Overview

MIMEDX is a transformational placental biologics company, developing and
distributing placental tissue allografts with patent-protected, proprietary
processes for multiple sectors of healthcare. As a pioneer in placental
biologics, we are focused on addressing unmet clinical needs in areas of
advanced wound care, surgical recovery applications and musculoskeletal
conditions. We derive our products from human placental tissues and process
these tissues using our proprietary methods, including the PURION® process. We
apply Current Good Tissue Practice ("CGTP") and Current Good Manufacturing
Practice ("CGMP") standards in addition to terminal sterilization to produce our
allografts. MIMEDX provides products primarily in the wound care, burn, and
surgical recovery sectors of healthcare. All of our products are regulated by
the United States Food and Drug Administration ("FDA").

MIMEDX is a leading supplier of human placental allografts, which are human
tissues that are derived from one person (the donor) and used to produce
products that treat another person (the recipient). MIMEDX has supplied over two
million allografts, through both direct and consignment shipments. Our platform
technologies include tissue allografts derived from the amnion and chorion
layers of human placental membrane (EPIFIX® and AMNIOFIX®) and tissue allografts
derived from human umbilical cord (EPICORD® and AMNIOCORD®). Our most recent
product innovation, AMNIOEFFECTTM, introduced in June 2022 via limited market
release, is a tri-layer placental tissue allograft that contains amnion,
intermediate layer and chorion membranes. This product is designed to meet the
needs of surgeons performing procedures where a more robust allograft with
expansive size offerings is desired.

EPIFIX and EPICORD products are marketed for external use, such as in advanced
wound care applications, while our AMNIOFIX, AMNIOEFFECT and AMNIOCORD products
are positioned for use in surgical recovery applications, including lower
extremity repair, plastic surgery, vascular surgery and multiple orthopedic
repairs and reconstructions.

AMNIOFIX Injectable, or mdHACM, is a micronized configuration of AMNIOFIX and is
not currently marketed in the United States. mdHACM is our lead product
candidate for our late-stage pipeline targeted at achieving FDA approval for
specific clinical indications, including degenerative musculoskeletal
conditions.

We have two classes of products: (1) Advanced Wound Care products, or Section
361 products, consisting of our tissue and cord sheet allograft products, and
(2) Section 351 Products, consisting of our micronized and particulate products,
which, prior to May 31, 2021, the date the FDA's period of enforcement
discretion ended (as described below), were used to treat a variety of clinical
conditions, including both advanced wound care and musculoskeletal applications.
Our Advanced Wound Care business includes two product categories, Tissue/Other
and Cord products. We sell product through two distribution channels: (1) direct
to customers (healthcare professionals and/or facilities); and (2) sales through
distributors.

In November 2017, the FDA published a series of guidances that established an
updated framework for the regulation of cellular and tissue-based products.
These guidances clarified the FDA's views about the criteria that differentiate
those products subject to regulation under Section 361 of the Public Health
Service Act from those considered to be drugs, devices, and/or biological
products subject to licensure under Section 351 of the Public Health Service Act
and related regulations. The FDA exercised enforcement discretion with respect
to Investigational New Drug ("IND") applications and pre-market approval
requirements until May 31, 2021 ("Enforcement Discretion"). As of May 31, 2021,
we stopped marketing our Section 351 products in the United States and are
precluded from marketing such products until a Biologics License Application
("BLA") is granted. If and when the FDA approves a BLA, we expect to be allowed
to market our Section 351 Products in the United States again, but only for
specific indications as permitted by the FDA.

Business Unit Update



During the second quarter of 2022, we announced the creation of two defined,
cohesive internal business units within the Company: (1) Wound Care & Surgical,
focused on Wound Care and Surgical Recovery markets, our existing product
portfolio, and near-term innovation; and (2) Regenerative Medicine & Biologics
Innovation, focused solely on Regenerative Medicine technologies, specifically
progressing our placental biologics platform towards registration as a U.S. Food
& Drug Administration (FDA) approved biological drug. We anticipate
transitioning our management structure on the basis of these two business units,
and providing operating results by business unit in the future.

