do so by aregulatory authority. A recall or market withdrawal of one of our products would be costly and would divert management resources. A recall or withdrawal ofone of our products, or a similar product processed by another entity, also could impair sales of our products as a result of confusion concerning the scope ofthe recall or withdrawal, or as a result of the damage to our reputation for quality and safety.Significant disruptions of information technology systems or breaches of information security could adversely affect our business.We rely to a large extent upon sophisticated information technology systems to operate our business. In the ordinary course of business, we collect,store and transmit large amounts of confidential information (including, but not limited to, personal information and intellectual property). We also haveoutsourced significant elements of our operations to third parties, including significant elements of our information technology infrastructure and, as a result,we are managing many independent vendor relationships with third parties who may or could have access to our confidential information. The size andcomplexity of our information technology and information security systems, and those of our third-party vendors with whom we contract (and the largeamounts of confidential information that is present on them), make such systems potentially vulnerable to service interruptions or to security breaches frominadvertent or intentional actions by our employees or vendors, or from malicous attacks by third parties. Such attacks are of ever-increasing levels ofsophistication and are made by groups and individuals with a wide range of motives (including, but not limited to, industrial espionage and marketmanipulation) and expertise. While we have invested significantly in the protection of data and information technology, there can be no assurance that ourefforts will prevent service interruptions or security breaches. Although we have cyber-insurance coverage that may cover certain events described above, thisinsurance is subject to deductibles and coverage limitations and we may not be able to maintain this insurance. Also, it is possible that claims could exceedthe limits of our coverage. Any interruption or breach in our systems could adversely affect our business operations and/or result in the loss of critical orsensitive confidential information or intellectual property, and could result in financial, legal, business and reputational harm to us or allow third parties togain material, inside information that they use to trade in our securities.We may not be successful in commercializing our CollaFix Technology.We have invested substantial time and resources in developing various additional products using our CollaFix technology. Furthercommercialization of this technology will require additional development, clinical evaluation, regulatory clearance or approval, significant marketing effortsand substantial additional investment before they can provide us with any revenue. Despite our efforts, any such products may not become commerciallysuccessful products for a number of reasons, including:·We may not be able to obtain regulatory clearance or approvals for such products, or the approved indication may be narrower than we seek;·Such products may not prove to be safe and effective in preclinical or clinical trials;·Physicians or hospitals may not receive any reimbursement from third party payers, or the level of reimbursement may be insufficient to supportwidespread adoption of such products;·We may experience delays in our development programs;·Any products that are approved may not be accepted in the marketplace by physicians or patients;·We may not be able to manufacture any such products in commercial quantities or at an acceptable cost; and·Rapid technological change may make such products obsolete.We may expand our business through acquisitions, licenses, investments, and other commercial arrangements in other companies or technologies, whichcontain significant risks.18 We periodically evaluate strategic opportunities to acquire companies, divisions, technologies, products, and rights through licenses, distributionagreements, investments, and outright acquisitions to grow our business. In connection with one or more of those transactions, we may:•Issue additional equity securities that would dilute our stockholders’ value;•Use cash that we may need in the future to operate our business;•Incur debt that could have terms unfavorable to us or that we might be unable to repay;•Structure the transaction in a manner that has unfavorable tax consequences, such as a stock purchase that does not permit a step-up in the tax basisfor the assets acquired;•Be unable to realize the anticipated benefits, such as increased revenues, cost savings, or synergies from additional sales;•Be unable to secure the services of key employees related to the acquisition; and•Be unable to succeed in the marketplace with the acquisition.Any of these items could materially, and adversely affect our revenues, financial condition, and profitability. Business acquisitions also involve therisk of unknown liabilities associated with the acquired business, which could be material. Incurring unknown liabilities or the failure to realize theanticipated benefits of an acquisition could materially, and adversely affect our business if we are unable to recover our initial investment, which couldinclude the cost of acquiring licenses or distribution rights, acquiring products, purchasing initial inventory, or investments in early stage companies.Inability to recover our investment, or any write off of such investment, associated goodwill, or assets, could have a material and adverse effect on ourbusiness, results of operations and financial condition.Our international expansion and operations in foreign markets expose us to risks associated with international sales and operations. We are actively seeking to expand into foreign markets. Managing a global organization is difficult, time consuming, and expensive. Conductinginternational operations subjects us to risks that could be different than those faced by us in the United States. These risks include: lack of familiarity withand unexpected changes in foreign regulatory requirements; longer accounts receivable payment cycles and difficulties in collecting accounts receivable;difficulties in managing and staffing international operations; fluctuations in currency exchange rates; the burdens of complying with a wide variety offoreign laws and legal standards; increased financial reporting burdens and complexities; and political, social, and economic instability abroad. Operating ininternational markets also requires significant management attention and financial resources. The investment and additional resources required to operateand manage growth in other countries may not produce desired levels of revenue or profitability.New lines of business or new products and services may subject us to additional risks. From time to time, we may implement or may acquire new lines of business or offer new products and services within existing lines of business. There arerisks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed or are evolving. In developing andmarketing new lines of business and new products and services, we may invest significant time and resources. External factors, such as regulatory complianceobligations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a newproduct or service. Failure to successfully manage these risks in the development and implementation of new lines of business or new products or servicescould have a material adverse effect on our business, results of operations and financial condition.Risks Related to Our Intellectual PropertyOur ability to protect our intellectual property and proprietary technology through patents and other means is uncertain and may be inadequate, whichcould have a material and adverse effect on us. Our success depends significantly on our ability to protect our proprietary rights to the technologies used in our products. We rely on patentprotection, as well as a combination of copyright, trade secret and trademark laws and nondisclosure, confidentiality and other contractual restrictions toprotect our proprietary technology, including our licensed technology. These legal means afford only limited protection and may not adequately protect ourrights or permit us to gain or19 keep any competitive advantage. In addition, our pending patent applications include claims to material aspects of our products and procedures that are notcurrently protected by issued patents. The patent application process can be time consuming and expensive. We cannot ensure that any of our pendingpatent applications will result in issued patents. Competitors may be able to design around our patents or develop products that provide outcomes that arecomparable or even superior to ours. Although we have taken steps to protect our intellectual property and proprietary technology, including entering intoconfidentiality agreements and intellectual property assignment agreements with some of our officers, employees, consultants and advisors, such agreementsmay not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use ordisclosure or other breaches of the agreements. Furthermore, the laws of foreign countries may not protect our intellectual property rights to the same extentas do the laws of the United States.The failure to obtain and maintain patents and/or protect our intellectual property rights could have a material and adverse effect on our business,results of operations, and financial condition. Whether a patent is valid is a complex matter of science and law, and therefore we cannot be certain that, ifchallenged, our patents would be upheld. If one or more of those patents are invalidated, that could reduce or eliminate any competitive advantage we mightotherwise have had.In the event a competitor infringes upon our licensed or pending patent or other intellectual property rights, enforcing those rights may be costly,uncertain, difficult and time consuming. Even if successful, litigation to enforce or defend our intellectual property rights could be expensive and timeconsuming and could divert our management's attention. Further, bringing litigation to enforce our patents subjects us to the potential for counterclaims.Other companies or entities also have commenced, and may again commence, actions seeking to establish the invalidity of our patents. For example, thedefendants in certain of our ongoing patent infringement suits have filed petitions for inter-partes review of certain of our patents with the United StatesPatent and Trademark Office (USPTO). We intend to defend these actions vigorously, but there is no guarantee of success, and such effort takes financial andtime resources from the Company. In the event that one or more of our patents are challenged, a court or the USPTO may invalidate the patent(s) or determinethat the patent(s) is not enforceable, which could harm our competitive position. If the USPTO ultimately cancels or narrows the claim in any of our patentsthrough these proceedings, it could prevent or hinder us from being able to enforce them against competitors. Such adverse decisions could negativelyimpact our future, expected revenue. See Item 3, Legal Proceedings for information regarding our ongoing patent infringement lawsuits and related inter-partes review proceedings.The prosecution and enforcement of patents licensed to us by third parties are not within our control, and without these technologies, our products may notbe successful and our business would be harmed if the patents were infringed or misappropriated.We have obtained licenses from third parties for patents and patent application rights related to our CollaFix technologies, allowing us to useintellectual property rights owned by or licensed to these third parties. We do not control the maintenance, prosecution, enforcement or strategy for many ofthese patents or patent application rights and as such are dependent in part on the owners of the intellectual property rights to maintain their viability. Theirfailure to do so could significantly impair our ability to exploit those technologies.We may become subject to claims of infringement of the intellectual property rights of others, which could prohibit us from developing our products,require us to obtain licenses from third parties or to develop non-infringing alternatives, and subject us to substantial monetary damages.Third parties could assert that our products infringe their patents or other intellectual property rights. Whether a product infringes a patent or otherintellectual property involves complex legal and factual issues, the determination of which is often uncertain. Therefore, we cannot be certain that we havenot infringed the intellectual property rights of others. Because patent applications may take years to issue, there also may be applications now pending ofwhich we are unaware that may later result in issued patents that our products or processes infringe. There also may be existing patents or pending patentapplications of which we are unaware that our products or processes may inadvertently infringe.Any infringement claim could cause us to incur significant costs, place significant strain on our financial resources, divert management's attentionfrom our business and harm our reputation. If the relevant patents in such claim were upheld as valid and enforceable and we were found to infringe, wecould be prohibited from selling any product that is found to infringe unless we could obtain licenses to use the technology covered by the patent or otherintellectual property or are able to design around the patent or other intellectual property. We may be unable to obtain such a license on terms acceptable tous, if at all, and we may not be able to redesign our products to avoid infringement. A court could also order us to pay compensatory damages for suchinfringement, plus prejudgment interest and could, in addition, treble the compensatory damages and award attorney fees. These damages could besubstantial and could harm our reputation, business, financial condition and operating results. A court also could enter orders that temporarily, preliminarilyor permanently enjoin us and our customers from making, using, or selling products, and could enter an order mandating that we undertake certain remedial20 activities. Depending on the nature of the relief ordered by the court, we could become liable for additional damages to third parties.We may be subject to damages resulting from claims that we, our employees, or our independent contractors have wrongfully used or disclosed allegedtrade secrets of others.Some of our employees were previously employed at other medical device or tissue companies. We may also hire additional employees who arecurrently employed at other medical device or tissue companies, including our competitors. Additionally, consultants or other independent agents withwhich we may contract may be or have been in a contractual arrangement with one or more of our competitors. Although no claims against us are currentlypending, we may be subject to claims that these employees or independent contractors have used or disclosed any party's trade secrets or other proprietaryinformation. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could resultin substantial costs and be a distraction to management. If we fail to defend such claims, in addition to paying monetary damages, we may lose valuableintellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to market existing or newproducts, which could severely harm our business.Our License Agreement for our CollaFix technology could be terminated.Under our license agreement with Shriners' Hospitals for Children and University of South Florida Research Foundation dated January 29, 2007, it ispossible for the licensor to terminate the agreement if we breach the license agreement and all of our cure rights are exhausted. If our license agreement wereto be terminated, our investment in the CollaFix technology would be lost.Risks Related to Regulatory Approval of Our Products and Other Government RegulationsTo the extent our products do not qualify for regulation as human cells, tissues and cellular and tissue-based products under Section 361 of the PublicHealth Service Act, this could result in removal of the applicable products from the market, would make the introduction of new tissue products moreexpensive and significantly delay the expansion of our tissue product offerings and subject us to additional post-market regulatory requirements.The products we manufacture and process are derived from human tissue. The FDA has specific regulations governing human cells, tissues andcellular and tissue-based products, or HCT/Ps. An HCT/P is a product containing or consisting of human cells or tissue intended for transplantation into ahuman patient. HCT/Ps that meet the criteria for regulation solely under Section 361 of the Public Health Service Act (so-called “361 HCT/Ps”) are notsubject to any premarket clearance or approval requirements and are subject to less stringent post-market regulatory requirements.If a product is deemed not to be a 361 HCT/P, FDA regulations will require premarket clearance or approval requirements that will involvesignificant time and cost investments by the Company. Further, there can be no assurance that the FDA will not, at some future point, change its position oncurrent or future products' 361 HCT/P status, and any regulatory reclassification could have adverse consequences for us and make it more difficult orexpensive for us to conduct our business by requiring premarket clearance or approval and compliance with additional post-market regulatory requirementswith respect to those products. Moreover, increased regulatory scrutiny within the industry in which we operate could lead to increased regulation of HCT/Ps,including 361 HCT/Ps. We also cannot assure you that the FDA will not impose more stringent definitions with respect to products that qualify as 361HCT/Ps.See "Government Regulation" in Item 1 for a discussion of 361 HCT/Ps and the FDA's position on our products. If the FDA does allow the Companyto continue to market a micronized form of its sheet allografts without a biologics license either prior to or after finalization of the draft guidance documents,it may impose conditions, such as labeling restrictions and compliance with cGMP. Although the Company is preparing for these requirements in connectionwith its pursuit of a BLA for certain of its micronized products, earlier compliance with these conditions would require significant additional time and costinvestments by the Company. It is also possible that the FDA will not allow the Company to market any form of a micronized product without a biologicslicense even prior to finalization of the draft guidance documents and could even require the Company to recall its micronized products. Revenues frommicronized products comprised approximately 12% of the Company's revenues in 2015.Obtaining and maintaining the necessary regulatory approvals for certain of our products will be expensive and time-consuming and may impede ourability to fully exploit our technologies.21 The process of obtaining regulatory clearances or approvals to market a biologic or medical device from the FDA or similar regulatory authoritiesoutside of the United States is costly and time consuming, and there can be no assurance that such clearances or approvals will be granted on a timely basis,or at all. As discussed above, we intend to pursue approval of a Biologics License Application (BLA) for certain of our micronized products. Additionally, theFDA may take the position that some of the other products that we currently market require a BLA as well. Some of the future products and enhancements toour current products that we expect to develop and market may require marketing clearance or approval from the FDA. There can be no assurance, however,that clearance or approval will be granted with respect to any of our products or enhancements or that FDA review will not involve delays that wouldadversely affect our ability to market such products or enhancements.The process of obtaining an approved BLA requires the expenditure of substantial time, effort and financial resources and may take years tocomplete. The fee for filing a BLA and the annual user fees payable with respect to any establishment that manufactures biologics and with respect to eachapproved product are substantial. Additionally, there are significant costs associated with clinical trials that cannot be estimated until the IND is approved.Moreover, data obtained from clinical activities are not always conclusive and may be susceptible to varying interpretations, which could delay, limit orprevent regulatory approval. The FDA may not grant approval on a timely basis, or at all. Additionally, the FDA may limit the indications for use or placeother conditions on any approvals that could restrict the commercial application of the products. After approval, some types of changes to the approvedproduct, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA reviewand approval.Like the process of obtaining an approved BLA, the process of obtaining a PMA requires the expenditure of substantial time, effort and financialresources and may take years to complete. The FDA may not grant approval on a timely basis, or at all. Additionally, the FDA may limit the indications foruse or place other conditions on any approvals that could restrict the commercial application of the products. After approval, some types of changes to theapproved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements andFDA review and approval.Our business is subject to continuing regulatory compliance by the FDA and other authorities, which is costly and our failure to comply could result innegative effects on our business.As discussed above, the FDA has specific regulations governing our tissue-based products, or HCT/Ps. The FDA has broad post-market andregulatory and enforcement powers. The FDA's regulation of HCT/Ps includes requirements for registration and listing of products, donor screening andtesting, processing and distribution (“Current Good Tissue Practices”), labeling, record keeping and adverse-reaction reporting, and inspection andenforcement.Biologics and medical devices are subject to even more stringent regulation by the FDA. Even if pre-market clearance or approval is obtained, theapproval or clearance may place substantial restrictions on the indications for which the product may be marketed or to whom it may be marketed, mayrequire warnings to accompany the product or impose additional restrictions on the sale and/or use of the product. In addition, regulatory approval is subjectto continuing compliance with regulatory standards, including the FDA's quality system regulations.If we fail to comply with the FDA regulations regarding our tissue