Commitments and Contingencies

3 Months Ended

Mar. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

TELA and Regenity Agreements

On March 15, 2024, the Company entered into an Asset Purchase Agreement (the “TELA APA”) with TELA Bio, Inc. (“TELA”) to obtain exclusive rights to sell and market a 510(k)-cleared collagen particulate xenograft product in the United States pursuant to a preexisting Manufacturing and Supply Agreement (the “TELA-Regenity Supply Agreement”) between TELA and Regenity Biosciences, Inc. (“Regenity”), which retains all intellectual property rights and regulatory clearances related to the product. Pursuant to the TELA APA, the Company paid $5.0 million of initial consideration to TELA and will be required to make future payments of $0.4 million to acquire TELA’s remaining product inventory, as well as future profit share payments (the “Profit Share Payments”) of between a minimum of $3.0 million and a maximum of $7.0 million based on MIMEDX’s net sales of the product over the two-years following its commercialization of the product.

Simultaneously with entry into the TELA APA, the Company executed a new Manufacturing and Supply Agreement (the “Supply Agreement”) with Regenity, replacing the previous TELA-Regenity Supply Agreement. The Supply Agreement maintains MIMEDX’s exclusive right to sell and market the product in the United States and requires MIMEDX to purchase a minimum amount of the xenograft product from Regenity annually through December 31, 2033. Should MIMEDX fail to meet a purchasing minimum in any one period, it has the option (among others) to amend its distribution rights under the Supply Agreement to be non-exclusive.

The transaction was accounted for as an acquisition of assets. The cost to acquire the assets on the transaction date was assessed to be $8.1 million, reflecting the $5.0 million of initial consideration, $0.4 million to acquire inventory, and $2.7 million, reflecting the fair value of the minimum amount of the Profit Share Payments, were allocated amongst the assets acquired. The Company assigned $7.6 million to the distribution rights acquired and $0.5 million to inventory. These amounts are reflected in the consolidated balance sheets as part of intangible assets, net and inventory, respectively, on the unaudited condensed consolidated balance sheet as of March 31, 2024.

The $2.7 million fair value for the minimum amount of Profit Share Payments reflects the anticipated timing of such Profit Share Payments, discounted to present value at a discount rate approximating the Company’s borrowing rate plus a risk premium.

Of the minimum Profit Share Payment, $1.1 million is reflected as part of other current liabilities in the unaudited condensed consolidated balance sheet as of March 31, 2024, reflecting the extent of the obligation that is anticipated to be repaid within twelve months of that date. The remaining balance is reflected in other liabilities.

Litigation and Regulatory Matters

In the ordinary course of business, the Company and its subsidiaries may be a party to pending and threatened legal, regulatory, and governmental actions and proceedings (including those described below). In view of the inherent difficulty of predicting the outcome of such matters, particularly where the plaintiffs or claimants seek very large or indeterminate damages or where the matters present novel legal theories or involve a large number of parties, the Company generally cannot predict what the eventual outcome of the pending matters will be, what the timing of the ultimate resolution of these matters will be, or what the

eventual recovery, loss, fines or penalties related to each pending matter may be. The Company's unaudited condensed consolidated balance sheet as of March 31, 2024 reflects the Company's current best estimate of probable losses associated with these matters, including costs to comply with various settlement agreements, where applicable. For more information regarding the Company’s legal proceedings, refer to Note 16, “Commitments and Contingencies” in the 2023 Form 10-K.

The Company has not accrued for any potential losses related to legal matters as of March 31, 2024. The Company made no payments toward the resolution of legal matters involving the Company during the three months ended March 31, 2024. The Company paid $0.2 million during the three months ended March 31, 2023.

The following is a description of certain litigation and regulatory matters to which the Company is a party:

Welker v. MiMedx, et. al.

On November 4, 2022, Troy Welker and Min Turner, former optionholders of the Company, brought a lawsuit in Fulton County State Court against the Company, former directors Terry Dewberry and Charles Evans, and former officers Parker H. “Pete” Petit, William C. Taylor, and Michael Senken alleging violations of the Georgia Racketeer Influenced and Corrupt Organizations (“RICO”) Act against all defendants, and conspiracy to violate the Georgia RICO Act and breach of fiduciary duty against the individual defendants. On motion by the Company, the case has been moved to the Fulton County Business Court. The Company and the individual defendants filed answers and motions to dismiss, which were denied on the RICO claims, but granted with respect to the breach of fiduciary duty claims against the individual defendants. The Company is defending against the allegations and is obligated to indemnify certain of its current and former officers and directors who are party to this proceeding.

Former Employee Litigation and Related Matters

On January 12, 2021, the Company filed suit in the Circuit Court of the Eleventh Judicial District in and for Miami-Dade County, Florida (MiMedx Group, Inc. v. Petit, et. al.) against its former CEO, Parker H. “Pete” Petit, and its former COO, William C. Taylor, seeking a determination of its rights and obligations under indemnification agreements with Petit and Taylor following a federal jury’s guilty verdict against Petit for securities fraud and Taylor for conspiracy to commit securities fraud. On March 26, 2024, the Company filed an amended complaint against only Petit as the Company previously reached as settlement with Taylor. The Company is seeking a declaratory judgment that Petit is not entitled to indemnification in connection with certain cases and the Company is also seeking to recoup amounts previously paid on behalf of Petit in connection with such cases.

As noted above, the Company and Mr. Taylor reached an agreement to settle the matter between them. Negotiations with Mr. Petit are ongoing.