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Effect of Covid-19 Pandemic



The COVID-19 Pandemic is still ongoing, though the effects on our operations,
such as restricted access to hospitals and difficulties obtaining donor
materials, have largely been ameliorated and did not materially affect our
operations during the three months ended June 30, 2022. We are continuously
monitoring for any developments that may impact our operations, including novel
variants of the virus and government and societal responses to mitigate the
spread.

We continue to exercise an abundance of caution with respect to the health and
well-being of our employees. Our offices are open and staffed, and we are
operating under a hybrid work model for some personnel as well as encouraging
all employees to get vaccinated if they have not already done so.

Results of Operations



Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30,
2021

                                                          Three Months Ended June 30,
                                                                 (in thousands)
                                                2022           2021        $ Change       % Change
   Net sales                                $   66,883      $ 68,165      $ (1,282)          (1.9) %
   Cost of sales                                11,823          12,760        (937)          (7.3) %
   Gross profit                                 55,060        55,405          (345)          (0.6) %

Selling, general and administrative 55,793 53,599

  2,194            4.1  %
   Research and development                      5,512         4,063         1,449           35.7  %

Investigation, restatement and related 3,218 (2,062)

5,280 (256.1) %


   Amortization of intangible assets               173           215           (42)         (19.5) %

   Interest expense, net                        (1,170)       (1,371)          201          (14.7) %
   Other expense, net                                -            (3)            3         (100.0) %
   Income tax provision (expense) benefit          (62)            5           (67)      (1,340.0) %
   Net loss                                 $  (10,868)     $ (1,779)
(9,089)         510.9  %


Net Sales

We recorded net sales for the three months ended June 30, 2022 of $66.9 million,
a $1.3 million decrease, or 1.9%, compared to the three months ended June 30,
2021, in which we recognized revenue of $68.2 million. Our sales by product were
as follows (amounts in thousands):

                                      Three Months Ended June 30,                   Change
                                          2022                   2021           $             %
   Advanced Wound Care
      Tissue/Other             $       60,274                 $ 53,408      $  6,866        12.9  %
      Cord                              5,889                    5,886             3         0.1  %
   Total Advanced Wound Care           66,163                   59,294         6,869        11.6  %
   Section 351                            642                    8,558        (7,916)      (92.5) %
   Other                                   78                      313          (235)      (75.1) %
   Net sales                   $       66,883                 $ 68,165      $ (1,282)       (1.9) %


The decrease in net sales reflects our inability to sell our Section 351
Products in the United States during the three months ended June 30, 2022,
following the end of Enforcement Discretion on May 31, 2021. Sales of our
Section 351 Products were $0.6 million for the three months ended June 30, 2022
compared to $8.6 million for the three months ended June 30, 2021, a decrease of
$7.9 million. Sales of Section 351 Products during the three months ended
June 30, 2022 were derived from sales outside the United States.

Sales growth in our Advanced Wound Care products of $6.9 million, or 11.6%
year-over-year, partially offset the decrease in Section 351 Product sales
described above. Our sales growth in this area was a result of our focus on the
application of these products into areas of surgical recovery, as well as the
results of our prior initiatives to expand, realign and train our sales team.

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Cost of Sales and Gross Profit Margin



Cost of sales for the three months ended June 30, 2022 and 2021 was $11.8
million and $12.8 million, respectively, a decrease of $0.9 million, or 7.3%.
Gross profit margin for the three months ended June 30, 2022 was 82.3% compared
to 81.3% for the three months ended June 30, 2021.

Cost of sales for the three months ended June 30, 2021 included $1.0 million of
inventory write-downs related to our Section 351 Products, resulting from the
end of Enforcement Discretion. This decreased gross margin by 1.5%. There were
no significant unusual write-downs during the.three months ended June 30, 2022.
Gross margin for the three months ended June 30, 2022 was also positively aided
by year-over-year changes in sales mix.