products or medical devices, the FDA could take enforcement action, including,without limitation, any of the following sanctions and the manufacture of our products or processing of our tissue could be delayed or terminated:•Untitled letters, warning letters, fines, injunctions, and civil penalties;•Recall or seizure of our products;•Operating restrictions, partial suspension or total shutdown of production;•Refusing our requests for clearance or approval of new products;•Withdrawing or suspending current applications for approval or approvals already granted;•Refusal to grant export approval for our products; and•Criminal prosecution.It is likely that the FDA's regulation of HCT/Ps will continue to evolve in the future. Complying with any such new regulatory requirements mayentail significant time delays and expense, which could have a material adverse effect on our business.22 The American Association of Tissue Banks (“AATB”) has issued operating standards for tissue banking. Compliance with these standards is arequirement in order to become an accredited tissue bank. In addition, some states have their own tissue banking regulations.In addition, procurement of certain human organs and tissue for transplantation is subject to the restrictions of the National Organ Transplant Act(“NOTA”), which prohibits the transfer of certain human organs, including skin and related tissue for valuable consideration, but permits the reasonablepayment associated with the removal, transportation, implantation, processing, preservation, quality control and storage of human tissue and skin. Wereimburse tissue banks, hospitals and physicians for their services associated with the recovery, storage and transportation of donated humantissue. Although we have independent third party appraisals that confirm that reasonableness of the service fees we pay, if we were to be found to haveviolated NOTA's prohibition on the sale or transfer of human tissue for valuable consideration, we would potentially be subject to criminal enforcementsanctions, which could materially and adversely affect our results of operations.Finally, as discussed above, we and other manufacturers of skin substitutes are required to provide ASP information to CMS on a quarterly basis. TheMedicare payment rates are updated quarterly based on this ASP information. If a manufacturer is found to have made a misrepresentation in the reporting ofASP, such manufacturer is subject to civil monetary penalties of up to $10,000 for each misrepresentation for each day in which the misrepresentation wasapplied.We and our sales representatives, whether employees or independent contractors, must comply with various federal and state anti-kickback, self-referral,false claims and similar laws, any breach of which could cause a material adverse effect on our business, financial condition and results of operations.Our relationships with physicians, hospitals and other healthcare providers are subject to scrutiny under various federal anti-kickback, self-referral,false claims and similar laws, often referred to collectively as healthcare fraud and abuse laws. Healthcare fraud and abuse laws are complex, and even minor,inadvertent violations can give rise to claims that the relevant law has been violated. Possible sanctions for violation of these fraud and abuse laws includemonetary fines, civil and criminal penalties, exclusion from federal and state healthcare programs, including Medicare, Medicaid, Veterans Administrationhealth programs, workers' compensation programs and TRICARE (the healthcare system administered by or on behalf of the U.S. Department of Defense foruniformed services beneficiaries, including active duty and their dependents, retirees and their dependents), and forfeiture of amounts collected in violationof such prohibitions. Certain states have similar fraud and abuse laws, imposing substantial penalties for violations. Any Government investigation or afinding of a violation of these laws would likely result in a material adverse effect on the market price of our common stock, as well as our business, financialcondition and results of operations.Anti-kickback laws and regulations prohibit any knowing and willful offer, payment, solicitation or receipt of any form of remuneration in return forthe referral of an individual or the ordering or recommending of the use of a product or service for which payment may be made by Medicare, Medicaid orother Government-sponsored healthcare programs. We have entered into consulting agreements, speaker agreements, research agreements and productdevelopment agreements with physicians, including some who may order our products or make decisions to use them. In addition, some of these physiciansown our stock, which they purchased in arm's length transactions on terms identical to those offered to non-physicians, or received stock awards from us asconsideration for services performed by them. While these transactions were structured with the intention of complying with all applicable laws, includingstate anti-referral laws and other applicable anti-kickback laws, it is possible that regulatory or enforcement agencies or courts may in the future view thesetransactions as prohibited arrangements that must be restructured or for which we would be subject to other significant civil or criminal penalties. Asdiscussed above, we have incorporated the AdvaMed code principles into our relationships with healthcare professionals under our consulting agreements,and our policies regarding payment of travel and lodging expenses, research and educational grant procedures and sponsorship of third-party conferences. Inaddition, we have conducted training sessions on these principles. However, there can be no assurance that regulatory or enforcement authorities will viewthese arrangements as being in compliance with applicable laws or that one or more of our employees or agents will not disregard the rules we haveestablished. Because our strategy relies on the involvement of physicians who consult with us on the design of our products, perform clinical research on ourbehalf or educate the market about the efficacy and uses of our products, we could be materially impacted if regulatory or enforcement agencies or courtsinterpret our financial relationships with physicians who refer or order our products to be in violation of applicable laws and determine that we would beunable to achieve compliance with such applicable laws. This could harm our reputation and the reputations of the physicians we engage to provide serviceson our behalf. In addition, the cost of noncompliance with these laws could be substantial since we could be subject to monetary fines and civil or criminalpenalties, and we could also be excluded from federally-funded healthcare programs, including Medicare and Medicaid, for non-compliance.The Federal False Claims Act (“FCA”) imposes civil liability on any person or entity that submits, or causes the submission of, a false or fraudulentclaim to the U.S. Government. Damages under the FCA can be significant and consist of23 the imposition of fines and penalties. The FCA also allows a private individual or entity with knowledge of past or present fraud against the FederalGovernment to sue on behalf of the Government to recover the civil penalties and treble damages. The U.S. Department of Justice (“DOJ”) on behalf of theGovernment has previously alleged that the marketing and promotional practices of pharmaceutical and medical device manufacturers, including the off-label promotion of products or the payment of prohibited kickbacks to doctors, violated the FCA, resulting in the submission of improper claims to federaland state healthcare entitlement programs such as Medicaid. In certain cases, manufacturers have entered into criminal and civil settlements with the federalgovernment under which they entered into plea agreements, paid substantial monetary amounts and entered into corporate integrity agreements that require,among other things, substantial reporting and remedial actions going forward.The scope and enforcement of all of these laws is uncertain and subject to rapid change, especially in light of the lack of applicable precedent andregulations. There can be no assurance that federal or state regulatory or enforcement authorities will not investigate or challenge our current or futureactivities under these laws. Any investigation or challenge could have a material adverse effect on our business, financial condition and results ofoperations. Any state or federal regulatory or enforcement review of us, regardless of the outcome, would be costly and time consuming. Additionally, wecannot predict the impact of any changes in these laws, whether these changes are retroactive or will have effect on a going-forward basis only.We face significant uncertainty in the industry due to Government healthcare reform.There have been and continue to be proposals by the Federal Government, State Governments, regulators and third party payers to control healthcarecosts, and generally, to reform the healthcare system in the United States. There are many programs and requirements for which the details have not yet beenfully established or the consequences are not fully understood. These proposals may affect aspects of our business. We also cannot predict what furtherreform proposals, if any, will be adopted, when they will be adopted, or what impact they may have on us.Risks Related to the Securities Markets and Ownership of Our Common StockThe price of our common stock has been, and will likely continue to be, volatile.The market price of our common stock, like that of the securities of many other companies that are in, or are just emerging from, the developmentstage, has fluctuated over a wide range and it is likely that the price of our common stock will fluctuate in the future. The market price of our common stockcould be impacted by a variety of factors, including:·Fluctuations in stock market prices and trading volumes of similar companies or of the markets generally;·Our ability to successfully launch, market and earn significant revenue from our products;·Our ability to obtain additional financing to support our continuing operations;·Disclosure of the details and results of regulatory applications and proceedings;·Changes in Government regulations or our failure to comply with any such regulations;·Additions or departures of key personnel;·Our investments in research and development or other corporate resources;·Announcements of technological innovations or new commercial products by us or our competitors;·Developments in the patents or other proprietary rights owned or licensed by us or our competitors;·The timing of new product introductions;·Actual or anticipated fluctuations in our operating results, including any restatements of previously reported results;·Our ability to effectively and consistently manufacture our products and avoid costs associated with the recall of defective or potentially defectiveproducts;·Our ability and the ability of our distribution partners to market and sell our products;·Changes in reimbursement for our products or the price for our products to our customers;24 ·Removal of our products from the Federal Supply Schedule, or changes in how Government accounts purchase products such as ours or in the pricefor our products to Government accounts; and.The other risks detailed in this Item 1A.Further, due to the relatively fixed nature of most of our costs, which primarily include personnel costs as well as facilities costs, any unanticipatedshortfall in revenue in any fiscal quarter would have an adverse effect on our results of operations in that quarter. These fluctuations could cause the tradingprice of our stock to be negatively affected. Our quarterly operating results have varied substantially in the past and may vary substantially in the future. Inaddition, the stock market has been very volatile in the recent past. This volatility is often not related to the operating performance of companies listedthereon and will probably continue in the foreseeable future.Securities analysts may elect not to report on our common stock or may issue negative reports that adversely affect the stock price.At this time, seven securities analysts provide research coverage of our common stock. However, there is no assurance that these analysts willcontinue to report on our common stock or that additional analysts will initiate reporting on our common stock. Rules mandated by the Sarbanes-Oxley Actand a global settlement reached in 2003 among the SEC, other regulatory agencies, and a number of investment banks led to a number of fundamentalchanges in how analysts are reviewed and compensated. In particular, many investment banking firms are required to contract with independent financialanalysts for their stock research. If securities analysts discontinue covering our common stock, the lack of research coverage may adversely affect its actualand potential market price. The trading market for our common stock may be affected in part by the research and reports that industry or financial analystspublish about our business. If one or more analysts elect to cover us and then downgrade the stock, the stock price would likely decline rapidly. If one ormore of these analysts cease coverage of us, we could lose visibility in the market, which in turn could cause our stock price to decline. This could have anegative effect on the market price of our shares.Our charges to earnings resulting from acquisition, restructuring and integration costs may materially adversely affect the market value of our commonstock.We account for the completion of our acquisitions using the purchase method of accounting. We allocate the total estimated purchase prices to nettangible assets, amortizable intangible assets and indefinite-lived intangible assets, and based on their fair values as of the date of completion of theacquisitions, record the excess of the purchase price over those fair values as goodwill. Our financial results, including earnings per share, could be adverselyaffected by a number of financial adjustments required in purchase accounting including the following:•We will incur additional amortization expense over the estimated useful lives of certain of the intangible assets acquired in connection withacquisitions during such estimated useful lives.•We will incur additional depreciation expense as a result of recording purchased tangible assets.•To the extent the value of goodwill or intangible assets becomes impaired, we may be required to incur material charges relating to the impairmentof those assets.•Cost of sales may increase temporarily following an acquisition as a result of acquired inventory being recorded at its fair market value.•Earnings may be affected by changes in estimates of future contingent consideration to be paid when an earn-out is part of the consideration.•Earnings may be affected by transaction and implementation costs, which are expensed immediately. We do not intend to pay cash dividends.We have never declared or paid cash dividends on our capital stock. We currently expect to use available funds and any future earnings in thedevelopment, operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. In addition, the terms ofour existing credit facility restrict us from paying dividends. As a result, capital appreciation, if any, of our common stock will be an investor's only source ofpotential gain from our common stock for the foreseeable future.25 We and certain of our executive officers have been named as defendants in a class action lawsuit that could result in substantial costs and divertmanagement’s attention.As discussed in Item 3, Legal Proceedings, we, and certain of our executive officers, have been named as defendants in purported class actionlawsuits that allege violations of federal securities laws related to various statements regarding our belief that our products were 361 HCT/Ps. The Court haspreliminarily approved a settlement in this action and has set the final settlement hearing for April 5, 2016. We do not believe the terms of the settlement, iffinally approved, will have a material adverse effect on our operating results or financial condition.In addition, the volatility in our stock price may make us more vulnerable to future class action litigation.Any adverse judgment in or settlement of the pending or any future litigation could require payments that exceed the limits of our availabledirectors’ and officers’ liability insurance, which could have a material adverse effect on our operating results or financial condition.Provisions of Florida law and anti-takeover provisions in our organizational documents may discourage or prevent a change of control, even if anacquisition would be beneficial to shareholders, which could affect our share price adversely and prevent attempts by shareholders to remove currentmanagement.We are subject to the Florida affiliated transactions statute, which generally requires approval by the disinterested directors or supermajorityapproval by shareholders for "affiliated transactions" between a corporation and an "interested stockholder." Additionally our organizational documentscontain provisions:·Authorizing the issuance of preferred stock that can be created and issued by the Board of Directors without prior common stock shareholderapproval, with rights senior to those of the common stock;·Restricting persons who may call shareholder meetings;·Electing directors on a staggered basis; and.Allowing the Board to fill vacancies and to fix the number of directors.These provisions of Florida law and our articles of incorporation and bylaws could negatively affect our share price, prevent attempts byshareholders to remove current management, prohibit or delay mergers or other takeovers or changes of control of the Company and discourage attempts byother companies to acquire us, even if such a transaction would be beneficial to our shareholders.Item 1B. Unresolved Staff CommentsNone.26 Item 2. PropertiesOur corporate headquarters are located in Marietta, Georgia, where we lease approximately 80,000 square feet of office, laboratory, tissue processingand warehouse space. We also lease (a) approximately 21,000 square feet for a facility in Kennesaw, Georgia, which primarily consists of laboratory, tissueprocessing and warehouse space; and (b) approximately 26,000 square feet of additional office space in Marietta, Georgia. In addition, Stability leasesapproximately 3,000 square feet for its corporate offices in Nashville, Tennessee and approximately 11,000 square feet in San Antonio, Texas which consistsof its tissue processing center.Item 3. Legal ProceedingsSecurities Class ActionFollowing the publication of an Untitled Letter from the FDA regarding the Company’s micronized products in September 2013, the trading price ofthe Company’s stock declined and several putative shareholder class action lawsuits were filed against the Company and certain of its executive officersasserting violations of the Securities Exchange Act of 1934. The cases were consolidated in the United States District Court for the Northern District ofGeorgia. On November 17, 2015, the parties entered into a stipulation of settlement to settle the consolidated case in its entirety. The stipulation ofsettlement was filed with the Court on November 18, 2015. On November 19, 2015, the Court preliminarily approved the settlement and has set the finalsettlement hearing for April 5, 2016. The Company does not believe the terms of the settlement, if finally approved, will have a material adverse effect on itsoperating results or financial condition.OIG InvestigationIn the fourth quarter of 2014, the Company received a subpoena from the Office of Inspector General, U.S. Department of Health and HumanServices, or OIG, in connection with a civil investigation into matters primarily related to the Company's sales and marketing activities. In March 2015, theCompany received notice from the Department of Justice that it declined at that time to intervene in the qui tam action that gave rise to the issuance of thesubpoena. The qui tam plaintiff had 120 days from the date of the Department of Justice’s notice to proceed with the case. The 120 day period passed withoutinitiation of the lawsuit. The plaintiff, who is an executive at the Company’s competitor Organogenesis, Inc., voluntarily dismissed the lawsuit in July 2015.This dismissal was approved by the Court on October 6, 2015. Patent Infringement LitigationMiMedx continues to diligently enforce its intellectual property against several entities. Currently, there are three actions pending, as describedbelow:The Liventa ActionFirst, there is an action pending against several entities in the in the United States District Court for the Northern District of Georgia, i.e., “theLiventa Action”. On April 22, 2014, the Company filed a patent infringement lawsuit against Liventa Bioscience, Inc. ("Liventa"), Medline Industries, Inc.