These effects on gross profit margin and cost of sales were offset by inflationary pressures, increasing materials and labor costs.

Selling, General and Administrative Expense



Selling, general and administrative expense for the three months ended June 30,
2022 was $55.8 million, compared to $53.6 million for the three months ended
June 30, 2021, an increase of $2.2 million, or 4.1%. The increase in these
expenses reflects increases in travel expenses and bad debt expense. The
increase in travel expenses reflects the lifting of travel restrictions that
were in place during the three months ended June 30, 2021 due to the COVID-19
Pandemic, as well as inflationary pressures experienced during the three months
ended June 30, 2022. The increase in bad debt expense was a result of the
deterioration of credit for certain specific customers.

The increase in selling, general and administrative expense was driven further
by year-over-year increases in commissions due to our focus on sales of products
into areas of Surgical Recovery, which resulted in a proportional increase in
sales through sales agents.

The increase was partially offset by a decrease in expenses incurred in
connection with our annual meeting of stockholders. During the three months
ended June 30, 2022 we incurred $2.1 million in consulting and advisory expenses
related to a withhold the vote campaign launched by a shareholder. This compares
to $3.8 million of expenses incurred during the three months ended June 30, 2021
related to a proxy contest initiated by the same shareholder.

The remaining variance was primarily the result of year-over-year decreases in depreciation expense.

Research and Development Expense



Our research and development expense increased $1.4 million, or 35.7%, to $5.5
million for the three months ended June 30, 2022, compared to $4.1 million for
the three months ended June 30, 2021. The increase reflects higher personnel
costs, driven by increases in headcount to support clinical research efforts
connected to our commercial and late-stage pipelines. This was offset by a
year-over-year decrease in professional services expenses and clinical trial
expenses that we had incurred during the three months ended June 30, 2021 to
close out and analyze the results of our clinical trials. The remaining variance
was primarily the result of increases in development and testing costs.

As discussed in the "Contractual Obligations" section below, we have engaged
Nordic Bioscience Clinical Development A/S to carry out our Knee Osteoarthritis
clinical trial program. Under the terms of this agreement, we are obligated to
pay $13.3 million upon the achievement of specified milestones over the course
of the clinical trial, as well as certain other costs necessary to complete the
clinical trial. We expect to begin incurring expenses related to this
arrangement in the third quarter of 2022.

Investigation, Restatement and Related Expense



Investigation, restatement and related expense for the three months ended June
30, 2022 was $3.2 million compared to a benefit of $2.1 million for the three
months ended June 30, 2021.

The prior year benefit was primarily the result of funds received from certain
director and officer insurance policies during the three months ended June 30,
2021, as well as negotiated reductions in previously-recognized legal expenses
advanced on behalf of certain former members of management. Excluding these
negotiated payments and reductions, our expenses decreased, year-over-year.

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Expenses incurred during the three months ended June 30, 2022 and 2021 included
amounts related to legal fees advanced under indemnification agreements with
certain former members of management. We remain subject to indemnification
agreements with certain former officers and directors of the Company (other than
Messrs. Petit and Taylor, our former Chief Executive Officer and Chief Operating
Officer) for whom legal proceedings are still ongoing, in particular, our former
Chief Financial Officer. Overall, costs to defend ourselves in legal matters
related to the findings of the Audit Committee Investigation from May 2019 also
decreased, year-over-year.

Amortization of Intangible Assets

Amortization expense related to intangible assets was $0.2 million for each of the three months ended June 30, 2022 and 2021.

Interest Expense, Net



Interest expense, net was $1.2 million for the three months ended June 30, 2022
compared to $1.4 million for the three months ended June 30, 2021, a decrease of
$0.2 million, or 14.7%. The difference was the result of the amortization of
deferred financing costs and original issue discount associated with a delayed
draw term loan facility under the Hayfin Loan Agreement (described below under
"Liquidity and Capital Resources"), which ceased at the conclusion of the
commitment period for the delayed draw facility on June 30, 2021.

We expect interest expense to increase in future quarters as a result of the
rising interest rate environment, as the London Interbank Offered Rate ("LIBOR")
increases to levels above the 1.5% floor stipulated in our Term Loan.

Income Tax Provision (Expense) Benefit

The effective tax rates for the Company were (0.6)% and 0.3% for the three months ended June 30, 2022 and June 30, 2021, respectively. There were no material discrete items affecting the effective tax rate in either period. Net operating losses incurred during both periods were offset by a valuation allowance.



Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021

                                                           Six Months Ended June 30,
                                                                (in thousands)
                                               2022           2021         $ Change       % Change
   Net sales                                $ 125,777      $ 128,132      $  (2,355)        (1.8) %
   Cost of sales                               21,759         22,401           (642)        (2.9) %
   Gross profit                               104,018        105,731         (1,713)        (1.6) %

Selling, general and administrative 105,363 99,003

6,360 6.4 %


   Research and development                    11,476          8,402        

3,074 36.6 %

Investigation, restatement and related 5,770 5,134

636 12.4 %


   Amortization of intangible assets              345            454           (109)       (24.0) %

   Interest expense, net                       (2,295)        (2,844)           549        (19.3) %
   Other expense, net                              (1)            (2)             1        (50.0) %
   Income tax provision expense                  (125)           (53)           (72)       135.8  %
   Net loss                                 $ (21,357)     $ (10,161)     $ (11,196)       110.2  %


Net Sales

We recorded net sales for the six months ended June 30, 2022 of $125.8 million,
a $2.4 million decrease, or 1.8%, compared to the six months ended June 30,
2021, for which we recorded net sales of $128.1 million. Our sales by product
were as follows (amounts in thousands):

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                                       Six Months Ended June 30,                   Change
                                          2022                 2021            $             %
     Advanced Wound Care
        Tissue/Other             $      113,126             $  99,977      $ 13,149        13.2  %
        Cord                             11,486                10,846           640         5.9  %

     Total Advanced Wound Care          124,612               110,823      

 13,789        12.4  %
     Section 351                          1,019                16,698       (15,679)      (93.9) %
     Other                                  146                   611          (465)      (76.1) %
     Net sales                   $      125,777             $ 128,132      $ (2,355)       (1.8) %


The decrease in net sales reflects our inability to sell our Section 351
Products in the United States during the six months ended June 30, 2022,
following the end of Enforcement Discretion on May 31, 2021. Sales of our
Section 351 Products were $1.0 million for the six months ended June 30, 2022
compared to $16.7 million for the three months ended June 30, 2021, a decrease
of $15.7 million. Sales of Section 351 Products during the six months ended
June 30, 2022 were derived from sales outside the United States.

Sales growth in our Advanced Wound Care products of $13.8 million, or 12.4%,
year-over-year, partially offset the decrease in Section 351 Product sales
described above. Our sales growth in this area was a result of our focus on the
application of these products into areas of surgical recovery, as well as the
results of our prior initiatives to expand, realign and train our sales team.

Cost of Sales and Gross Profit Margin

Cost of sales for the six months ended June 30, 2022 was $21.8 million, a decrease of $0.6 million, or 2.9%, compared to $22.4 million for the six months ended June 30, 2021.

Gross profit margin for the six months ended June 30, 2022 was 82.7% compared to 82.5% for the six months ended June 30, 2021.



Cost of sales for the six months ended June 30, 2021 included $1.0 million of
inventory write-downs related to our Section 351 Products, resulting from the
end of Enforcement Discretion. This decreased gross margin by 0.8%. There were
no significant unusual write-downs during the six months ended June 30, 2022.

Gross profit margin and cost of sales during the six months ended June 30, 2022 were negatively impacted by inflationary pressures, increasing material and labor costs. This effect was offset by year-over-year changes in sales mix.