("Medline") and Musculoskeletal Transplant Foundation, Inc. ("MTF") for permanent injunctive relief and unspecified damages. In addition to theallegations of infringement of MiMedx's patents, the lawsuit asserts that Liventa and Medline knowingly and willfully made false and misleadingrepresentations about their respective products to providers, patients, and in some cases, prospective investors. The Liventa Action was filed in the UnitedStates District Court for the Northern District of Georgia.MiMedx asserts that Liventa (formerly known as AFCell Medical, Inc.), Medline and MTF infringed and continue to infringe certain of theCompany's patents relating to the MiMedx dehydrated human amnion/chorion membrane ("dHACM") allografts. MTF is the tissue processor while Liventaand Medline are the distributors of the allegedly infringing products. On May 30, 2014, defendants filed answers to the Complaint, denying the allegationsin the Complaint. They also raised affirmative defenses of non-infringement, invalidity, laches and estoppel. MTF and Medline also filed counterclaimsseeking declaratory judgments of non-infringement and invalidity.On June 30, 2014, fact discovery began and the parties have engaged in extensive fact discovery.MiMedx served Infringement Contentions on August 29, 2014, and Defendants served Invalidity Contentions and Responses to InfringementContentions on September 29, 2014. After a protracted series of meet and confers, MiMedx27 required Defendants to supplement their invalidity contentions in view of parallel Inter Partes Review ("IPR")(see further discussion, infra) proceedings. MTFcomplied on June 26, 2015.In September 2015, the Defendants filed a renewed Motion to Stay in light of the Patent Trial and Appeal Board's ("PTAB") decisions to instituteIPRs on the ’437 and ’687 Patents, seeking a partial stay of the litigation as to the ’437, ’687, and ’494 Patents (i.e., the ’437 Patent family). MiMedx opposedthe Motion to Stay with respect to the ’494 Patent and once again successfully defeated Defendants’ motion to stay.Claim Construction proceedings began in October 2014. The parties submitted proposed constructions for key terms for the ’701, ’092, ’437, ’687,’207, and ’494 Patents. Briefing was completed in March 2015.On December 22, 2015, a Markman Hearing was held before Special Master Sumner C. Rosenberg. Over thirty disputed claim terms were at issue.One week later, on December 30, 2015, the Special Master issued its Report and Recommendation. Except for one term, the Special Master’s Reportessentially adopted MiMedx’s proposed constructions. The parties are awaiting a final Court decision pending their respective objections.The Bone Bank ActionOn May 16, 2014, the Company also filed a patent infringement lawsuit against Transplant Technology, Inc. d/b/a Bone Bank Allografts ("BoneBank") and Texas Human Biologics, Ltd. ("Biologics") for permanent injunctive relief and unspecified damages (the "Bone Bank Action"). The Bone BankAction was filed in the United States District Court for the Western District of Texas. This lawsuit similarly asserts that Bone Bank and Biologics infringedcertain of the Company's patents through the manufacturing and sale of their placental-derived tissue graft products. On July 10, 2014, defendants filed ananswer to the Complaint, denying the allegations in the Complaint. They also raised affirmative defenses of non-infringement and invalidity and filedcounterclaims seeking declaratory judgments of non-infringement and invalidity. The Bone Bank Action is in an advanced stage. The parties have (i)substantially completed document production; (ii) taken several fact depositions (both party and non-party); and (iii) completed claim construction briefing.The Markman hearing in this case was held on October 2, 2015. Except for one term, the Court adopted MiMedx’s proposed construction of the disputedterms. The parties have submitted a proposed scheduling order to the Court and are awaiting the Court’s order in this regard. Meanwhile, the parties continuewith fact discovery in view of recent depositions.The NuTech ActionFinally, on March 2, 2015, the Company filed a patent infringement lawsuit against NuTech Medical, Inc. ("NuTech") and DCI Donor Services, Inc.("DCI") for permanent injunctive relief and unspecified damages. This lawsuit was filed in the United States District Court for the Northern District ofAlabama. The lawsuit alleges that NuTech and DCI have infringed and continue to infringe the Company's patents through the manufacture, use, sale, and/oroffering of their tissue graft product. The lawsuit also asserts that NuTech knowingly and willfully made false and misleading representations about itsproducts to customers and/or prospective customers.On April 17, 2015, NuTech filed a motion to dismiss the case purportedly for lack of patentable subject matter, which the Company opposed.NuTech also filed a motion to stay the case pending disposition of the motion to dismiss, which MiMedx also opposed, and on which the Court declined torule. Hearing on the motion to dismiss occurred on August 20, 2015. On November 24, 2015, the court ruled on NuTech’s Motion to Dismiss, granting inpart, and denying in part. MiMedx still has claims against NuTech for infringement of the ‘494 and ‘687 patents, as well as violations of the Lanham Act;these claims shall proceed.On December 30, 2015, the parties submitted a Joint Rule 26(f) Report of Parties’ Planning Meeting and Proposed Case Management Order to theCourt. In the Report, the parties requested that the Court stay the proceedings with respect to the ’687 patent pending the completion of the inter partesreview on that patent.On January 8, 2016, MiMedx served its infringement contentions. Discovery has recently begun. Pending IPRsIn addition to defending the claims in the pending district court litigations, defendants in the Liventa and Bone Bank cases have challenged certainof the Company's patents in several IPR proceedings to avoid the high burden of proof of proving invalidity by "clear and convincing evidence" in thedistrict court litigations. An inter partes review (or "IPR") is a request for a specialized group within the United States Patent and Trademark Office to reviewthe validity of a plaintiff's patent claims. The28 defendants in the Bone Bank Action have challenged the validity of the Company's 8,597,687 and 8,709,494 patents (the "'687" and "'494" patents,respectively); while the defendants in the Liventa Action have challenged the validity of the Company's 8,372,437 and 8,323,701 patents (the "'437" and"'701" patents, respectively).On June 29, 2015, the Patent Trial and Appeals Board ("PTAB") denied defendants' request for institution of an IPR with respect to the '494 patenton all seven challenged grounds. On August 18, 2015, the PTAB also denied defendants' request for institution of an IPR with respect to the '701 patent on allsix challenged grounds. That is, the PTAB decided in each case that the defendants failed to establish a reasonable likelihood that defendants would prevailin showing any of the challenged claims of the '494 or the '701 patent were unpatentable.On July 10, 2015 the PTAB issued an opinion allowing a review of the '687 patent to proceed, although on only two of the five challenged grounds.The PTAB also adopted MiMedx's construction of the claims which will govern the Board's review of the '687 patent. On August 18, 2015, the PTAB issuedan opinion allowing a review of the '437 patent to proceed, although only on one of the seven challenged grounds. Briefing and expert discovery is ongoing.Following the PTAB decisions, the defendants in the Bone Bank Action moved to stay the district court litigation, despite the Court's previousdenial of such a stay, pending the outcome of the '687 patent inter partes review. The parties agreed to stay the case with respect to the '687 patent only andthe Court denied Bone Bank's motion to stay the litigation with respect to the '494 patent. The Company has also successfully defeated an attempt bydefendants in the Liventa Action to stay that litigation -- also pending the outcome of the IPR of the patents at issue in that case.Item 4. Mine Safety DisclosuresNot applicable.29 PART IIItem 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity SecuritiesOur common stock was approved for quotation on the OTC Bulletin Board on July 19, 2007. Only a limited number of shares were traded after theapproval of the quotation in July 2007. The common stock was traded with the trading symbol of “AYXC.” Our common stock began trading under thesymbol “MDXG” on April 2, 2008. On April 25, 2013, our common stock was approved for trading on the NASDAQ.The following table sets forth, for the periods indicated, the range of high and low sale prices per share of common stock on NASDAQ for the fiscalyears ended December 31, 2014 and 2015.Year ended December 31, 2015High LowFirst Quarter$11.33 $7.92Second Quarter11.93 8.97Third Quarter13.20 8.52Fourth Quarter10.14 6.71 Year ended December 31, 2014High LowFirst Quarter$8.68 $5.56Second Quarter7.63 4.88Third Quarter7.90 6.10Fourth Quarter11.97 6.81 Based upon information supplied from our transfer agent, there were approximately 739 shareholders of record of our common stock as of February10, 2016.30 Stock Performance GraphThe following graph compares the cumulative total stockholder return on our common stock with the cumulative total stockholder return of theNasdaq Composite Index and the Nasdaq Biotechnology Index and assumes an investment of $100.00 on December 31, 2010, in each of the common stock,the stocks comprising the Nasdaq Composite Index and the stocks comprising the Nasdaq Biotechnology Index.ASSUMES $100 INVESTED ON DEC. 31, 2010ASSUMES NO DIVIDENDSFISCAL YEAR ENDING DEC. 31, 2015 Unregistered Sales of Equity Securities and Use of ProceedsIn November of 2015, we issued approximately 42,000 unregistered shares of common stock in connection with the exercise of warrants at anexercise price of $1.09 per share. These issuances were exempt under Section 4(a)(2) of the Securities Act of 1933 since the issuance of shares did not involvea public offering.31 Purchases of Equity Securities by the Issuer and Affiliated PurchasersOn May 12, 2014, our Board of Directors authorized the repurchase of up to $10 million of our common stock from time to time, through December31, 2014. The Board subsequently extended the program until December 31, 2016. In December 2014, the Board increased the authorization to a total of $20million and further increased the authorization in 2015 to a total of $60 million. The timing and amount of repurchases will depend upon the Company'sstock price, economic and market conditions, regulatory requirements, and other corporate considerations. The Company may initiate, suspend ordiscontinue purchases under the stock repurchase program at any time. Below is a summary of the Company's stock repurchases, before brokeragecommissions of approximately $70,000, for the quarter ended December 31, 2015. All shares were purchased pursuant to the Company's publicly announcedrepurchase program. Total Number ofShares PurchasedAverage Price Paidper ShareTotal Amount Spent Under thePlanRemaining Amountto be SpentUnder the PlanTotal amount remaining October 1, 2015 $3,414,850 October 2015 increased spendingauthorization $20,000,000 October 1, 2015 - October 31, 20151,282,757$8.53$10,940,681$12,474,169 November 1, 2015 - November 30, 2015912.456$7.65$6,980,399$5,493,770 December 2015 increased spendingauthorization $10,000,000 December 1, 2015 - December 31, 2015141,000$8.65$1,220,131$14,273,639 Total for the quarter2,336,213$8.19$19,141,211 32 Item 6. Selected Financial DataThe following selected consolidated financial data was derived from our consolidated financial statements. The data should be read in conjunctionwith "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 and Consolidated Financial Statements and notesin Item 8. As of December 31, in thousands 2015 2014 2013 2012 2011Statement of Operations Data: Net sales $187,296 $118,223 $59,181 $27,054 $7,760Gross margin 167,094 105,558 49,853 21,865 4,403Operating income (loss) 24,364 7,100 (2,639) (5,355) (9,761)Net income (loss) $29,446 $6,220 $(4,112) $(7,662) $(10,194)Net income (loss) per common share -basic $0.28 $0.06 $(0.04) $(0.09) $(0.14)Net income (loss) per common share -diluted $0.26 $0.05 $(0.04) $(0.09) $(0.14) As of December 31, in thousands 2015 2014 2013 2012 2011Balance Sheet Data: Total assets $135,913 $109,259 $84,694 $35,183 $27,096Working capital 69,533 67,272 55,781 13,072 2,149Long term liabilities 1,148 1,526 1,518 10,158 10,468Stockholders' equity 107,988 89,329 73,568 20,007 11,897 33 Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and the corresponding notesincluded in Item 8. Certain percentages presented in this discussion and analysis are calculated from the underlying whole dollar amounts and therefore maynot recalculate from the rounded numbers used for disclosure purposes. Some of the information contained in this discussion and analysis or set forthelsewhere in this report includes forward-looking statements that involve risks and uncertainties. You should read the “Risk Factors” section of this report fora discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statementscontained in the following discussion and analysis.The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared inaccordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires making estimates and assumptions thataffect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as thereported revenue, and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates and judgments, including those described ingreater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, theresults of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actualresults may differ from these estimates under different assumptions or conditions.OverviewMiMedx® is an integrated developer, processor and marketer of patent protected and proprietary regenerative biomaterial products and bioimplantsprocessed from human amniotic membrane and other birth tissues and human skin and bone. "Innovations in Regenerative Biomaterials" is the frameworkbehind our mission to give physicians products and tissues to help the body heal itself. Our biomaterial platform technologies are AmnioFix®, EpiFix®,OrthoFlo, Physio™, AlloBurn™, and CollaFix™. AmnioFix and EpiFix are our tissue technologies processed from human amniotic membrane derived fromdonated placentas. Elected in advance of delivery through our donor program, a mother delivering a healthy baby via scheduled full-term Caesarean sectionbirth may donate the placenta in lieu of having it discarded as medical waste. We process the human amniotic membrane utilizing our proprietary PURION®Process, to produce a safe and effective implant. MiMedx is the leading supplier of amniotic tissue, having supplied over 500,000 allografts to date forapplication in the Wound Care, Burn, Surgical, Orthopedic, Spine, Sports Medicine, Ophthalmic and Dental sectors of healthcare. We recently introducedOrthoFlo, an amniotic fluid derived allograft for homologous use. Amniotic fluid is donated by a consenting mother delivering a full-term healthy baby byscheduled Caesarean section. Through the recent acquisition of Stability Biologics, our newest proprietary platforms include Physio, a unique bone graftingmaterial comprised of 100% bone tissue with no added carrier, a demineralized bone matrix (DBM) to complement our product portfolio offerings within theOrthopedic market and AlloBurn, a skin product for burns. CollaFix, our next technology platform we plan to commercialize, is our collagen fibertechnology designed to mimic the natural composition, structure and mechanical properties of musculoskeletal tissues in order to augment their repair. CollaFix is the only known biological, biodegradable, biomimetic technology that matches human tendon in strength and stiffness. Our EpiFix allografts are configured for external use. We offer EpiFix® in a sheet form as well as a micronized powder form. Currently, the EpiFixplatform is being used to treat chronic wounds, including diabetic foot ulcers, venous stasis ulcers, arterial ulcers and pressure ulcers, burns and surgicalwounds (such as wounds following plastic surgery).Our AmnioFix allografts consist of three configurations, all configured for internal use:•AmnioFix is provided in a sheet form. It is used to modulate inflammation, enhance soft tissue healing and to minimize scar tissue formation. Ithas been used in spine, urology and general surgeries.•AmnioFix Wrap also is supplied in a sheet form and is configured for the same purposes as AmnioFix®, but is optimized for use as a “wrap” fornerves, tendons or ligaments.•AmnioFix Injectable is supplied in micronized powder form used to reduce inflammation while enhancing healing of soft tissue. AmnioFixInjectable has been used to treat conditions such as tendonitis, including plantar fasciitis, lateral epicondylitis, and medial epicondylitis,bursitis, strains and sprains.We also process allografts for ophthalmic surgery and dental applications, which are sold on an OEM basis.34 Our assets also include licenses to two medical device technology platforms- HydroFix and CollaFix. Although we had commercialized someproducts based on the HydroFix technology, due to the relatively small size of the addressable market for those products, we decided to discontinue thatproduct line in the fourth quarter of 2013. We are currently working to develop products using our CollaFix technology and continue to assess how best toexploit that technology.Our distribution model is comprised of direct sales, third party sales agents and stocking distributors that market MiMedx-branded products. We alsohave several OEM relationships targeting the spine, orthopedic, ophthalmic and dental markets. Our primary focus is in the U.S. market, but we are currentlyexploring international expansion opportunities. In 2015 approximately 3% of our revenues were from sales outside the U.S. to stocking distributorscompared with less than 1% of revenues in 2014.Recent EventsFDA GuidanceOn December 22, 2014, the FDA issued for comment “Draft Guidance for Industry and FDA Staff: Minimal Manipulation of Human Cells, Tissues,and Cellular and Tissue-Based Products.” Essentially, the Minimal Manipulation draft guidance takes the same position with respect to micronized amniotictissue that it took in the Untitled Letter to the Company 16 months earlier. The Company submitted comments to the Minimal Manipulation draft guidanceasserting that the Minimal Manipulation draft guidance represents agency action that goes far beyond the FDA’s statutory authority, is inconsistent withexisting HCT/ P regulations and the FDA’s prior positions, and is internally inconsistent and scientifically unsound. On October 28, 2015, the FDA issued forcomment, "Draft Guidance for Industry and FDA Staff: Homologous Use of Human Cells, Tissues, and Cellular and Tissue-Based Products." The Companysubmitted comments on this Homologous Use draft guidance. The FDA has also indicated that it will hold a public hearing on a date in 2016 to bedetermined to obtain input on the Homologous Use draft guidance and the previously released Minimal Manipulation draft guidance, as well as otherrecently issued guidance documents on HCT/Ps. The Company has requested, and has been granted an opportunity to speak at this hearing.Acquisition of StabilityOn January 13, 2016, the Company completed the acquisition of Stability Inc., d/b/a Stability Biologics, a provider of human tissue products tosurgeons, facilities, and distributors serving the surgical, spine, and orthopedic sectors of the healthcare industry. The acquisition of Stability was effected bythe merger of Stability Inc. into a newly created wholly owned subsidiary of the Company. The new subsidiary was the surviving company in the merger andwas subsequently renamed Stability Biologics, LLC ("Stability"). The Company paid $10 million at the closing, comprised of 60% cash and 40% in shares ofcommon stock of MiMedx Group, Inc., assumed approximately $800,000 in debt and eliminated a $2.4 million receivable related to Company products soldto Stability prior to the acquisition. The Company will also pay future contingent consideration through a two-year earn out arrangement based on the 2016and 2017 performance of Stability's business. The Company expects the earn out will be the larger portion of the overall consideration for the transaction.The earn out will also be paid in the form of 60% cash and 40% in shares of stock of MiMedx Group, Inc.Critical Accounting PoliciesWe believe that of our significant accounting policies, which are described in Note 2 to our financial statements appearing elsewhere in this report,the following accounting policies involve a greater degree of judgment and complexity. Revenue Recognition and Sales Returns, Discounts, and Allowances AccrualsThe Company sells its products primarily through a combination of a direct sales force, independent stocking distributors and third - partyrepresentatives in the U.S. and independent distributors in international markets. The Company recognizes revenue when title to the goods and risk of losstransfers to customers, provided there are no material remaining performance obligations required of the Company or any matters of customer acceptance. Incases where the Company utilizes distributors or ships products directly to the end user, it recognizes revenue according to the shipping terms of theagreement provided all revenue recognition criteria have been met. A portion of the Company’s revenue is generated from inventory maintained at hospitalsor with field representatives. For these products, revenue is recognized at the time the product has been35 used or implanted. The Company records estimated sales returns, discounts and allowances as a reduction of net sales in the same period revenue isrecognized.Goodwill and Impairment of Long-Lived AssetsGoodwill is the excess of the purchase price over the fair value of net assets of acquired businesses. Goodwill is tested for impairment annually orwhenever an event occurs or circumstances change that would indicate that the carrying amount may be impaired. The test for impairment requires us to makeseveral estimates about fair value, most of which are based on projected future cash flows. Our estimates associated with the goodwill impairment test areconsidered critical due to the amount of goodwill recorded on our consolidated balance sheets and the judgment required in determining fair value,including projected future cash flows. No goodwill impairment has been recognized during 2015, 2014 or 2013.Other intangible assets include patents, trademarks, and purchased technology. Intangible assets with a definite life are amortized on a straight-lineor accelerated basis, as appropriate, with estimated useful lives ranging from ten to fourteen years, and are tested for impairment whenever events or changesin circumstances indicate that the carrying amount of an intangible asset may not be recoverable. Indefinite-lived intangible assets are tested for impairmentannually or whenever events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. Refer to Note 8 tothe consolidated financial statements in Item 8 for additional information. Our impairment reviews are based on an estimated future cash flow approach thatrequires significant judgment with respect to future revenue and expense growth rates, selection of appropriate discount rate, asset groupings, and otherassumptions and estimates. We use estimates that are consistent with our business plans and a market participant view of the assets being evaluated. Actualresults may differ from our estimates. In 2012, because our impairment test indicated that the carrying value of the intangible assets related to HydroFixexceeded its fair value, an impairment loss of approximately $1,798,000 was recognized and the intangible asset carrying amount was adjusted to its newbasis. During the fourth quarter of 2013 we chose to discontinue the HydroFix product line. This action resulted in an impairment charge of approximately$368,000. This item is included in our Statement of Operations for the year ended December 31, 2013.Fair Value MeasurementsWe record certain financial instruments at fair value, including: cash equivalents and contingent consideration. We may make an irrevocableelection to measure other financial instruments at fair value on an instrument-by-instrument basis; although as of December 31, 2015 we have not chosen tomake any such elections. Fair value financial instruments are recorded in accordance with the fair value measurement framework.We also measure certain non-financial assets at fair value on a non-recurring basis. These non-recurring valuations include evaluating assets such aslong-lived assets, and non-amortizing intangible assets for impairment; allocating value to assets in an acquired asset group; and applying accounting forbusiness combinations. We use the fair value measurement framework to