Selling, General and Administrative Expense



Selling, general and administrative expenses for the six months ended June 30,
2022 increased $6.4 million, or 6.4%, to $105.4 million, compared to $99.0
million for the six months ended June 30, 2021. The increase in these expenses
reflects increases in travel expenses, sales commissions, personnel costs, and
bad debt expense. The increase in travel expenses reflects the lifting of travel
restrictions that were in place during the six months ended June 30, 2021 due to
the COVID-19 Pandemic, as well as inflationary pressures experienced during the
six months ended June 30, 2022. Increases in personnel costs and sales
commissions were the result of annual compensation adjustments as well as sales
force realignment and expansion; additionally, our focus on sales of products
into areas of Surgical Recovery resulted in a proportional increase in sales
through sales agents. The increase in bad debt expense was a result of the
deterioration of credit for certain specific customers.

The increase was partially offset by a decrease in expenses incurred in
connection with our annual meeting of stockholders. During the six months ended
June 30, 2022 we incurred $2.1 million in consulting and advisory expenses
related to a withhold the vote campaign launched by a shareholder. This compares
to $3.8 million of similar expenses incurred during the six months ended June
30, 2021 related to a proxy contest initiated by the same shareholder.

The remaining variance was the result of year-over-year decreases in depreciation expense.

Research and Development Expense



Our research and development expenses increased $3.1 million, or 36.6%, to $11.5
million for the six months ended June 30, 2022, compared to $8.4 million for the
six months ended June 30, 2021. The increase reflects higher personnel costs,
driven by increases in headcount to support clinical research efforts connected
to our commercial and late-stage pipelines. This effect was

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offset primarily by decreases in clinical trial and professional services expenses that we had incurred during the six months ended June 30, 2021, to close out and analyze the results of our clinical trials.

Investigation, Restatement and Related Expense



Investigation, restatement and related expenses for the six months ended June
30, 2022 increased approximately $0.6 million, or 12.4%, to $5.8 million
compared to $5.1 million for the six months ended June 30, 2021. The increase
reflects receipt of funds from certain director and officer insurance policies
during the six months ended June 30, 2021. This effect was offset by year-over
year decreases in indemnification fees, net of negotiated reductions, advanced
to former officers and directors of the Company and litigation expenses toward
our defense in legal matters. Expenses incurred during the six months ended June
30, 2022 and 2021 included amounts related to legal fees advanced under
indemnification agreements with certain former members of management, in
particular, our former Chief Financial Officer.

Amortization of Intangible Assets



Amortization expense decreased $0.1 million or 24.0% from the six months ended
June 30, 2021 to the six months ended June 30, 2022. The decrease was the result
of amortization avoided on licenses, supplier relationships, and non-compete
agreements, which were fully amortized or impaired during 2021.

Interest Expense, Net



Interest expense, net was $2.3 million for the six months ended June 30, 2022
compared to $2.8 million for the six months ended June 30, 2021. The difference
was the result of the amortization of deferred financing costs and original
issue discount associated with a delayed draw term loan facility under the
Hayfin Loan Agreement (described below under "Liquidity and Capital Resources"),
which ceased at the conclusion of the commitment period for the delayed draw
facility on June 30, 2021.

Income Tax Provision Expense

The effective tax rates for the Company were (0.6)% and (0.5)% for the six months ended June 30, 2022 and 2021, respectively. There were no material discrete items affecting the effective tax rate in either period. Net operating losses incurred during both periods were offset by a valuation allowance.

Non-GAAP Financial Measures



In addition to our GAAP results, we provide certain Non-GAAP measures including
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), and
Adjusted EBITDA. We believe that the presentation of these measures provides
important supplemental information to management and investors regarding our
performance. These measurements are not a substitute for GAAP measurements, and
the manner in which we calculate such metrics may not be identical to the manner
in which other companies calculate and present similar metrics. Company
management uses these Non-GAAP measurements as aids in monitoring our ongoing
financial performance from quarter-to-quarter and year-to-year on a regular
basis and for benchmarking against comparable companies.

EBITDA and Adjusted EBITDA

EBITDA is intended to provide a measure of the Company's operating performance as it eliminates the effects of financing and capital expenditures. EBITDA consists of GAAP net loss excluding:

(i) depreciation, (ii) amortization of intangibles, (iii) interest expense, net, and (iv) income tax provision.



Adjusted EBITDA is intended to provide an enduring, normalized view of EBITDA
and our broader business operations that we expect to experience on an ongoing
basis by removing certain non-cash items and items which may be irregular,
one-time, or non-recurring from EBITDA. This also includes share-based
compensation, which is predominantly settled in shares. This enables us to
identify underlying trends in our business that could otherwise be masked by
such items.

Adjusted EBITDA consists of GAAP net loss excluding:



(i) depreciation, (ii) amortization of intangibles, (iii) interest expense, (iv)
income tax provision, (v) costs incurred in connection with the Audit Committee
Investigation and Restatement, and (vi) share-based compensation.

Management also assesses EBITDA margin and Adjusted EBITDA margin to provide an
additional layer of context to the Company's profitability; indicating our
ability to convert our sales into sustainable operating results. EBITDA margin
is calculated as EBITDA divided by GAAP net sales. Similarly, Adjusted EBITDA
margin is calculated as Adjusted EBITDA divided by GAAP net sales.

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A reconciliation of GAAP net loss to EBITDA and Adjusted EBITDA appears in the table below (in thousands):



                                                 Three Months Ended June 30,                    Six Months Ended June 30,
                                                   2022                  2021                  2022                     2021
Net loss                                    $      (10,868)          $   (1,779)         $    (21,357)              $  (10,161)
Net margin                                           (16.2)  %             (2.6) %              (17.0)  %                 (7.9) %
Non-GAAP Adjustments:
Depreciation expense                                   858                1,306                 1,718                    2,467
Amortization of intangible assets                      173                  215                   345                      454
Interest expense, net                                1,170                1,371                 2,295                    2,844

Income tax provision                                    62                   (5)                  125                       53
EBITDA                                              (8,605)               1,108               (16,874)                  (4,343)

EBITDA margin                                        (12.9)  %              1.6  %              (13.4)  %                 (3.4) %
Additional Non-GAAP Adjustments
Costs (benefits) incurred in connection
with Audit Committee Investigation and
Restatement                                          3,218               (2,062)                5,770                    5,134

Share-based compensation                             4,428                4,060                 8,426                    7,305
Adjusted EBITDA                             $         (959)          $    3,106          $     (2,678)              $    8,096
Adjusted EBITDA margin                                (1.4)  %              4.6  %               (2.1)  %                  6.3  %


Discussion of Cash Flows

Operating Activities

Net cash used in operating activities during the six months ended June 30, 2022
was $13.2 million, compared to $5.1 million of cash used for the six months
ended June 30, 2021. The increase was driven primarily by year-over-year
increases in selling, general and administrative expenses and research and
development expenses. In addition, payments of accrued compensation increased
for the six months ended June 30, 2022 due to a restructuring of our internal
commission arrangements during 2021. These effects were offset by year-over-year
decreases in payments related to legal accruals and recoveries from director and
officer insurance policies during the six months ended June 30, 2021.

Investing Activities



Net cash used for investing activities during the six months ended June 30, 2022
was $0.6 million, compared to $2.5 million for the six months ended June 30,
2021. This decrease was the result of a $1.8 million year-over-year decrease in
capital expenditures. In addition, patent application costs decreased $0.1
million, year-over-year.

Financing Activities



Net cash used in financing activities was $0.8 million during the six months
ended June 30, 2022 compared to $3.2 million during the six months ended
June 30, 2021. The decrease was the result of a $3.4 million decrease in cash
paid for tax withholdings upon the vesting of restricted stock awards during the
six months ended June 30, 2022 compared to the six months ended June 30, 2021.
This was offset by a $0.9 million decrease in cash proceeds from the exercise of
stock options, year-over-year.

Liquidity and Capital Resources



Our business requires capital for our operating activities, including costs
associated with the sale of product through direct and indirect sales channels,
the conduct of research and development activities, compliance costs, and legal
and consulting fees in connection with ongoing litigation and other matters.