value these assets and report the fair values in the periods in which they arerecorded or written down.The fair value measurement framework includes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fairvalues in their broad levels. These levels from highest to lowest priority are as follows: •Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities;•Level 2: Quoted prices in active markets for similar assets or liabilities or observable prices that are based on inputs not quoted on activemarkets, but corroborated by market data; and•Level 3: Unobservable inputs or valuation techniques that are used when little or no market data is available.The determination of fair value and the assessment of a measurement’s placement within the hierarchy requires judgment. Level 3 valuations ofteninvolve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologiesapplied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and thevaluation method used. Such assumptions could include: estimates of prices, earnings, costs, actions of market participants, market factors, or the weightingof various valuation methods. We may also engage external advisors to assist us in determining fair value, as appropriate.Although we believe that the recorded fair value of our financial instruments is appropriate, these fair values may not be indicative of net realizablevalue or reflective of future fair values.36 Share-based CompensationWe follow the provisions of FASB Accounting Standards Codification (“ASC”) 718, “Compensation — Stock Compensation” (ASC 718),previously referred to as Statement of Financial Accounting Standards No. 123R — Share-based Payments which requires the measurement and recognitionof compensation expense for all share-based payment awards either modified or granted to employees and directors based upon estimated fair values. TheBlack-Scholes-Merton option-pricing model, consistent with the provisions of ASC 718, was used to determine the fair value of each option granted. Optionvaluation models require the input of highly subjective assumptions, including the expected stock price volatility. We use projected volatility rates, whichare based upon historical volatility rates, trended into future years. Because our stock options have characteristics significantly different from those of tradedoptions, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing modelsdo not necessarily provide a reliable single measure of the fair value of our options.Income Taxes The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for theexpected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets andliabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the yearin which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the periodthat includes the enactment date.The Company recognizes deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such adetermination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected futuretaxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the futurein excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision forincome taxes.The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it ismore likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet themore-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimatesettlement with the related tax authority.Recently Adopted Accounting PronouncementsSee Note 2 to the consolidated financial statements in Item 8 for recently adopted accounting pronouncements.Results of Operations for the year ended December 31, 2015, compared to the year ended December 31, 2014RevenueTotal revenue increased $69.1 million, or 58%, from approximately $118.2 million in 2014 to $187.3 million in 2015. This growth in revenue wasdriven by increases in our direct sales force, taking market share from other suppliers of wound care technologies, as well as market expansion due to theclinical and cost benefits of our EpiFix platform. Growth was also driven by expansion into several new surgical applications with our AmnioFix platform.Wound Care revenue in 2015 grew by $47.5 million, or approximately 51%, compared with 2014. Surgical, Sports Medicine, and Orthopedics (SSO) revenuein 2015 grew by $21.5 million or approximately 87%, compared with 2014.Tissue Processing Costs and Cost of Products SoldCost of sales as a percentage of revenue was 10.8% versus 10.7% when compared to the prior year. The increase is due to the expiration of passthrough status of our wound care products for Medicare patients in hospital out-patient clinics and ambulatory surgery centers, product sales mix, mostlyoffset by an increase in direct sales revenue and higher production rates that absorb a greater percentage of fixed manufacturing costs, and continuedimprovements in manufacturing efficiencies. SSO sales have lower gross margins than Wound Care sales, so the Company expects cost of sales as apercentage of revenue to increase as SSO sales become a larger percentage of total company sales.37 Research and Development ExpensesOur research and development expenses increased approximately $1.4 million, or 19%, to $8.4 million in 2015, compared to approximately $7.0million in the prior year. The increase is primarily related to increased investments in clinical trials, personnel costs, lab supplies, and consulting fees. TheCompany expects research and development expenses to remain in line with current spending on a percentage of sales basis moving forward.Selling, General and Administrative ExpensesSelling, General and Administrative expenses for 2015 increased approximately $42.9 million, or 47%, to $133.4 million compared to $90.5 millionfor 2014. Selling expense increases were driven primarily by costs associated with building our direct sales organization for both the Wound Care and SSOmarkets, where headcount grew by 65 during the year, as well as increased commissions due to higher sales volume. General and administrative expenseincreases were driven primarily by costs associated with adding personnel to support continued growth, as well as increased patent litigation costs.Selling, General and Administrative expenses consist of personnel costs, professional fees, sales commissions, sales training costs, industry tradeshow fees and expenses, product promotions and product literature costs, facilities costs and other sales, marketing and administrative costs, depreciation andamortization, and share-based compensation. Share-based compensation included in SG&A for the years ended December 31, 2015 and 2014, wasapproximately $15.8 million and $10.5 million, respectively, an increase of approximately $5.3 million, or 50%.Amortization expense related to intangible assets remained flat at $0.9 million for the year ended December 31, 2015 as compared to the prior year.We amortize our intangible assets over a period of 10 to 17 years, which we believe represents the remaining useful lives of the patents underlying thelicensing rights and intellectual property. We do not amortize goodwill but we test our goodwill at least annually for impairment and periodically evaluateother intangibles for impairment based on events or changes in circumstances as they occur.Net Interest ExpenseWe recorded financing and net interest expense of approximately $86,000 during the year ended December 31, 2015, compared with approximately$48,000 of financing and net interest expense during the year ended December 31, 2014. The increase is due to the amortization of deferred financing costsincurred during 2015 related to our $50 million revolving credit facility. See Note 9 in the consolidated financial statements in Item 8 for further details.Results of Operations for the year ended December 31, 2014, compared to the year ended December 31, 2013RevenueTotal revenue increased $59 million, or 100%, from approximately $59.2 million in 2013 to $118.2 million in 2014. The increase in revenue ascompared to the prior year is due primarily to increased wound care sales of EpiFix in both commercial and Government accounts. Commercial revenuegrowth was driven by expanded Medicare and private insurance coverage.Tissue Processing Costs and Cost of Products SoldCost of products sold as a percentage of revenue were 10.7% versus 15.8% when compared to the prior year. The improvement was due primarily tothe increase in direct sales revenue, favorable product mix and higher production rates that absorb a greater percentage of fixed manufacturing costs.Research and Development ExpensesOur research and development expenses increased approximately $2.2 million, or 46%, to $7.0 million in 2014, compared to approximately $4.8million in the prior year. The increase is primarily related to increased investments in clinical trials, personnel costs, lab supplies, and testing costs. Ourresearch and development expenses consist primarily of internal personnel costs, clinical trials, fees paid to external consultants, and supplies andinstruments used in our laboratories. Additionally, during 2014, we were granted seven U.S. patents for the amnion technology, one U.S. patent for thecollagen technology (under license agreement), and four international patents for the collagen technology (three under license agreements). Selling, General and Administrative Expenses38 Selling, General and Administrative expenses for 2014 increased approximately $44.3 million, or 96%, to $90.5 million compared to $46.2 millionfor 2013. Selling expense increases were driven by costs associated with building our direct sales organization for Government and commercial accounts,where headcount grew by 94 during the year, as well as increased commissions due to higher sales volume.Additional increases included spending on support costs related to medical reimbursement, including our reimbursement hotline; our informationtechnology infrastructure to help manage the growth of the business; increased share-based compensation expense, and a provision for anticipated costsassociated with the management incentive program.Selling, General and Administrative expenses consist of personnel costs, professional fees, sales commissions, sales training costs, industry tradeshow fees and expenses, product promotions and product literature costs, facilities costs and other sales, marketing and administrative costs, depreciation andamortization, and share-based compensation. Share-based compensation included in SG&A for the years ended December 31, 2014 and 2013, wasapproximately $10.5 million and $5.3 million, respectively, an increase of approximately $5.2 million, or 98%.We recorded approximately $.9 million and $1.1 million in amortization expense related to intangible assets in the years ended December 31, 2014and 2013, respectively. The decrease of approximately $0.2 million is attributable to the impairment related to our HydroFix product line which we electedto discontinue in the fourth quarter of 2013. We amortize our intangible assets over a period of 10 to 17 years, which we believe represents the remaininguseful lives of the patents underlying the licensing rights and intellectual property. We do not amortize goodwill but we test our goodwill at least annuallyfor impairment and periodically evaluate other intangibles for impairment based on events or changes in circumstances as they occur.Net Interest ExpenseWe recorded financing and net interest expense of approximately $48,000 during the year ended December 31, 2014, compared with approximately$1.4 million of financing and net interest expense during the year ended December 31, 2013, which represented the amortization of debt discount inconnection with convertible senior secured promissory notes issued in 2011.Contractual CommitmentsThe table below sets forth our known contractual obligations as of December 31, 2015 (in thousands): less than MorethanContractual ObligationsTOTAL 1 year 1-3 years 3-5 years 5 yearsCapital lease obligations$133 $102 $31 $— $—Operating lease obligations7,542 1,804 3,623 2,115 —Charitable contribution obligations250 250 — — —Meeting space commitments1,247 764 483 — — $9,172 $2,920 $4,137 $2,115 $—Off-Balance Sheet ArrangementsWe have no off-balance sheet arrangements.Liquidity and Capital ResourcesOur net working capital at December 31, 2015, increased $2.2 million to $69.5 million from $67.3 million at December 31, 2014. The increase inworking capital was primarily due to our revenue growth resulting in an increase in accounts receivable, mostly offset by cash used for share repurchases. Thecurrent ratio (current assets divided by current liabilities) decreased to 3.6 as of December 31, 2015, as compared to 4.6 at December 31, 2014.On October 12, 2015, the Company and its subsidiaries entered into a Credit Agreement (the "Credit Agreement") with certain lenders and Bank ofAmerica, N.A., as administrative agent. The Credit Agreement establishes a senior secured revolving credit facility in favor of the Company, with anaggregate lender commitment of up to $50 million at any time39 outstanding. As of the date hereof, there are no outstanding revolving loans under the Credit Agreement. The Credit Agreement also provides for anuncommitted incremental facility of up to $35 million, which can be exercised as one or more revolving commitment increases or new term loans, all subjectto certain customary terms and conditions set forth in the Credit Agreement. The obligations of the Company under the Credit Agreement are guaranteed bythe Company's subsidiaries. Borrowings under the Credit Agreement bear interest at a rate equal to, at the Company’s option, the base rate or LIBOR, in eachcase plus an applicable margin. The base rate under the Credit Agreement equals the highest of (i) the agent’s prime rate, (ii) the Federal Funds rate plus0.50%, or (iii) LIBOR for a one month interest period plus 1.0%. The initial applicable margin is 0.50% with respect to base rate borrowings and 1.50% withrespect to the LIBOR borrowings. The applicable margin is subject to quarterly pricing adjustments based on the Company’s consolidated leverage ratio. Inaddition to paying interest on outstanding principal under the facility, the Company is required to pay a commitment fee in respect of committed butunutilized commitments equal to 0.25% per annum initially. The commitment fee is subject to quarterly adjustments based on the Company's consolidatedleverage ratio. The Company must pay a fee on outstanding letters of credit under the facility at a rate equal to the applicable margin in respect of LIBORborrowings plus certain fronting and administrative fees. The maturity date of the revolving credit facility is October 12, 2018. The Credit Agreementprovides that the maturity date may be extended up to twice for one additional year each, subject to certain customary terms and conditions set forth in theCredit Agreement, if requested by the Company and agreed-upon by the lenders. The Credit Agreement contains customary covenants and events of defaultfor senior secured credit agreements of this type. The covenants include (a) a requirement for the Company to maintain a maximum consolidated leverageratio of 2.50:1.00; (b) a requirement for the Company to maintain a minimum consolidated fixed charge coverage ratio of 2.00:1.00; and (c) a requirement forthe Company to maintain minimum liquidity of $10 million.As of December 31, 2015, we had approximately $28.5 million of cash and cash equivalents. In addition, we had short term investments in FDICinsured certificates of deposit at various U.S. financial institutions that totaled, approximately $3.0 million. We believe that our anticipated cash fromoperating activities, existing cash and cash equivalents and availability under the Credit Agreement will enable us to meet our operational liquidity needsand fund our planned investing activities for the next year.Discussion of cash flowsNet cash from operations during the year ended December 31, 2015, increased approximately $2.0 million to $18.8 million, compared to $16.8million from operating activities for the year ended December 31, 2014, and was primarily attributable to the increase in Net Income (net of non cash items),partially offset by an increase in accounts receivable.Net cash used in investing activities during the year ended December 31, 2015, decreased approximately $11.5 million to $0.7 million compared to$12.2 million used in investing activities for the year ended December 31, 2014. The decrease was primarily due to maturing certificates of deposit.Net cash flows used in financing activities during the year ended December 31, 2015, was approximately $36.2 million compared to $2.1 millionduring the year ended December 31, 2014. The increase is primarily due to an increase in share repurchases, partially offset by an increase in proceedsreceived from the exercise of stock options and warrants.Due to the material amount of non-cash related items included in our results of operations, we have developed an Adjusted EBITDA metric thatprovides management with a clearer view of operational use of cash (see the table below). Our Adjusted EBITDA for the year ended December 31, 2015, wasapproximately $44.0 million which is an improvement of approximately $23.3 million as compared to 2014 and an improvement of $38.5 million comparedto 2013. These year-over-year improvements were the result of improved operating results.Adjusted EBITDA is a non-GAAP measure. Non-GAAP financial measures are commonly used in the industry and are presented becausemanagement believes they provide relevant and useful information to investors. However, there are limitations to using these non-GAAP financial measures.Adjusted EBITDA is not indicative of cash provided or used by operating activities and may differ from comparable information provided by othercompanies. Adjusted EBITDA should not be considered in isolation, as an alternative to, or more meaningful than measures of financial performancedetermined in accordance with U.S. GAAP. The following table presents a reconciliation of Adjusted EBITDA to Net Income (loss), the most comparablefinancial measure reported under GAAP, for the years ended December 31, 2015, 2014 and 2013.40 Years Ended December 31 (in thousands) 2015 2014 2013Net Income (Loss) (Per GAAP)$29,446 $6,220 $(4,112)Add back (deduct): Income Taxes(5,168) 832 100Financing expense associated with beneficial conversion of Senior Secured PromissoryNotes— — 1,328Other interest expense, net86 48 45Depreciation Expense1,799 1,197 637Loss on fixed asset disposal— — 37Amortization Expense933 928 1,054Share-Based Compensation16,896 11,453 6,010Impairment of Intangible Assets— — 368Income Before Interest, Taxes, Depreciation, Amortization and Share -Based Compensation(Adjusted EBITDA)$43,992$20,678 $5,467InflationWe do not believe that the rate of inflation has had a material effect on our operating results. However, inflation could adversely affect our futureoperating results.Item 7A. Quantitative and Qualitative Disclosures About Market RiskBased on our lack of market risk sensitive instruments outstanding at December 31, 2015, we have determined that there was no material market riskexposure to our consolidated financial position, results of operations or cash flows as of such date.41 Item 8. Financial Statements and Supplementary DataIndex to Financial Statements Reports of Independent Registered Public Accounting Firm43Consolidated Balance Sheets – As of December 31, 2015 and December 31, 201445Consolidated Statements of Operations – For the years ended December 31, 2015, 2014 and 201346Consolidated Statements of Stockholders’ Equity – For the Years ended December 31, 2015, 2014 and 201347Consolidated Statements of Cash Flows – For the years ended December 31, 2015, 2014 and 201348Notes to Consolidated Financial Statements49Schedule II - Valuation and Qualifying Accounts6942 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors andStockholders of MiMedx Group, Inc.We have audited the accompanying consolidated balance sheets of MiMedx Group, Inc. and subsidiaries ( the "Company") as of December 31, 2015 and2014, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years ended in the period endedDecember 31, 2015. We have also audited the accompanying consolidated financial statement schedule for each of the three years in the period endedDecember 31, 2015 listed in the index at Item 15. These consolidated financial statements and schedules are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MiMedx Group, Inc.and subsidiaries as of December 31, 2015 and 2014, and the consolidated results of their operations and their cash flows for each of the three years in theperiod ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, therelated consolidated financial statement schedule for each of the three years in the period ended December 31, 2015, when considered in relation to the basicconsolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), MiMedx Group, Inc.’s internalcontrol over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 29, 2016 expressed an unqualified opinion./s/ Cherry Bekaert LLP Atlanta, Georgia February 29, 2016 43 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors andStockholders of MiMedx Group, Inc.We have audited MiMedx Group, Inc.’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). MiMedx Group, Inc.’smanagement is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal controlover financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to expressan opinion on the company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained inall material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting,assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessedrisk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides areasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.In our opinion, MiMedx Group, Inc maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based oncriteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission(COSO).We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetsof MiMedx Group, Inc. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations, stockholders’ equity, andcash flows for each of the three years in the period ended December 31, 2015 and the related consolidated financial statement schedules as of December 31,2015, 2014 and 2013, and our report dated February 29, 2016 expressed an unqualified opinion./s/ Cherry Bekaert LLP Atlanta, Georgia February 29, 2016 44 MIMEDX GROUP, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(in thousands, except share data) December 31, 2015 2014ASSETS Current assets: Cash and cash equivalents$28,486 $46,582Short term investments3,000 5,750Accounts receivable, net53,755 26,672Inventory, net7,460 5,133Prepaid expenses and other current assets3,609 1,540Total current assets96,310 85,677Investments— 3,250Property and equipment, net of accumulated depreciation9,475 5,447Goodwill4,040 4,040Intangible assets, net of accumulated amortization10,763 10,845Deferred tax asset, net14,838 —Deferred financing costs and other assets487 —Total assets$135,913 $109,259LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable$6,633 $3,661Accrued compensation15,034 11,523Accrued expenses4,644 2,504Other current liabilities466 716Total current liabilities26,777 18,404 Other liabilities1,148 1,526Total liabilities27,925 19,930Commitments and contingencies (Note 16) Stockholders' equity: Preferred stock; $.001 par value; 5,000,000 shares authorized and 0 shares issued and outstanding— —Common stock; $0.001 par value; 150,000,000 shares authorized; 109,467,416 issued and107,361,471 outstanding at December 31, 2015 and 108,776,247 issued and 107,789,611outstanding at December 31, 2014109 108Additional paid-in capital163,133 162,433Treasury stock at cost:2,105,945 shares at December 31, 2015 and 986,636 shares at December 31, 2014(17,125) (5,637)Accumulated deficit(38,129) (67,575)Total stockholders' equity107,988 89,329Total liabilities and stockholders' equity$135,913 $109,259 See notes to consolidated financial statements45 MIMEDX GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except share and per share data) Years Ended December 31, 2015 2014 2013 Net sales$187,296 $118,223 $59,181Cost of sales20,202 12,665 9,328Gross margin167,094 105,558 49,853 Operating expenses: Research and development expenses8,413 7,050 4,843Selling, general and administrative expenses133,384 90,480 46,227Impairment of intangible assets— — 368Amortization of intangible assets933 928 1,054 Operating income (loss)24,364 7,100 (2,639) Other income (expense), net Amortization of debt discount— — (1,328)Interest expense, net(86) (48) (45) Income (loss) before income tax provision24,278 7,052 (4,012)Income tax provision5,168 (832) (100) Net income (loss)$29,446 $6,220 $(4,112) Net income (loss) per common share - basic$0.28 $0.06 $(0.04) Net income (loss) per common share - diluted$0.26 $0.05 $(0.04) Weighted average shares outstanding - basic105,929,205 105,793,008 96,285,504 Weighted average shares outstanding - diluted113,628,482 113,295,504 96,285,504See notes to consolidated financial statements46 MIMEDX GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(in thousands, except share data) Common Stock AdditionalPaid-in Treasury Stock Accumulated Shares Amount Capital Shares Amount Deficit TotalBalances, December 31, 201288,423,169 $88 $89,627 50,000 $(25) $(69,683) $20,007 Share-based compensation expense— — 6,010 — — — 6,010Exercise of stock options1,958,674 2 1,979 — — — 1,981Exercise of warrants1,844,352 2 2,106 — — — 2,108Common stock issued for 5% convertible note5,272,004 5 5,267 — — — 5,272Common stock issued for earn - out liability1,174,915 1 5,791 — — — 5,792Issuance of restricted stock2,500 — — — — — —Public offering of common stock, net ofexpenses5,750,000 6 36,504 — — — 36,510Net income (loss)— — — — — (4,112) (4,112)Balances, December 31, 2013104,425,614 $104 $147,284 50,000 $(25) $(73,795) $73,568 Share-based compensation expense— — 11,453 — — — 11,453Exercise of stock options1,653,690 2 2,468 — — — 2,470Exercise of warrants1,242,416 1 1,112 — — — 1,113Issuance of restricted stock1,438,569 1 (1) — — — —Shares issued for services performed15,958 — 117 — — — 117Stock repurchase— — — 936,636 (5,612) — (5,612)Net income— — — — — 6,220 6,220Balance December 31, 2014108,776,247 $108 $162,433 986,636 $(5,637) $(67,575) $89,329 Share-based compensation expense— — 16,896 — — — 16,896Tax benefit of share-based compensationexpense— — 7,757 — — — 7,757Exercise of stock options647,656 1 (9,792) (1,573,225) 14,420 — 4,629Exercise of warrants— — (379) (42,400) 425 — 46Issuance of restricted stock34,250 — (14,547) (1,940,009) 14,547 — —Restricted stock shares canceled/forfeited(2,058) — 652 69,949 (652) — —Shares issued for services performed11,321 — 113 (5,172) 51 — 164Stock repurchase— — — 4,610,166 (40,279) — (40,279)Net income— — — — — 29,446 29,446Balances, December 31, 2015109,467,416 $109 $163,133 2,105,945 $(17,125) $(38,129) $107,988See notes to consolidated financial statements47 MIMEDX GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Years Ended December 31, 2015 2014 2013Cash flows from operating activities: Net income (loss)$29,446 $6,220 $(4,112)Adjustments to reconcile net income (loss) to net cash from operating activities: Depreciation1,799 1,197 637Loss on fixed asset disposal— — 37Amortization of intangible assets933 928 1,054Impairment of intangible assets— — 368Amortization of debt discount and deferred financing costs42 — 1,328Share-based compensation16,896 11,453 6,010Change in deferred income taxes(7,081) — —Increase (decrease) in cash resulting from changes in: Accounts receivable(27,083) (10,579) (8,439)Inventory(2,327) (1,252) (858)Prepaid expenses and other assets(2,094) (203) (637)Accounts payable3,136 1,287 1,209Accrued compensation3,511 5,935 2,836Accrued expenses2,140 1,098 353Accrued interest— — (42)Other liabilities(511) 718 (28)Net cash flows from operating activities18,807 16,802 (284)Cash flows from investing activities: Purchases of equipment(5,827) (2,558) (2,337)Maturity (purchases) of fixed maturity securities6,000 (9,000) —Patent application costs(851) (594) (689)Net cash flows from investing activities(678) (12,152) (3,026) Cash flows from financing activities: Proceeds from exercise of stock options4,6292,4701,981Proceeds from exercise of warrants461,1132,108Proceeds from public offering, net of expenses——36,602Deferred financing costs(504) — —Stock repurchase(40,279)(5,612)—Principal payments of equipment leases(117)(117)(57)Net cash flows from financing activities(36,225) (2,146) 40,634 Net change in cash(18,096) 2,504 37,324Cash and cash equivalents, beginning of period46,582 44,078 6,754Cash and cash equivalents, end of period$28,486 $46,582 $44,078See notes to consolidated financial statements48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFOR THE FISCAL YEARS ENDED DECEMBER 31, 2015 AND 20141.Nature of BusinessMiMedx Group, Inc. (“MiMedx,” "the Company,” “we,” or “us”) operates in one business segment, Regenerative Biomaterials, which includes thedevelopment, processing and marketing of regenerative biomaterial products and bioimplants processed from human amniotic membrane and other birthtissues in the Wound Care, Surgical, Sports Medicine, Ophthalmic and Dental market categories. The Company's biomaterial platform technologies includetissue technologies, AmnioFix and EpiFix, amniotic fluid derived allograft, OrthoFlo, and anticipated device technology CollaFix , which the Company hasyet to commercialize.The Company is focused primarily on the United States but is actively exploring international expansion opportunities. The adoption of thetechnologies may vary depending on each country’s regulations, but the opportunities to help individuals in the different disease states remain similar andlarge.2.Significant Accounting PoliciesUse of EstimatesThe preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financialstatements and the reported consolidated statements of operations during the reporting period. Actual results could differ from those estimates.Principles of ConsolidationThe accompanying financial statements include the accounts of MiMedx Group, Inc. and its wholly-owned subsidiaries MiMedx, Inc., MiMedxProcessing Services, LLC (formerly known as SpineMedica, LLC), and MiMedx Tissue Services, LLC (formerly known as Surgical Biologics, LLC). Allsignificant inter-company balances and transactions have been eliminated.Segment ReportingASC 280, “Segment Reporting” requires use of the “management approach” model for segment reporting. The management approach model is based onthe way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company hasdetermined it has one operating segment. Disaggregation of the Company’s operating results is impracticable, because the Company’s research anddevelopment activities and its assets overlap, and management reviews its business as a single operating segment. Thus, discrete financial information is notavailable for more than one operating segment.Market Concentrations and Credit RiskThe Company places its cash and cash equivalents on deposit with financial institutions in the United States. In July 2010, the Federal DepositInsurance Corporation (“FDIC”) increased coverage to $250,000 for substantially all depository accounts. As of December 31, 2015 and 2014, the Companyhad cash and cash equivalents of approximately $27,700,000 and $44,600,000, respectively, in excess of the insured amounts.The Company’s principal market concentration of risk is related to its limited distribution channels. The Company's revenues include the distributionefforts of several independent companies as well as the Company's internal sales force. Significant revenues are derived from the Company's relationship withone of its distributors, AvKare, Inc. which sells our products to the Federal Government. For the years ended December 31, 2015, 2014 and 2013, AvKarerevenue was approximately 24%, 34%, and 56%, of total revenue, respectively. Related receivables for the years ended December 31, 2015 and 2014 wereapproximately 26%, and 33%, of total accounts receivable, respectively.Cash and Cash EquivalentsCash and cash equivalents include cash and FDIC insured certificates of deposit held at various banks with an original maturity of three months or less.Accounts Receivable49 Accounts receivable represent amounts due from customers for which revenue has been recognized. Generally, the Company does not require collateralor any other security to support its receivables.The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in the Company's existing receivables. TheCompany determines the allowance based on factors such as historical collection experience, customers' current creditworthiness, customer concentrations,age of accounts receivable balance and general economic conditions that may affect the customers' ability to pay.InvestmentsInvestments consist of FDIC insured certificates of deposit held at various banks and are classified as either Short term investments or Investmentsdepending on their maturity date and are valued at cost, which approximates market value.InventoriesInventories are valued at the lower of cost or market, using the first–in, first-out (FIFO) method. Inventory is tracked through Raw Material, WIP, andFinished Good stages as the product progresses through various production steps and stocking locations. Labor and overhead costs are absorbed through thevarious production processes up to when the work order closes. Historical yields and normal capacities are utilized in the calculation of production overheadrates. Reserves for inventory obsolescence are utilized to account for slow-moving inventory as well as inventory no longer needed due to diminishedmarket demand.Goodwill and Purchased Intangible AssetsGoodwill and purchased intangible assets with indefinite useful lives are not amortized but are tested for impairment at least annually. The Company reviewsgoodwill and purchased intangible assets with indefinite lives for impairment annually at the beginning of its fourth fiscal quarter and whenever events orchanges in circumstances indicate the carrying value of an asset may not be recoverable. Potential impairment indicators include a significant change in thebusiness climate, legal factors, operating performance indicators, competition, and the sale of disposition of a significant portion of the business. TheCompany first assesses certain qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than notthat the fair value of the Company was less than its carrying amount. If after assessing the totality of events or circumstances, the Company were to determinethat it is more likely than not that the fair value of the Company is less than its carrying amount, then the Company would perform a two-step quantitativeimpairment testing. In the first step, the Company compares the fair value of the Company to its carrying value. The Company determines the fair valueutilizing the market approach. Under the market approach, the Company uses its market capitalization which is calculated by taking the Company’s shareprice times the number of outstanding shares. If the fair value of the Company exceeds the carrying value of the net assets, goodwill is not impaired, and nofurther testing is required. If the fair value of the Company is less than the carrying value, the Company must perform the second step of the impairment testto measure the amount of impairment loss, if any. In the second step, the Company’s value is allocated to all of the assets and liabilities, including anyunrecognized intangible assets, in a hypothetical analysis that calculates the implied fair value of goodwill in the same manner as if the Company was beingacquired in a business combination. If the implied fair value of the reporting unit's goodwill is less than the carrying value, the difference is recorded as animpairment loss.Impairment of Intangible Assets with Finite LivesThe Company reviews purchased intangible assets with finite lives for impairment whenever events or changes in circumstances indicate the carryingvalue of an asset may not be recoverable using a two-step impairment test. In step one, we determine the sum of the undiscounted future cash flows of theassets based on management's estimates and compare it to the carrying value of the assets. If the carrying amount is greater than the sum of the undiscountedcash flows, then the asset is impaired and step two is required. In step two, the impairment loss is calculated as the difference between the fair value of theassets and the carrying value of the assets.Impairment reviews are based on an estimated future cash flow approach that requires significant judgment with respect to future revenue and expense growthrates, selection of appropriate discount rate, asset groupings, and other assumptions and estimates. The Company uses estimates that are consistent with ourbusiness plans and a market participant view of the assets being evaluated. Actual results may differ from our estimates.During the fourth quarter of 2013, the Company chose to discontinue the HydroFix product line. This action resulted in an impairment charge ofapproximately $368,000 related to the Licenses for SaluMedica LLC, Spine Repair and Polyvinyl50 Alcohol Cryogel. This item is included in our Statement of Operations for the year ended December 31, 2013. An impairment charge of approximately$1,800,000 had previously been booked in 2012.Property and EquipmentProperty and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives, principally three to sevenyears. Leasehold improvements are depreciated on a straight-line basis over the lesser of the estimated useful lives or the life of the lease. The Company isparty to various lease arrangements for its facility space and equipment. These arrangements include interest, scheduled rent increases and rent holidayswhich are included in the determination of minimum lease payments when assessing lease classification, and are included in rent expense on a straight linebasis over the lease term. See Notes 7 and 16 for further information regarding capital leases, operating leases and rent expense.Patent CostsThe Company incurs certain legal and related costs in connection with patent applications for tissue based products and processes. The Companycapitalizes such costs to be amortized over the expected life of the patent to the extent that an economic benefit is anticipated from the resulting patent oralternative future use is available to the Company. The Company capitalized approximately $851,000 of patent costs during 2015, $594,000 of patent costsduring 2014 and $689,000 of patent costs during 2013.Impairment of Long-lived AssetsThe Company evaluates the recoverability of its long-lived assets (property and equipment) whenever adverse events or changes in business climateindicate that the expected undiscounted future cash flows from the related assets may be less than previously anticipated. If the net book value of the relatedassets exceeds the expected undiscounted future cash flows of the assets, the carrying amount would be reduced to the present value of their expected futurecash flows and an impairment loss would be recognized. During the fourth quarter of 2013, the Company chose to discontinue the HydroFix product line.This action resulted in a disposal loss of approximately $30,000. This item is included in the Consolidated Statements of Operations for the year endedDecember 31, 2013, as Selling, General and Administrative expenses.Grant IncomeThe Company received a Regional Economic Business Assistance ("REBA") grant in the amount of $250,000 from the State of Georgia to help theCompany defray certain expenses and capital expenditures related to the Company's expansion of manufacturing activities in the State. In order to retain thegrant monies the Company was required to add a certain number of full time positions and spend a certain amount on capital and operations expenditures byDecember 31, 2014. As of December 31, 2013, the Company had satisfied the grant requirements. Accordingly, the Company recorded the $250,000 as areduction of Selling, General and Administrative expenses in the accompanying 2013 Consolidated Statements of Operations.Revenue RecognitionThe Company sells its products primarily through a combination of a direct sales force, independent stocking distributors and third - partyrepresentatives in the U.S. and independent distributors in international markets. The Company recognizes revenue when title to the goods and risk of losstransfers to customers, provided there are no material remaining performance obligations required of the Company or any matters of customer acceptance. Incases where the Company utilizes distributors or ships products directly to the end user, it recognizes revenue according to the shipping terms of theagreement provided all revenue recognition criteria have been met. A portion of the Company’s revenue is generated from inventory maintained at hospitalsor with field representatives. For these products, revenue is recognized at the time the product has been used or implanted. The Company records estimatedsales returns, discounts and allowances as a reduction of net sales in the same period revenue is recognized.Research and Development CostsResearch and development costs consist of direct and indirect costs associated with the development of the Company’s technologies. These costs areexpensed as incurred.Income TaxesThe Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for theexpected future tax consequences of events that have been included in the financial statements.51 Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets andliabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred taxassets and liabilities is recognized in income in the period that includes the enactment date.The Company recognizes deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such adetermination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected futuretaxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the futurein excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision forincome taxes.The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is morelikely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimatesettlement with the related tax authority.Share-based CompensationThe Company accounts for its share- based compensation plans in accordance with FASB ASC topic 718 “Compensation- Stock compensation”. FASBASC 718 requires the measurement and recognition of compensation expense for all share-based awards made to employees and directors, includingemployee stock options, restricted stock and warrants. Under the provisions of FASB ASC 718, and U. S. Securities and Exchange Commission StaffAccounting Bulleting No. 107, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and isrecognized as an expense on a straight line basis over the requisite service period of the entire award (generally the vesting period of the award).Fair Value of Financial InstrumentsThe respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature and type ofthese instruments. These financial instruments include cash and cash equivalents, accounts receivable, short term investments, accounts payable and accruedexpenses. The carrying cost of the Company’s investments also reflects their fair values due to the type of these investments and the fair value of capitalleases approximates their carrying value based upon current rates available to the Company.Fair Value MeasurementsThe Company records certain financial instruments at fair value, including: cash equivalents, short term investments and investments. The Companymay make an irrevocable election to measure other financial instruments at fair value on an instrument-by-instrument basis; although as of December 31,2015, the Company has not chosen to make any such elections. Fair value financial instruments are recorded in accordance with the fair value measurementframework.The Company also measures certain non-financial assets at fair value on a non-recurring basis. These non-recurring valuations include evaluating assetssuch as long-lived assets, and non-amortizing intangible assets for impairment; allocating value to assets in an acquired asset group, and accounting forbusiness combinations. The Company uses the fair value measurement framework to value these assets and reports these fair values in the periods in whichthey are recorded or written down.The fair value measurement framework includes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair values intheir broad levels. These levels from highest to lowest priority are as follows:•Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities;•Level 2: Quoted prices in active markets for similar assets or liabilities or observable prices that are based on inputs not quoted on active markets,but corroborated by market data.