As of June 30, 2022, we had $72.5 million of cash and cash equivalents. We reported total current assets of $131.0 million and total current liabilities of $37.1 million at June 30, 2022, a current ratio of 3.5 as of June 30, 2022.

We are currently paying our obligations in the ordinary course of business.

We anticipate cash requirements related to the following items within one year of the date of the filing of this Quarterly Report:


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•expenditures required to conduct clinical trials to advance our BLAs and other potential R&D investments;



•expenditures required to achieve necessary regulatory approval and establish
operations in new markets deemed strategically important toward the enhancement
of our global footprint;

•investments in manufacturing capacity to advance and expand our existing product portfolio; and

•indemnification payments to certain former members of our management team.



We have analyzed our ability to address these commitments and potential
liabilities for the 12 months extending from the date of the filing of this
Quarterly Report. After completing this analysis, which included a review of
expectations of revenue, margins, and expenses, we believe that our existing
cash and cash from operations will be sufficient to meet our obligations as they
come due.

Term Loan

The Hayfin Loan Agreement was funded on July 2, 2020 and provided us with a
senior secured term loan of $50 million (the "Term Loan"). The Term Loan matures
on June 30, 2025 (the "Maturity Date"). On February 28, 2022 (the "Amendment
Date"), we executed an Amendment to the Hayfin Loan Agreement.

No principal payments are due on the Term Loan until the Maturity Date.



Interest is payable on the Term Loan for principal outstanding quarterly through
the Maturity Date. The interest rate applicable to any borrowings under the Term
Loan is equal to LIBOR (subject to a floor of 1.5%) plus a margin of 6.75%. If
LIBOR is unavailable, the loan will carry interest at the greatest of the Prime
Rate, the Federal Funds Rate plus 0.5% per annum, and 2.5% plus the 6.75%
margin.

An additional 3.0% margin would be applied to the interest rate upon the
occurrence of an Event of Default as defined in the Hayfin Loan Agreement, as
amended (the "Amended Hayfin Loan Agreement"). As of June 30, 2022, the Term
Loan carried an interest rate of 9.0%.

If an event of default (as defined by the Amended Hayfin Loan Agreement) occurs,
an additional 3.0% margin is applied to the interest rate until such event of
default is cured.

The Amended Hayfin Loan Agreement contains financial covenants requiring the Company, on a consolidated basis, to maintain the following:



•Maximum Consolidated Total Net Sales (as defined in the Amended Hayfin Loan
Agreement) of varying amounts, required to be calculated on a quarterly basis,
and

•Minimum Liquidity (as defined in the Amended Hayfin Loan Agreement) of $20 million, an at-all-times financial covenant, tested monthly.

As of June 30, 2022, we are in compliance with all financial covenants required under the Amended Hayfin Loan Agreement.

The Amended Hayfin Loan Agreement specifies that any prepayment of the Term Loan, voluntary or mandatory, as defined in the agreement, would subject us to a prepayment premium applicable as of the date of the prepayment, as follows:

•On or before July 2, 2023: 2% of the principal balance repaid.

•After July 2, 2023 but on or before July 2, 2024: 1% of the principal balance repaid.

•After July 2, 2024: no premium.



The Amended Hayfin Loan Agreement also includes certain negative covenants and
events of default customary for facilities of this type, and upon the occurrence
of such events of default, subject to customary cure rights, all outstanding
loans under the Amended Hayfin Loan Agreement may be accelerated or the lenders'
commitments terminated. Mandatory prepayments are also required in the event of
a change in control, incurring other indebtedness, certain proceeds from
disposal of assets and insured casualty event (as defined in the Amended Hayfin
Loan Agreement).

Beginning with the fiscal year ending December 31, 2021, we are required to
prepay the outstanding loans based on the percentage of our Excess Cash Flow (as
defined in the Amended Hayfin Loan Agreement), if such is generated. To date, we
have not been required to make any prepayments under this provision.