•Level 3: Unobservable inputs or valuation techniques that are used when little or no market data is available.The determination of fair value and the assessment of a measurement’s placement within the hierarchy require judgment. Level 3 valuations ofteninvolve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologiesapplied to unobservable management estimates and assumptions. Management’s assumptions could vary depending on the asset or liability valued and thevaluation method52 used. Such assumptions could include: estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of variousvaluation methods. The Company may also engage external advisors to assist it in determining fair value, as appropriate.Although the Company believes that the recorded fair value of its financial instruments is appropriate, these fair values may not be indicative of netrealizable value or reflective of future fair values.Recently Issued Accounting PronouncementsThe Company considers the applicability and impact of all Accounting Standards Updates ("ASUs"). In May 2014, the Financial Accounting StandardsBoard issued ASU 2014-09, “Revenue Recognition - Revenue from Contracts with Customers” (ASU 2014-09) that requires companies to recognize revenuewhen a customer obtains control rather than when companies have transferred substantially all risks and rewards of a good or service. This update is effectivefor annual reporting periods beginning on or after December 15, 2017 and interim periods therein and requires expanded disclosures. The Company iscurrently assessing the impact the adoption of ASU 2014-09 will have on its consolidated financial statements.In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-17, Balance SheetClassification of Deferred Taxes. ASU 2015-17 simplifies the presentation of deferred taxes by requiring deferred tax assets and liabilities be classified asnoncurrent on the balance sheet. ASU 2015-17 is effective for public companies for annual reporting periods beginning after December 15, 2016, and interimperiods within those fiscal years. The guidance may be adopted prospectively or retrospectively and early adoption is permitted. The Company has adoptedthis standard, prospectively, at the beginning of the fourth quarter 2015 to simplify reporting with the release of the valuation allowance as disclosed in Note13. Prior periods were not retrospectively adjusted.In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842).The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. ASU 2016-02 is effective for publiccompanies for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years. The guidance may be adoptedprospectively or retrospectively and early adoption is permitted. The Company is currently assessing the impact the adoption of ASU 2016-02 will have onits consolidated financial statements.All other ASUs issued and not yet effective for the year ended December 31, 2015, and through the date of this report, were assessed and determined to beeither not applicable or are expected to have minimal impact on the Company's financial position or results of operations.3.Liquidity and Capital ResourcesNet Working CapitalAs of December 31, 2015, the Company had approximately $28,486,000 of cash and cash equivalents. The Company reported total current assets ofapproximately $96,310,000 and current liabilities of approximately $26,777,000 and had net working capital of approximately $69,533,000.Overall Liquidity and Capital Resources The Company's largest cash requirement for the twelve months ended December 31, 2015 was cash for general working capital needs. In addition, theCompany's other cash requirements included capital expenditures, and repurchases of the Company's common stock. The Company funded its cashrequirements through its existing cash reserves, and its operating activities which generated approximately $18,807,000 during the period. The Companybelieves that its anticipated cash from operating and financing activities and existing cash and cash equivalents as well as its investments in FDIC insuredcertificates of deposit will enable the Company to meet its operational liquidity needs and fund its planned investing activities for the next year. In addition,on October 12, 2015, the Company entered into a new three-year $50 million senior secured revolving credit facility, which provides additional liquidity.4.Cash Equivalents and Short Term InvestmentsIncluded in Cash and cash equivalents as of December 31, 2014, were approximately $1,250,000 of FDIC insured certificates of deposit held withvarious U.S. financial institutions. Short term investments at December 31, 2015 and 2014 consist of approximately $3,000,000 and $5,750,000,respectively, of FDIC insured certificates of deposits held with various financial institutions. The cost of these instruments approximates their fair marketvalue.53 5.InventoriesInventories consisted of the following items as of December 31, 2015 and 2014 (in thousands): December 31, 2015 2014Raw materials$602 $255Work in process3,850 3,419Finished goods3,405 1,986Inventory, gross7,857 5,660Reserve for obsolescence(397) (527)Inventory, net$7,460 $5,1336.InvestmentsInvestments consisted of FDIC insured certificates of deposit with various U.S. financial institutions. The balance as of December 31, 2015 was zero andthe balance as of December 31, 2014 was approximately $3,250,000 and the cost approximated fair market value. Maturities of these instruments range toMay of 2016.7.Property and EquipmentProperty and equipment consist of the following as of December 31, 2015 and 2014 (in thousands): December 31, 2015 2014Leasehold improvements$2,684 $2,559Lab and clean room equipment4,564 3,040Furniture and equipment4,577 2,398Construction in Progress2,629 949Property and equipment, gross14,454 8,946Less accumulated depreciation(4,979) (3,499)Property and equipment, net$9,475 $5,447Included in property and equipment is approximately $427,000 of capital leases. The corresponding liability of approximately $133,000 is included inother liabilities in the accompanying condensed consolidated balance sheet. Also included is approximately $1,000,000 in leasehold improvements paid forby the landlord of our main operating facility with a corresponding liability included in long term liabilities, which is amortized over the term of the lease.Depreciation expense for the years ended December 31, 2015, 2014, and 2013 was approximately $1,799,000, $1,197,000, and $637,000, respectively.54 8.Intangible Assets and Royalty AgreementIntangible assets are summarized as follows (in thousands): December 31, 2015 2014 WeightedAverageAmortizationLives Cost CostLicenses (a) (b) 10 years $1,009 $1,009Patents & Know How (b) 17 years 8,001 7,891Customer & Supplier Relationships (b) 14 years 3,761 3,761Tradenames & Trademarks (b) indefinite 1,008 1,008In Process Research & Development (b) n/a 25 25Patents in Process (c) n/a 1,823 1,082Total 15,627 14,776Less Accumulated amortization (4,864) (3,931)Net $10,763 $10,845(a)On January 29, 2007, the Company acquired a license from Shriners Hospitals for Children and University of South Florida Research Foundation,Inc. in the amount of $996,000. Within 30 days after the receipt by the Company of approval by the FDA allowing the sale of the first licensedproduct, the Company is required to pay an additional $200,000 to the licensor. Due to its contingent nature, this amount is not recorded as aliability. The Company will also be required to pay a royalty of 3% on all commercial sales revenue from the licensed products. The Company isalso obligated to pay a $50,000 minimum annual royalty payment over the life of the license. As of December 31, 2015, this license had a remainingnet book value of approximately $110,000.(b)On January 5, 2011, the Company acquired Surgical Biologics, LLC. As a result, the Company recorded intangible assets for Customer & SupplierRelationships of $3,761,000, Patents & Know-How of $7,690,000, Licenses of $13,000, Trade Names & Trademarks of $1,008,000 and In-ProcessResearch & Development of $25,000. During 2015 approximately $110,000 of additional costs associated with patents granted during the year werecapitalized and included in Patents & Know- How subject to amortization.(c)Capitalized external legal and other registration costs in connection with internally developed tissue-based patents that are pending. Once issued,the costs associated with a given patent will be included in Patents & Know-How under intangible assets subject to amortization.Amortization expense for the years ended December 31, 2015, 2014, and 2013, was approximately $933,000, $928,000, and $1,054,000, respectively.55 Expected future amortization of intangible assets as of December 31, 2015, is as follows (in thousands): Estimated AmortizationYear ending December 31,Expense2016$9362017846201883620198362020836Thereafter5,465 $9,7559.Long-Term DebtSenior Secured Promissory Notes From December 27 to December 31, 2011, the Company sold 5% Convertible Senior Secured Promissory Notes (the “Notes”) to individual accreditedinvestors for aggregate proceeds of $5,000,000. The aggregate proceeds included $500,000 of Notes sold to the Company’s Chairman of the Board andCEO. In total, the principal of the Notes were convertible into up to 5,000,000 shares of common stock of the Company (“Common Stock”) plus accrued butunpaid interest at $1.00 per share at any time upon the election of the holder of the note.In conjunction with the sale of the Notes, the Company incurred a placement fee of $32,800 and issued 42,400 common stock warrants to the placementagents at an exercise price of $1.09 per share. These warrants were exercised in November 2015. The fair value of the warrants was determined to beapproximately $15,000 using the Black-Scholes-Merton valuation technique. The total direct costs of approximately $47,800 were recorded as deferredfinancing costs and were amortized over the term of the Notes using the effective interest method. Further, the placement agent warrants are classified instockholders’ equity because they achieved all of the requisite conditions for equity classification in accordance with GAAP.During the months of January and February 2013, all holders of the Notes converted their interest in this obligation to shares of MiMedx commonstock. The total amount of debt plus accrued interest that was exchanged was approximately $5,272,000. In conjunction with this exchange, approximately5,272,000 shares of the Company’s common stock were issued in full satisfaction of this obligation. Included in this total are 532,260 shares representing theCEO’s conversion of his Note. This also resulted in the acceleration of amortization of debt discount and total interest expense of approximately $1,328,000during the year ended December 31, 2013.Credit FacilityOn October 12, 2015, the Company and its subsidiaries entered into a Credit Agreement (the "Credit Agreement") with certain lenders and Bank ofAmerica, N.A., as administrative agent. The Credit Agreement establishes a senior secured revolving credit facility in favor of the Company with a maturitydate of October 12, 2018 and an aggregate lender commitment of up to $50 million. The Credit Agreement also provides for an uncommitted incrementalfacility of up to $35 million, which can be exercised as one or more revolving commitment increases or new term loans, all subject to certain customary termsand conditions set forth in the Credit Agreement. Borrowings under the facility will bear interest at LIBOR plus 1.5% to 2.25%. Fees paid in connection withthe initiation of the credit facility totaled approximately $500,000. These deferred financing costs are being amortized to interest expense over the three-yearlife of the facility. The Credit Agreement contains customary representations, warranties, covenants, and events of default. As of December 31, 2015, therewere no outstanding revolving loans under the credit facility.10.Net Income (loss) Per ShareBasic net income (loss) per common share is computed using the weighted-average number of common shares outstanding during the period. Diluted netincome per common share is computed using the weighted-average number of common and dilutive common equivalent shares from stock options, warrantsand restricted stock using the treasury stock method. 56 The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands except per share data): Year Ended December 31, 2015 2014 2013Net income (loss)$29,446 $6,220$(4,112)Denominator for basic earnings per share - weighted average shares105,929,205 105,793,008 96,285,504Effect of dilutive securities: Stock options, warrants, and restricted stock (a)7,699,277 7,502,496 —Denominator for diluted earnings per share - weighted average shares adjusted for dilutivesecurities113,628,482 113,295,504 96,285,504Income (loss) per common share - basic0.28 0.06 (0.04)Income (loss) per common share - diluted$0.26 $0.05 $(0.04)(a)Securities that are included in the computation of the denominator above, utilizing the treasury stock method for the years ended December 31, 2015and 2014 are as follows: Effect of dilutive securities:20152014 Stock Options7,121,7747,035,728 Warrants33,676226,926 Restricted Stock Awards543,827239,842 7,699,2777,502,496Securities for the year ended December 31, 2013 were excluded from the computation of diluted earnings per share because they would have been anti-dilutive.11.Common Stock PlacementsPublic Offering of Common StockIn December of 2013, the Company completed a public offering (the "Offering”) of 5,750,000 shares of its common stock at $6.80 per share. Proceedsfrom the Offering, net of underwriting expenses were $36,704,000. In addition, the Company incurred approximately $194,000 in various legal fees forservices related to the Offering.Proceeds from the Offering were used for general corporate purposes, including, but not limited to, research, development and further commercializationof our products, obtaining regulatory approvals, funding of our clinical trials, capital expenditures, working capital and future acquisitions of complementarybusinesses, technology or products.12.EquityStock Incentive Plans The Company has three share-based compensation plans: the MiMedx Group, Inc. Assumed 2006 Stock Incentive Plan (the “2006 Plan”), the MiMedxInc. 2007 Assumed Stock Plan (the “Assumed 2007 Plan”) and the MiMedx Group Inc. Amended and Restated Assumed 2005 Stock Plan (the “Assumed2005 Plan”) which provide for the granting of qualified incentive and non-qualified stock options, stock appreciation awards and restricted stock awards toemployees, directors, consultants and advisors. The awards are subject to a vesting schedule as set forth in each individual agreement. The Company intendsto use only the 2006 Plan to make future grants. The number of assumed options under the Assumed 2005 Plan and Assumed 2007 Plan outstanding atDecember 31, 2015, totaled 70,000. The maximum number of shares of common stock that can be issued under the 2006 Plan total 26,500,000 atDecember 31, 2015.57 Activity with respect to the stock options is summarized as follows: Number ofShares Weighted-AverageExercisePrice Weighted-AverageRemainingContractualTerm(in years) AggregateIntrinsicValueOutstanding at January 1, 201516,474,227 $3.43 Granted75,100 $9.66 Exercised(2,220,881) $2.08 Unvested options forfeited(239,322) $6.66 Vested options expired(69,495) $2.61 Outstanding at December 31, 201514,019,629 $3.62 6.5 $80,740,577Vested at December 31, 201510,951,694 $2.80 6.2 $71,955,234Vested or expected to vest at December 31, 2015 (a)13,917,122 $3.60 6.5 $80,496,150(a)Includes forfeiture adjusted unvested shares.The intrinsic value of the options exercised during the years ended December 31, 2015, 2014 and 2013 were approximately $17,181,000, $10,566,000,and $8,864,000, respectively.The intrinsic value of options vested during the years ended December 31, 2015, 2014 and 2013 were approximately $10,044,000, $6,615,000, and$3,351,000, respectively.Following is a summary of stock options outstanding and exercisable at December 31, 2015: Options Outstanding Options ExercisableRange of Exercise PricesNumberoutstanding Weighted-AverageRemainingContractualTerm(in years) Weighted-AverageExercisePrice NumberExercisable Weighted-AverageExercise Price$0.50 - $0.76441,429 3.4 $0.72 441,429 $0.72$0.87 - $1.354,783,304 5.7 1.19 4,783,304 1.19$1.40 - $2.451,641,928 5.1 1.93 1,641,928 1.93$2.66 - $3.99957,454 6.8 3.05 907,452 3.00$4.19 - $6.383,552,323 7.4 5.35 2,229,386 5.32$6.45- $9.782,527,525 8.1 7.29 914,703 7.18 $9.90 - $10.99115,666 8.9 10.43 33,492 10.50 14,019,629 6.5 $3.62 10,951,694 $2.80 58 A summary of the status of the Company’s unvested stock options as of December 31, 2015 is presented below:Unvested Stock OptionsNumber ofShares Weighted-AverageGrant Date FairValueUnvested at January 1, 20157,193,577 $3.08Granted75,100 $5.15Cancelled(239,322) $3.79Vested(3,961,420) $2.53Unvested at December 31, 20153,067,935 $3.81Total unrecognized compensation expense at December 31, 2015, was approximately $6,241,000 and will be charged to expense through March 2017.The fair value of the options granted was estimated on the date of grant using the Black-Scholes-Merton option-pricing model that uses assumptions forexpected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on historical volatility of peercompanies 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 midpoint between the weighted average time to vesting and the contractual maturity. The simplified method was useddue to the Company’s lack of sufficient historical data to provide a reasonable basis upon which to estimate the expected term due to the limited period oftime its equity shares have been publicly traded. The term for non-employee options is generally based upon the contractual term of the option. The risk-freerate 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: Year ended December 31, 2015 2014 2013Expected volatility54.35 - 58.14% 58.14 - 64.50% 61.41 - 64.77%Expected life (in years)6 6 6Expected dividend yield— — —Risk-free interest rate1.51 - 1.68% 1.64 - 1.96% 0.85 - 1.88%The weighted-average grant date fair value for options granted during the years ended December 31, 2015, 2014 and 2013 were approximately $5.15,$4.18 and $3.08, respectively.Restricted Stock AwardsFollowing is summary information for restricted stock awards for the year ended December 31, 2015. Shares vest over a one to three year period. As ofDecember 31, 2015, there was approximately $16,606,000 of total unrecognized stock-based compensation related to time-based, non-vested restrictedstock. That expense is expected to be recognized on a straight-line basis over a weighted-average period of 2.1 years.Additionally, during the twelve months ended December 31, 2015, 5,172 shares of common stock valued at approximately $57,000 were issued underthe 2006 Plan to a consultant in return for services performed.59 Number ofShares Weighted-Average GrantDateFair ValueUnvested at January 1, 2015 1,228,898 $7.16Granted 1,974,259 $9.80Vested (517,883) $6.90Forfeited (72,007) $9.77Unvested at December 31, 2015 2,613,267 $9.14For the years ended December 31, 2015, 2014, and 2013 the Company recognized stock-based compensation as follows (in thousands): Year Ended December 31, 2015 2014 2013Cost of sales$352 $322 $279Research and development790 660 417Selling, general and administrative15,754 10,471 5,314 $16,896 $11,453 $6,010WarrantsOn November 18, 2015, 42,400 common stock warrants representing the balance remaining from those granted in connection with equity sharepurchases by investors as an additional incentive for providing long - term equity capital to the Company and as additional compensation to consultants andadvisors were exercised at an exercise price of $1.09. The warrants were granted at negotiated prices in connection with the equity share purchases and at themarket price of the common stock in other instances. The warrants were issued for terms of five years.Treasury StockOn May 12, 2014, our Board of Directors authorized the repurchase of up to $10 million of our common stock from time to time, through December 31, 2014.The Board subsequently extended the program until December 31, 2016. In December 2014, the Board increased the authorization to $20 million and furtherincreased the authorization in 2015 to $60 million. The timing and amount of repurchases will depend upon the Company's stock price, economic andmarket conditions, regulatory requirements, and other corporate considerations. The Company may initiate, suspend or discontinue purchases under the stockrepurchase program at any time.For the year ended December 31, 2015, the Company purchased approximately 4,610,000 shares of its common stock for an aggregate purchase price ofapproximately $40,143,000 exclusive of commissions of approximately $136,000. As of December 31, 2015, the Company had approximately $14,274,000remaining under the repurchase program.13.Income TaxesDeferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reportingpurposes and the amounts used for income tax purposes.Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):60 December 31, 2015 2014Deferred tax assets and liabilities: Accruals and prepaids$4,606 $3,563Intangible assets146 619Property and equipment(1,396) (770)R&D and other tax credits3,293 2,086Stock compensation7,063 4,163Charitable contributions— 1Federal and state basis difference145 114Net operating loss1,763 6,382Net deferred tax assets$15,620 $16,158 Valuation allowance(782) (16,158) $14,838 $—The reconciliation of the Federal statutory income tax rate of 34% to the effective rate is as follows: December 31, 2015 2014Federal statutory rate34.00 % 34.00 %State taxes, net of federal benefit3.33 % 9.58 %Non deductible compensation0.63 % 5.59 %Meals & entertainment2.27 % 5.55 %Stock based compensation - ISO6.39 % 21.73 %Other(4.58)% (5.92)%Valuation allowance(63.33)% (58.73)% (21.29)% 11.80 %Current and deferred income tax expense (benefit) is as follows (in thousands): December 31, 2015December 31, 2014Current: Federal$8,452$— State1,218832 Total current9,670832 Deferred: Federal(13,070)— State(1,768)— Total deferred(14,838)— Total expense$(5,168)$83261 Income taxes are based on estimates of the annual effective tax rate and evaluations of possible future events and transactions and may be subject tosubsequent refinement or revision.Certain items of income and expense are not reported in tax returns and financial statements in the same year. The tax effect of such temporarydifferences is reported as deferred income taxes. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefit that, basedon available evidence, is not expected to be realized. The Company establishes a valuation allowance for deferred tax assets for which realization is notlikely.As of December 31, 2015, our deferred tax assets were primarily the result of accrued liabilities, equity compensation, and tax credit and net operatingloss carryforwards. A valuation allowance of approximately $782,000 and $16,158,000 was recorded against our gross deferred tax asset balance as ofDecember 31, 2015, and December 31, 2014, respectively. For the year ended December 31, 2015, we recorded a net valuation allowance release of$15,376,000 on the basis of management's reassessment of the amount of its deferred tax assets that are more likely than not to be realized.As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred taxassets. As of December 31, 2015, in part because in the current year we achieved three years of cumulative pretax income in the U.S. federal tax jurisdiction,management determined that there is sufficient positive evidence to conclude that it is more likely than not that additional deferred taxes are realizable. Ittherefore reduced the valuation allowance accordingly.At December 31, 2015, and December 31, 2014, the Company had income tax net operating loss ("NOL") carryforwards for federal and state purposes of$579,000 and $27,552,000, respectively. If not utilized, the federal and state tax loss carryforwards will expire between 2026 and 2031. The Company hasrecorded a deferred tax asset for both federal and state NOL carryforwards of approximately $197,000 and approximately $1,566,000, respectively. Avaluation allowance remains recorded against the deferred tax asset for certain federal net operating loss carryovers in the amount of $197,000 due tolimitations provided by Internal Revenue Code Section 382 and certain state net operating loss carryovers in the amount of $585,000 not expected to beutilized prior to expiration.The Company's net operating losses and tax credits are subject to annual limitations due to ownership change limitations provided by Internal Revenue CodeSection 382. The Company has performed an analysis and determined that the limitation exceeds the utilization of NOLs in the current year and does notanticipate much limitation going forward.As a result of certain realization requirements of ASC 718, Compensation - Stock Compensation, the table of deferred tax assets and liabilities shown abovedoes not include certain deferred tax assets as of December 31, 2015, and December 31, 2014, that arose directly from (or the use of which was postponed by)tax deductions related to equity compensation that are greater than the compensation recognized for financial reporting. During 2015, deferred tax assets inthe amount of $7,757,000 were realized resulting in an increase to equity in the same amount. The Company has approximately $1,661,000 of remainingdeferred tax assets that will result in an increase to equity, if and when these deferred tax assets are ultimately realized. The Company uses ASC 740 orderingwhen determining when excess tax benefits have been realized.The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands): December 31, 2015December 31, 2014Unrecognized tax benefits - January 1$—$— Gross increases - tax positions in current period170— Unrecognized tax benefits - December 31$170$—Included in the balance of unrecognized tax benefits as of December 31, 2015 and December 31, 2014, are $170,000 and $0, respectively, of tax benefits that,if recognized, would affect the effective tax rate. Also included in the balance of unrecognized tax benefits as of December 31, 2015 and December 31, 2014,are $170,000 and $0, respectively, of tax benefits that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes. This amountis recorded in Other Liabilities in the accompanying consolidated balance sheets.62 The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. Related to the unrecognized tax benefitsnoted above, the Company accrued no penalties or interest during 2015, and, in total, as of December 31, 2015 has not recognized any liabilities for penaltiesor interest. During 2014, we also did not accrue any penalties or interest and, in total, as of December 31, 2014, had not recognized any liability for penaltiesor interest.The Company is subject to taxation in the US and various state jurisdictions. As of December 31, 2015, the Company’s tax years for 2012, 2013, 2014and 2015 are subject to examination by the tax authorities. As of December 31, 2015, the Company is generally no longer subject to US federal, state, or localexaminations by tax authorities for years before 2012.14. Supplemental Disclosure of Cash Flow and Non-Cash Investing and Financing ActivitiesSelected cash payments, receipts, and noncash activities are as follows (in thousands): Years Ended December 31, 2015 2014 2013Cash paid for interest$86 $48 $36Income taxes paid2,293 384 61Purchases of equipment financed through capital leases— — 355Retirement of fixed assets319 — —Deferred financing costs504 — 27APIC related tax adjustments7,757 — —Stock issuance in connection with Earn-Out Liability of 1,174,915 shares— — 5,792Stock issuance in exchange for convertible debt of 5,272,004 shares— — 5,272Stock issuance of 16,493 and 15,958 shares in exchange for services performed in 2015 and 2014,respectively164 117 —Tenant improvement incentive— — 997Legal fees paid for public offering— — 102Legal fees related to public offering included in accounts payable— — 30Legal fees related to public offering included in accrued expenses— — 6263 15.401k PlanThe Company has a 401(k) plan (the “Plan”) covering employees who have attained 21 years of age and have completed three months of service. Underthe Plan, participants may defer up to 100% of their eligible wages to a maximum of $18,000 per year (annual limit for 2015). Employees age 50 or over in2015 may make additional pre-tax contributions up to $6,000 above and beyond normal plan and legal limits. Annually, the Company may elect to matchemployee contributions up to 6% of the employee’s compensation. Additionally, the Company may elect to make a discretionary contribution to the Plan.The Company did not provide matching contributions for the years ended December 31, 2015, 2014 and 2013.16.Commitments and ContingenciesContractual ArrangementsIn addition to the capital leases noted under Property and Equipment above, the Company has entered into operating lease agreements for facility spaceand equipment. These leases expire over the next five years and generally contain renewal options. The Company anticipates that most of these leases will berenewed or replaced upon expiration. The Company also has commitments for meeting space and to various charitable organizations.The estimated annual payments are as follows (in thousands):Year ended December 31, 2016$2,81820172,34020181,76620191,7632020352 $9,039Rent expense for the years ended December 31, 2015, 2014 and 2013, was approximately $1,317,000, $1,130,000 and $1,000,000, respectively and isallocated among cost of sales, research and development, and selling, general and administrative expenses.Letters of CreditAs a condition of the leases for the Company's facilities we are obligated under standby letters of credit in the amount of approximately $235,000. Theseobligations are reduced at various times over the lives of the leases.FDA Untitled Letter, Draft Guidance and Related LitigationFDA Untitled Letter and Draft GuidanceOn August 28, 2013, the FDA issued an Untitled Letter alleging that the Company's micronized allografts do not meet the criteria for regulationsolely under Section 361 of the Public Health Service Act and that, as a result, MiMedx would need a biologics license to lawfully market those micronizedproducts. Since the issuance of the Untitled Letter, the Company has been in discussions with the FDA to communicate its disagreement with the FDA'sassertion that the Company's allografts are more than minimally manipulated. To date, the FDA has not changed its position that the Company's micronizedproducts are not eligible for marketing solely under Section 361 of the Public Health Service Act, but discussions are continuing. The Company continues tomarket its micronized products but is also pursuing the Biologics License Application (“BLA”) process for certain of its micronized products.On December 22, 2014, the FDA issued for comment “Draft Guidance for Industry and FDA Staff: Minimal Manipulation of Human Cells, Tissues,and Cellular and Tissue-Based Products.” Essentially the Minimal Manipulation draft guidance takes the same position with respect to micronized amniotictissue that it took in the Untitled Letter to MiMedx 16 months earlier. The Company submitted comments asserting that the Minimal Manipulation draftguidance represents agency action that goes far beyond the FDA’s statutory authority, is inconsistent with existing HCT/P regulations and the FDA’s priorpositions, and is internally inconsistent and scientifically unsound.On October 28, 2015, the FDA issued for comment, "Draft Guidance for Industry and FDA Staff: Homologous Use of Human Cells, Tissues, andCellular and Tissue-Based Products." The Company submitted comments on this Homologous Use64 draft guidance. The FDA has also indicated that it will hold a public hearing on on a date in 2016 to be determined to obtain input on the Homologous Usedraft guidance and the previously released Minimal Manipulation draft guidance, as well as other recently issued guidance documents on HCT/Ps. TheCompany has requested, and has been granted an opportunity to speak at this hearing.If the FDA does allow the Company to continue to market a micronized form of its sheet allografts without a biologics license either prior to or afterfinalization of the draft guidance documents, it may impose conditions, such as labeling restrictions and compliance with cGMP. Although the Company ispreparing for these requirements in connection with its pursuit of a BLA for certain of its micronized products, earlier compliance with these conditionswould require significant additional time and cost investments by the Company. It is also possible that the FDA will not allow the Company to market anyform of a micronized product without a biologics license even prior to finalization of the draft guidance documents and could even require the Company torecall its micronized products. Revenues from micronized products comprised approximately 12% of the Company's revenues in 2015.Related LitigationFollowing the publication of the Untitled Letter from the FDA regarding the Company’s micronized products in September 2013, the trading priceof the Company’s stock declined and several putative shareholder class action lawsuits were filed against the Company and certain of its executive officersasserting violations of the Securities Exchange Act of 1934. The cases were consolidated in the United States District Court for the Northern District ofGeorgia. On November 17, 2015, the parties entered into a stipulation of settlement to settle the consolidated case in its entirety. The stipulation ofsettlement was filed with the Court on November 18, 2015. On November 19, 2015, the Court preliminarily approved the settlement and has set the finalsettlement hearing for April 5, 2016.OIG SubpoenaIn the fourth quarter of 2014, the Company received a subpoena from the Office of Inspector General, U.S. Department of Health and HumanServices, or OIG, in connection with a civil investigation into matters primarily related to the Company's sales and marketing activities. In March 2015, theCompany received notice from the Department of Justice that it declined at that time to intervene in the qui tam action that gave rise to the issuance of thesubpoena. The qui tam plaintiff had 120 days from the date of the Department of Justice’s notice to proceed with the case. The 120 day period passed withoutinitiation of the lawsuit. The plaintiff, who is an executive at the Company’s competitor Organogenesis, Inc., voluntarily dismissed the lawsuit in July 2015.This dismissal was approved by the Court on October 6, 2015. Patent LitigationMiMedx continues to diligently enforce its intellectual property against several entities. Currently, there are three actions pending, as describedbelow:The Liventa ActionFirst, there is an action pending against several entities in the in the United States District Court for the Northern District of Georgia, i.e., “theLiventa Action”. On April 22, 2014, the Company filed a patent infringement lawsuit against Liventa Bioscience, Inc. ("Liventa"), Medline Industries, Inc.("Medline") and Musculoskeletal Transplant Foundation, Inc. ("MTF") for permanent injunctive relief and unspecified damages. In addition to theallegations of infringement of MiMedx's patents, the lawsuit asserts that Liventa and Medline knowingly and willfully made false and misleadingrepresentations about their respective products to providers, patients, and in some cases, prospective investors. The Liventa Action was filed in the UnitedStates District Court for the Northern District of Georgia.MiMedx asserts that Liventa (formerly known as AFCell Medical, Inc.), Medline and MTF infringed and continue to infringe certain of theCompany's patents relating to the MiMedx dehydrated human amnion/chorion membrane ("dHACM") allografts. MTF is the tissue processor while Liventaand Medline are the distributors of the allegedly infringing products. On May 30, 2014, defendants filed answers to the Complaint, denying the allegationsin the Complaint. They also raised affirmative defenses of non-infringement, invalidity, laches and estoppel. MTF and Medline also filed counterclaimsseeking declaratory judgments of non-infringement and invalidity.On June 30, 2014, fact discovery began and the parties have engaged in extensive fact discovery.65 MiMedx served Infringement Contentions on August 29, 2014, and Defendants served Invalidity Contentions and Responses to InfringementContentions on September 29, 2014. After a protracted series of meet and confers, MiMedx required Defendants to supplement their invalidity contentions inview of parallel Inter Partes Review ("IPR")(see further discussion, infra) proceedings. MTF complied on June 26, 2015.In September 2015, the Defendants filed a renewed Motion to Stay in light of the Patent Trial and Appeal Board's ("PTAB") decisions to instituteIPRs on the ’437 and ’687 Patents, seeking a partial stay of the litigation as to the ’437, ’687, and ’494 Patents (i.e., the ’437 Patent family). MiMedx opposedthe Motion to Stay with respect to the ’494 Patent and once again successfully defeated Defendants’ motion to stay.Claim Construction proceedings began in October 2014. The parties submitted proposed constructions for key terms for the ’701, ’092, ’437, ’687,’207, and ’494 Patents. Briefing was completed in March 2015.On December 22, 2015, a Markman Hearing was held before Special Master Sumner C. Rosenberg. Over thirty disputed claim terms were at issue.One week later, on December 30, 2015, the Special Master issued its Report and Recommendation. Except for one term, the Special Master’s Reportessentially adopted MiMedx’s proposed constructions. The parties are awaiting a final Court decision pending their respective objections.The Bone Bank ActionOn May 16, 2014, the Company also filed a patent infringement lawsuit against Transplant Technology, Inc. d/b/a Bone Bank Allografts ("BoneBank") and Texas Human Biologics, Ltd. ("Biologics") for permanent injunctive relief and unspecified damages (the "Bone Bank Action"). The Bone BankAction was filed in the United States District Court for the Western District of Texas. This lawsuit similarly asserts that Bone Bank and Biologics infringedcertain of the Company's patents through the manufacturing and sale of their placental-derived tissue graft products. On July 10, 2014, defendants filed ananswer to the Complaint, denying the allegations in the Complaint. They also raised affirmative defenses of non-infringement and invalidity and filedcounterclaims seeking declaratory judgments of non-infringement and invalidity. The Bone Bank Action is in an advanced stage. The parties have (i)substantially completed document production; (ii) taken several fact depositions (both party and non-party); and (iii) completed claim construction briefing.The Markman hearing in this case was held on October 2, 2015. Except for one term, the Court adopted MiMedx’s proposed construction of the disputedterms. The parties have submitted a proposed scheduling order to the Court and are awaiting the Court’s order in this regard. Meanwhile, the parties continuewith fact discovery in view of recent depositions.The NuTech ActionFinally, on March 2, 2015, the Company filed a patent infringement lawsuit against NuTech Medical, Inc. ("NuTech") and DCI Donor Services, Inc.("DCI") for permanent injunctive relief and unspecified damages. This lawsuit was filed in the United States District Court for the Northern District ofAlabama. The lawsuit alleges that NuTech and DCI have infringed and continue to infringe the Company's patents through the manufacture, use, sale, and/oroffering of their tissue graft product. The lawsuit also asserts that NuTech knowingly and willfully made false and misleading representations about itsproducts to customers and/or prospective customers.On April 17, 2015, NuTech filed a motion to dismiss the case purportedly for lack of patentable subject matter, which the Company opposed.NuTech also filed a motion to stay the case pending disposition of the motion to dismiss, which MiMedx also opposed, and on which the Court declined torule. Hearing on the motion to dismiss occurred on August 20, 2015. On November 24, 2015, the court ruled on NuTech’s Motion to Dismiss, granting inpart, and denying in part. MiMedx still has claims against NuTech for infringement of the ‘494 and ‘687 patents, as well as violations of the Lanham Act;these claims shall proceed.On December 30, 2015, the parties submitted a Joint Rule 26(f) Report of Parties’ Planning Meeting and Proposed Case Management Order to theCourt. In the Report, the parties requested that the Court stay the proceedings with respect to the ’687 patent pending the completion of the inter partesreview on that patent.On January 8, 2016, MiMedx served its infringement contentions. Discovery has recently begun. Pending IPRsIn addition to defending the claims in the pending district court litigations, defendants in the Liventa and Bone Bank cases have challenged certainof the Company's patents in several IPR proceedings to avoid the high burden of proof of proving66 invalidity by "clear and convincing evidence" in the district court litigations. An inter partes review (or "IPR") is a request for a specialized group within theUnited States Patent and Trademark Office to review the validity of a plaintiff's patent claims. The defendants in the Bone Bank Action have challenged thevalidity of the C ompany's 8,597,687 and 8,709,494 patents (the "'687" and "'494" patents, respectively); while the defendants in the Liventa Action havechallenged the validity of the Company's 8,372,437 and 8,323,701 patents (the "'437" and "'701" patents, respectively).On June 29, 2015, the Patent Trial and Appeals Board ("PTAB") denied defendants' request for institution of an IPR with respect to the '494 patenton all seven challenged grounds. On August 18, 2015, the PTAB also denied defendants' request for institution of an IPR with respect to the '701 patent on allsix challenged grounds. That is, the PTAB decided in each case that the defendants failed to establish a reasonable likelihood that defendants would prevailin showing any of the challenged claims of the '494 or the '701 patent were unpatentable.On July 10, 2015 the PTAB issued an opinion allowing a review of the '687 patent to proceed, although on only two of the five challenged grounds.The PTAB also adopted MiMedx's construction of the claims which will govern the Board's review of the '687 patent. On August 18, 2015, the PTAB issuedan opinion allowing a review of the '437 patent to proceed, although only on one of the seven challenged grounds. Briefing and expert discovery is ongoing.Following the PTAB decisions, the defendants in the Bone Bank Action moved to stay the district court litigation, despite the Court's previousdenial of such a stay, pending the outcome of the '687 patent inter partes review. The parties agreed to stay the case with respect to the '687 patent only andthe Court denied Bone Bank's motion to stay the litigation with respect to the '494 patent. The Company has also successfully defeated an attempt bydefendants in the Liventa Action to stay that litigation -- also pending the outcome of the IPR of the patents at issue in that case.67 17.Quarterly Financial Data (Unaudited) (in thousands except per share data) FirstQuarter SecondQuarter ThirdQuarter FourthQuarterNET SALES 2015 $40,767$45,679$49,015$51,835 2014 19,559 25,573 33,518 39,573 2013 11,556 13,515 16,116 17,994 GROSS MARGIN 2015 $35,619$40,590$44,036$46,849 2014 16,582 22,833 30,170 35,973 2013 9,651 11,316 14,002 14,883 NET INCOME (LOSS) 2015 $4,087$5,430$6,551 $13,378 2014 (922) (390) 3,700 3,832 2013 (1,620) (757) (307) (1,427) NET INCOME (LOSS) PER COMMON SHARE - BASIC 2015 $0.04 $0.05 $0.06 $0.13 2014 (0.01) — 0.03 0.04 2013 (0.02) (0.01) — (0.01) NET INCOME (LOSS)PER COMMON SHARE - DILUTED 2015 $0.04 $0.05 $0.06 $0.11 2014 (0.01) — 0.03 0.03 2013 (0.02) (0.01) — (0.01)68 18. Subsequent EventsOn January 13, 2016, the Company completed the acquisition of Stability Inc., d/b/a Stability Biologics, a provider of human tissue products tosurgeons, facilities, and distributors serving the surgical, spine, and orthopedic sectors of the healthcare industry. The acquisition of Stability was effected bythe merger of Stability Inc. into a newly created wholly owned subsidiary of the Company. The new subsidiary was the surviving company in the merger andwas subsequently renamed Stability Biologics, LLC ("Stability"). The Company paid $10 million at the closing, comprised of 60% cash and 40% in shares ofcommon stock of MiMedx Group, Inc., assumed approximately $800,000 in debt, and eliminated a $2.4 million receivable related to Company products soldto Stability prior to the acquisition . The Company will also pay future contingent consideration through a two-year earn out arrangement based on the 2016and 2017 performance of Stability's business. The Company expects the earn out will be the larger portion of the overall consideration for the transaction.The earn out will also be paid in the form of 60% cash and 40% in shares of stock of MiMedx Group, Inc.Schedule II Valuation and Qualifying AccountsMIMEDX GROUP, INC. AND SUBSIDIARIESSCHEDULE II VALUATION AND QUALIFYING ACCOUNTS Years ended December 31, 2015, 2014 and 2013 (in thousands) Balance at Beginning ofYear Additions charged toExpense or Revenue Deductions and write-offs Balance atEnd of Year For the Year ended December 31, 2015 Allowance for doubtful accounts $1,750 $1,698 $(178) $3,270Allowance for product returns 841 3,257 (2,836) 1,262Allowance for obsolescence 527 540 (670) 397 For the Year ended December 31, 2014 Allowance for doubtful accounts $407 $1,357 $(14) $1,750Allowance for product returns 215 2,215 (1,589) 841Allowance for obsolescence 322 405 (200) 527 For the Year ended December 31, 2013 Allowance for doubtful accounts $49 $391 $(33) $407Allowance for product returns 89 917 (791) 215Allowance for obsolescence 159 213 (50) 32269 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresDisclosure Controls and ProceduresWe maintain “disclosure controls and procedures” within the meaning of Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or theExchange Act. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by theCompany in the reports filed under the Exchange Act, such as this Annual Report on Form 10-K, is recorded, processed, summarized and reported within thetime periods specified in the U.S. Securities and Exchange Commission’s rules and forms. Our disclosure controls and procedures include controls andprocedures designed to provide reasonable assurance that such information is accumulated and communicated to our management, including our ChiefExecutive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating ourdisclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide onlyreasonable assurance of achieving the desired control objectives, and no evaluation of controls and procedures can provide absolute assurance that allcontrol issues and instances of fraud, if any, within a company have been detected. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.As required by Rule 13a-15(b) of the Exchange Act, prior to filing this Annual Report on Form 10-K, we carried out an evaluation, under thesupervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of thedesign and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the periodcovered by this Annual Report on Form 10-K. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that ourdisclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K.Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f)under the Exchange Act). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2015. In making thisassessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in InternalControl-Integrated Framework (2013). Our management has concluded that, as of December 31, 2015, our internal control over financial reporting is effectivebased on these criteria.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systemsdetermined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of anyevaluation of the effectiveness of internal controls over financial reporting to future periods are subject to the risk that the controls may become inadequate.An evaluation was also performed under the supervision and with the participation of our management, including our Chief Executive Officer andChief Financial Officer, of any changes in our internal control over financial reporting that occurred during our last fiscal quarter and that has materiallyaffected, or is reasonably likely to materially affect, our internal control over financial reporting. That evaluation did not identify any change in our internalcontrol over financial reporting that occurred during our latest fiscal quarter that has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.Cherry Bekaert LLP, an independent registered accounting firm, as auditors of our financial statements have issued an attestation report on theeffectiveness of the Company’s and its subsidiaries’ internal control over financial reporting as of December 31, 2015. Cherry Bekaert LLP's report isincluded in this report.Item 9B. Other InformationNone.70 PART IIIItem 10. Directors, Executive Officers and Corporate GovernanceInformation required by this Item will be contained in our definitive proxy statement relating to our 2016 Annual Meeting of Shareholders under thecaptions “Executive Officers,” “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance,” or similar captions which areincorporated herein by reference.We have adopted our “Code of Business Conduct and Ethics” and a copy is posted on our website at www.mimedx.com. In the event that we amendany of the provisions of this Code of Business Conduct and Ethics that require disclosure under applicable law, SEC rules or listing standards, we intend todisclose such amendment on our website.Any waiver of the Code of Business Conduct and Ethics for any executive officer or director must be approved by the Board and will be disclosedon a Form 8-K filed with the SEC, along with the reasons for the waiver.Item 11. Executive CompensationInformation required by this Item will be contained in our definitive proxy statement relating to our 2016 Annual Meeting of Shareholders under thecaption “Executive Compensation,” or similar caption which is incorporated herein by reference.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder MattersInformation required by this Item will be contained in our definitive proxy statement relating to our 2016 Annual Meeting of Shareholders under thecaptions “Stock Ownership",” “Executive Compensation,” and “Equity Compensation Plan Information,” or similar captions which are incorporated hereinby reference.Item 13. Certain Relationships and Related Transactions, and Director IndependenceInformation required by this Item will be contained in our definitive proxy statement relating to our 2016 Annual Meeting of Shareholders under thecaptions “Certain Relationships and Related Party Transactions,” and "Election of Directors" or similar captions which are incorporated herein by reference.Item 14. Principal Accounting Fees and ServicesInformation required by this Item will be contained in our definitive proxy statement relating to our 2016 Annual Meeting of Shareholders under thecaptions “Ratification of Appointment of Independent Registered Public Accounting Firm” and “Election of Directors,” or similar captions which areincorporated herein by reference.71 PART IVItem 15. Exhibits, Financial Statement Schedules(a)Documents filed as part of this report:(1)Financial Statements(2)Financial Statement Schedule:The following Financial Statement Schedule is filed as part of this Report:Schedule II Valuation and Qualifying Accounts for the years ended December 31, 2015, 2014 and 2013(3)ExhibitsSee Item 15(b) below. Each management contract or compensation plan has been identified.(b)Exhibits ExhibitNumber Description 2.1## Agreement and Plan of Merger is entered into as of the 22nd day of December, 2010 by and among MiMedx Group, Inc., MP HoldingsAcquisition Sub, LLC, ORCI Acquisition Sub, LLC, Membrane Products Holdings, LLC, Onramp Capital Investments, LLC, each of theOnRamp Members (as defined therein); John R. Daniel, in his capacity as the representative of the Members and Surgical Biologics,LLC (Incorporated by reference to Exhibit 2.2 filed with Registrant's Form 10-K filed on March 31, 2011)2.2## Agreement and Plan of Merger dated January 10, 2016, by and among MiMedx Group, Inc., Titan Acquisition Sub I, Inc., TitanAcquisition Sub II, LLC, Stability Inc., certain stockholders of Stability Inc. and Brian Martin as representative of the Stabilitystockholders (Incorporated by reference to Exhibit 2.1 filed with Registrant's Form 8-K filed on January 13, 2016)3.1 Articles of Incorporation of MiMedx Group, Inc. as filed with the Secretary of the State of Florida on March 31, 2008 (Incorporated byreference to Exhibit 3.1 filed with Registrant's Form 10-Q on August 8, 2013)3.2 Articles of Amendment to Articles of Incorporation as filed with the Secretary of the State of Florida on May 14, 2010 (Incorporated byreference to Exhibit 3.2 filed with Registrant's Form 10-Q on August 8, 2013)3.3 Articles of Amendment to Articles of Incorporation as filed with the Secretary of the State of Florida on August 8, 2012 (Incorporated byreference to Exhibit 3.3 filed with Registrant's Form 10-Q on August 8, 2013)3.4 Articles of Amendment to Articles of Incorporation as filed with the Secretary of the State of Florida on November 8, 2012 (Incorporatedby reference to Exhibit 3.4 filed with Registrant's Form 10-Q on August 8, 2013)3.5 Articles of Amendment to Articles of Incorporation as filed with the Secretary of the State of Florida on May 15, 2015 (Incorporated byreference to Exhibit 3.5 to the Company's 10-Q filed on August 7, 2015)3.6 Bylaws of MiMedx Group, Inc. (Incorporated by reference to Exhibit 3.2 filed with Registrant's Form 8-K filed on April 2, 2008)3.7 Amendment to the Bylaws of MiMedx Group, Inc. adopted by the Board of Directors on May 11, 2010, (Incorporated by reference toExhibit 3.2 to the Registrant's Form 8-K filed on May 14, 2010)10.1* MiMedx Group, Inc. 2006 Assumed Stock Incentive Plan, as amended and restated effective February 25, 2014 (Incorporated byreference to Exhibit 10.1 of the Registrant's Form 8-K filed on March 3, 2014)10.2* Form of Restricted Stock Agreement for Non-employee Directors (Incorporated by reference to Exhibit 10.66 to the Registrant's Form10-Q filed on August 8, 2013)10.3* Form of Restricted Stock Agreement under the MiMedx Group, Inc. 2006 Assumed Stock Incentive Plan (Incorporated by reference toExhibit 10.3 to the Registrant's Form 10-K filed on March 4, 2014)10.4* Form of Incentive Award Agreement under the MiMedx Group, Inc. 2006 Assumed Stock Incentive Plan (Incorporated by reference toExhibit 10.4 to the Registrant's Form 10-K filed on March 4, 2014)72 10.5* Form of Nonqualified Incentive Award Agreement under the MiMedx Group, Inc. 2006 Assumed Stock Incentive Plan (Incorporated byreference to Exhibit 10.5 to the Registrant's Form 10-K filed on March 4, 2014)10.6* MiMedx, Inc. 2005 Assumed Stock Plan, formerly the SpineMedica Corp. 2005 Employee, Director and Consultant Stock Plan(Incorporated by reference to Exhibit 10.4 filed with the Registrant's Form 8-K filed February 8, 2008)10.7* Declaration of Amendment to MiMedx, Inc. 2005 Assumed Stock Plan (Incorporated by reference to Exhibit 10.6 filed with theRegistrant's Form 8-K filed February 8, 2008)10.8* Form of Incentive Award Agreement under the MiMedx, Inc. Assumed 2005 Stock Plan (formerly the SpineMedica Corp. 2005Employee, Director and Consultant Stock Plan), including a list of officers and directors receiving options thereunder (Incorporated byreference to Exhibit 10.7 filed with the Registrant's Form 8-K filed February 8, 2008)10.9* Form of Nonqualified Incentive Award Agreement under the MiMedx, Inc. Assumed 2005 Stock Plan (formerly the SpineMedica Corp.2005 Employee, Director and Consultant Stock Plan) (Incorporated by reference to Exhibit 10.8 filed with the Registrant's Form 8-Kfiled February 8, 2008)10.10* MiMedx, Inc. Assumed 2007 Stock Plan (formerly the SpineMedica Corp. 2007 Stock Incentive Plan) (Incorporated by reference toExhibit 10.9 filed with the Registrant's Form 8-K filed February 8, 2008)10.11* Declaration of Amendment to MiMedx, Inc. Assumed 2007 Stock Plan (formerly the SpineMedica Corp. 2007 Stock Incentive Plan)(Incorporated by reference to Exhibit 10.10 filed with the Registrant's Form 8-K filed February 8, 2008)10.12* Form of Incentive Award Agreement under the MiMedx, Inc. Assumed 2007 Stock Plan (formerly the SpineMedica Corp. 2007 StockIncentive Plan) (Incorporated by reference to Exhibit 10.11 filed with the Registrant's Form 8-K filed February 8, 2008)10.13* Form of Nonqualified Incentive Award Agreement under the MiMedx, Inc. Assumed 2007 Stock Plan (formerly the SpineMedica Corp.2007 Stock Incentive Plan) (Incorporated by reference to Exhibit 10.12 filed with the Registrant's Form 8-K filed February 8, 2008)10.14* Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.65 filed with the Registrant's Form 8-K filed July 15, 2008)10.15* MiMedx Group, Inc. Amended and Restated Assumed 2005 Stock Plan (Incorporated by reference to Exhibit 10.4 filed with theRegistrant's Form S-8 filed August 29, 2008)10.16* Form of Incentive Stock Option Award Agreement under MiMedx Group, Inc. Amended and Restated Assumed 2005 Stock Plan(Incorporated by reference to Exhibit 10.68 filed with the Registrant's Form 8 -K filed September 4, 2008)10.17* Form of Nonqualified Stock Option Award Agreement under MiMedx Group, Inc. Amended and Restated Assumed 2005 Stock Plan(Incorporated by reference to Exhibit 10.69 filed with the Registrant's Form 8 -K filed September 4, 2008)10.30 Form of MiMedx, Inc. Employee Proprietary Information and Inventions Assignment Agreement (Incorporated by reference to Exhibit10.13 filed with the Registrant's Form 8-K filed February 8, 2008)73 10.31 Technology License Agreement between MiMedx, Inc., Shriners Hospitals for Children, and University of South Florida ResearchFoundation dated January 29, 2007 (Incorporated by reference to Exhibit 10.12 filed with the Registrant's Form 8-K filed February 8,2008)10.35 Warrant to Purchase Common Stock dated September 22, 2009 (Incorporated by reference to Exhibit 10.3 filed with Registrant's Form 8-K filed September 28, 2009)10.36 Form of Warrant to Purchase Common Stock (Incorporated by reference to Exhibit 10.4 filed with Registrant's Form 8-K filed January 7,2010)10.37 Form of Subscription Agreement 5% Convertible Promissory Note (Incorporated by reference to Exhibit 10.1 filed with Registrant'sForm 8-K filed October 25, 2010)10.38 Form of 5% Convertible Promissory Note (Incorporated by reference to Exhibit 10.2 filed with Registrant's Form 8-K filed October 25,2010)10.39 Form of Warrant to Purchase Common Stock (Incorporated by reference to Exhibit 10.3 filed with Registrant's Form 8-K filed October25, 2010)10.40 Revolving Secured Line of Credit Agreement dated March 31, 2011 (Incorporated by reference to Exhibit 10.89 filed with Registrant'sForm 10-K filed March 31, 2011)10.41 Amendment dated January 2, 2012, to Revolving Secured Line of Credit Agreement (Incorporated by reference to Exhibit 10.6 filedwith Registrant's Form 8-K filed January 3, 2012)10.42 Form of Subscription Agreement 5% Convertible Senior Secured Promissory Note (Incorporated by reference to Exhibit 10.1 ofRegistrant's Form 8-K filed January 3, 2012)10.43 Form of 5% Convertible Senior Secured Promissory Note (Incorporated by reference to Exhibit 10.2 filed with Registrant's Form 8-Kfiled January 3, 2012)10.44 Form of Warrant to Purchase Common Stock (Incorporated by reference to Exhibit 10.3 filed with Registrant's Form 8-K filed January 3,2012)74 10.45 Form of Warrant to Purchase Common Stock (Incorporated by reference to Exhibit 10.4 filed with Registrant’s Form 8-K filed January3, 2012)10.46 Form of Warrant to Purchase Common (Incorporated by reference to Exhibit 10.5 filed with Registrant’s Form 8-K filed January 3,2012)10.47 Form of Amended and Restated Security and Intercreditor Agreement (Incorporated by reference to Exhibit 10.6 filed with Registrant’sForm 8-K filed January 3, 2012)10.48 Form of Registration Rights Agreement (Incorporated by reference to Exhibit 10.7 filed with Registrant’s Form 8-K filed January 3,2012)10.49* Change of Control Agreement Severance Compensation and Restrictive Covenant Agreement dated November 11, 2011, betweenMiMedx Group, Inc. and Parker H. Petit (Incorporated by reference to Exhibit 10.91 filed with Registrant’s Form 10-Q filed onNovember 14, 2011)10.50* Change of Control Agreement Severance Compensation and Restrictive Covenant Agreement dated November 11, 2011, betweenMiMedx Group, Inc. and with William C. Taylor (Incorporated by reference to Exhibit 10.92 filed with Registrant’s Form 10-Q filed onNovember 14, 2011)10.51* First Amendment to Change in Control Severance Compensation and Restrictive Covenant Agreement dated May 9, 2013 by andbetween MiMedx Group, Inc., and William C. Taylor (Incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed onMay 15, 2013)10.52* Change of Control Agreement Severance Compensation and Restrictive Covenant Agreement dated November 11, 2011, betweenMiMedx Group, Inc., and Michael J. Senken(Incorporated by reference to Exhibit 10.93 filed with Registrant’s Form 10-Q filed onNovember 14, 2011)10.53* First Amendment to Change in Control Severance Compensation and Restrictive Covenant Agreement dated May 9, 2013 by andbetween MiMedx Group, Inc., and Michael J. Senken (Incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K filed onMay 15, 2013)10.54* 2013 Management Incentive Plan and 2013 Operating Incentive Plan (Incorporated by reference to Exhibit 10.1 filed with Registrant’sForm 8-K filed March 12, 2013)10.55* 2014 Management Incentive Plan and 2014 Operating Incentive Plan (Incorporated by reference to Exhibit 10.2 filed with Registrant'sForm 8-K filed March 3, 2014)10.56* 2015 Management Incentive Plan (Incorporated by reference to Exhibit 10.1 to the Registrant's Form 10-Q filed on May 1, 2015)10.60** Product Distribution Agreement by and between AvKARE, Inc. and MiMedx Group, Inc. dated April 19, 2012 (Incorporated byreference to Exhibit 10.56 to the Registrant’s Form 10-K filed March 15, 2013)10.61 First Amendment to Product Distribution Agreement amending that certain Product Distribution Agreement that was effective April 19,2012 (Incorporated by reference to Exhibit 10.56 filed with the Registrant’s Form 10-Q filed on November 8, 2013)10.62** Second Amendment to Product Distribution between MiMedx Group, Inc. and AvKARE, Inc. (Incorporated by reference to Exhibit10.58 filed with the Registrant’s Form 10-Q filed on November 8, 2013)10.63** Third Amendment to Product Distribution Agreement dated April 17, 2015 between MiMedx Group, Inc. and AvKARE,Inc. (Incorporated by reference to Exhibit 10.2 to the Company's 10-Q filed on August 7, 2015)10.64 Loan Agreement between MiMedx Group, Inc., and Bank of America N.A. dated May 17, 2013 (Incorporated by reference to Exhibit10.1 to the Registrant's Form 8-K filed on May 23, 2013)10.65 Security Agreement dated May 17, 2013, executed by MiMedx Group, Inc. in favor of Bank of America and Bank of AmericaCorporation and its subsidiaries and affiliates (Incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q filed on August8, 2013)10.66 Lease by and between Hub Properties of GA, LLC and MiMedx Group, Inc., effective May 1, 2013 (Incorporated by reference to Exhibit10.1 to the Registrant's Form 10-Q filed May 10, 1013)10.67 Credit Agreement dated October 12, 2015, among MiMedx Group, Inc., the Guarantors identified therein, Bank of America, N.A., andthe other Lenders party thereto (Incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on October 13, 2015)10.68 First Amendment to the Credit Agreement dated October 12, 2015, by and among MiMedx Group, Inc., the Guarantors identifiedtherein, Bank of America, N.A. and the other Lenders party thereto (Incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on January 13, 201610.69 Security and Pledge Agreement dated October 12, 2015, among MiMedx Group, Inc., the Guarantors identified therein and Bank ofAmerica, N.A., as administrative agent (Incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K filed on October 13,2015)75 21.1# Subsidiaries of MiMedx Group, Inc.23.1# Consent of Independent Registered Public Accounting Firm31.1# Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Acts of 200231.2# Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Acts of 200232.1# Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2# Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002101.INS# XBRL Instance Document101.SCH# XBRL Taxonomy Extension Schema Document101.CAL# XBRL Taxonomy Extension Calculation Linkbase Document101.DEF# XBRL Taxonomy Extension Definition Linkbase Document101.LAB# XBRL Taxonomy Extension Label Linkbase Document101.PRE# XBRL Taxonomy Extension Presentation Linkbase Document Notes*Indicates a management contract or compensatory plan or arrangement#Filed herewith**Certain confidential material appearing in this document, marked by [*****], has been omitted and filed separatelywith the Securities and Exchange Commission pursuant to a request for confidential treatment under rule 24b-2promulgated under the Securities Exchange Act of 1934, as amended.##Certain exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K, but a copy will befurnished supplementally to the Securities and Exchange Commission upon request)76 SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.February 29, 2016MIMEDX GROUP, INC. By:/s/ Michael J. Senken Michael J. Senken Chief Financial Officer 77 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature / Name Title Date /s/: Parker H. Petit Chief Executive Officer and Chairman February 29, 2016Parker H. Petit (principal executive officer) /s/: Michael J. Senken Chief Financial Officer February 29, 2016Michael J. Senken (principal financial and accounting officer) /s/: Joseph G. Bleser Director February 29, 2016Joseph G. Bleser /s/: J. Terry Dewberry Director February 29, 2016J. Terry Dewberry /s/: Charles Evans Director February 29, 2016Charles Evans /s/: Bruce Hack Director February 29, 2016Bruce Hack /s/: Charles E. Koob Director February 29, 2016Charles E. Koob /s/: Larry W. Papasan Director February 29, 2016Larry W. Papasan /s/: William C. Taylor Director February 29, 2016William C. Taylor /s/: Neil Yeston Director February 29, 2016Neil Yeston 78 EXHIBIT 21.1MiMedx Group, Inc. List of SubsidiariesCompanyJurisdiction of OrganizationMiMedx, Inc.FloridaMiMedx Processing Services, LLCFloridaMiMedx Tissue Services, LLCGeorgiaStability Biologics, LLCGeorgia Consent of Independent Registered Public Accounting FirmWe hereby consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-153255, 333-183991, 333-189784 and 333-199841 and Form S-3 No. 333-189785) of our reports dated February 29, 2016, included in this Annual Report onForm 10-K of MiMedx Group, Inc. and Subsidiaries (the Company) relating to the consolidated balance sheets of the Company as ofDecember 31, 2015 and 2014, and the related consolidated statements of operations, stockholders’ equity, and cash flows and therelated consolidated financial statement schedule for each of the three years in the period ended December 31, 2015, and theeffectiveness of internal control over financial reporting for the Company as of December 31, 2015./s/ Cherry Bekaert LLPAtlanta, GeorgiaFebruary 29, 2016 EXHIBIT 31.1 Section 302 CertificationI, Parker H. Petit, certify that:1.I have reviewed this annual report on Form 10-K of MiMedx Group, Inc.;2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisannual report;3.Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this annual report is being prepared,(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles,(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation,and(d)disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’smost recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: February 29, 2016 /s/: Parker H. Petit Parker H. Petit Chief Executive Officer (principal executive officer) EXHIBIT 31.2 Section 302 CertificationI, Michael J. Senken, certify that:1.I have reviewed this annual report on Form 10-K of MiMedx Group, Inc.;2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisannual report;3.Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in the Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this annual report is being prepared,(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles,(c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation,and(d)disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’smost recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likelyto materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: February 29, 2016 /s/: Michael J. Senken Michael J. Senken Chief Financial Officer (principal financial officer) Exhibit 32.1Section 906 CertificationThe undersigned Parker H. Petit, the Chief Executive Officer of MiMedx Group, Inc. (the “Company”), has executed this certification in connection withthe filing with the Securities and Exchange Commission of the Company’s Annual Report on Form 10-K for the year ending December 31, 2015 (the“Report”). The undersigned hereby certifies, to the best of his knowledge, that:(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: February 29, 2016 /s/: Parker H. Petit Parker H. Petit Chief Executive Officer (principal executive officer) Exhibit 32.2Section 906 CertificationThe undersigned Michael J. Senken, the Chief Financial Officer of MiMedx Group, Inc. (the “Company”), has executed this certification in connectionwith the filing with the Securities and Exchange Commission of the Company’s Annual Report on Form 10-K for the year ending December 31, 2015 (the“Report”). The undersigned hereby certifies, to the best of his knowledge, that:(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: February 29, 2016 /s/: Michael J. Senken Michael J. Senken Chief Financial Officer (principal financial officer)
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