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Series B Preferred Stock

We have 100,000 shares of Series B Preferred Stock outstanding as of June 30, 2022.



The Series B Preferred Stock pays a 6.0% cumulative dividend per annum.
Dividends are declared at the sole discretion of our board of directors.
Dividends, if declared, are paid in cash at the end of each quarter based on
dividend amounts that accumulate beginning on the last payment date through the
day prior to the end of each quarter. In lieu of paying a dividend in cash, we
may elect to accrue the dividend owed to shareholders. Dividend balances
accumulate at the prevailing dividend rate for each dividend period for which
they are outstanding.

Each share of Series B Preferred Stock, including any accrued and unpaid
dividends, is convertible into our common stock at any time at the option of the
holder at a conversion price of $3.85 per common share, or 259.74 common shares
for each share of Series B Preferred Stock prior to any accrued and unpaid
dividends. The Series B Preferred Stock, including any accrued and unpaid
dividends, automatically converts into common stock at any time after July 2,
2023, provided that the common stock has traded at $7.70 or higher (i) for 20
out of 30 consecutive trading days and (ii) on such date of conversion.

If we undergo a change of control, we will have the option to repurchase some or
all of the then-outstanding shares of Series B Preferred Stock for cash in an
amount equal to the liquidation preference and any accumulated and unpaid
dividends, subject to the rights of the holders of the Series B Preferred Stock
in connection with such change in control. If we do not exercise such repurchase
right, holders of the Series B Preferred Stock will have the option to (1)
require us to repurchase any or all of our then-outstanding shares of Series B
Preferred Stock for cash in an amount equal to the liquidation preference or (2)
convert the Series B Preferred Stock, including accrued and unpaid dividends
into common stock and receive its pro rata consideration thereunder.

We have not declared or paid any cash dividends on our Series B Convertible Preferred Stock since issuance. Dividends accumulated but not paid as of June 30, 2022 were $10.4 million.

Share Repurchases



We did not repurchase any shares of our common stock, during the three months
ended June 30, 2022. The timing and amount of future repurchases, if any, will
depend upon our stock price, economic and market conditions, regulatory
requirements, and other corporate considerations. We may initiate, suspend or
discontinue purchases at any time.

Contractual Obligations

Nordic Agreement



In June 2022, we entered into a collaboration agreement (the "Nordic Agreement")
with Nordic Bioscience Clinical Development A/S ("NBCD") to provide full
operational support for our upcoming Knee Osteoarthritis clinical trial program,
which we expect to begin later this year. As part of the agreement, NBCD will
perform site selection and monitoring, manage patient recruitment and
enrollment, data management, statistical analysis and reporting activities for
the duration of the trial.

Under the terms of the Nordic Agreement, we are obligated to pay $13.3 million
upon the achievement of specified milestones over the course of the clinical
trial, including $2.0 million within 30 days of execution of the agreement. The
milestones are based upon various factors including, but not limited to, site
selection and enrollment, patient enrollment, patient completion, and certain
other activities related to start-up and close-out. The milestone payments are
revised semi-annually based on fluctuations in the consumer price index.

We have the ability to terminate the Nordic Agreement with 30 days written notice to NBCD. At such time, we would be required to pay for services performed through the date of termination and any non-cancelable obligations.

No payments have been made under the Nordic Agreement as of June 30, 2022.

Other Obligations



Other than the obligations discussed above, there were no significant changes to
our contractual obligations during the six months ended June 30, 2022 from those
disclosed in the section Item 7, "Management's Discussion and Analysis of
Financial Condition and Results from Operations", in our 2021 Form 10-K.

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Critical Accounting Estimates



In preparing financial statements, we follow accounting principles generally
accepted in the United States, which require us to make certain estimates and
apply judgments that affect our financial position and results of operations. We
regularly review our accounting policies and financial information disclosures.
A summary of critical accounting estimates in preparing the financial statements
was provided in our 2021 Form 10-K. During the quarter covered by this report,
there were no material changes to the accounting policies and assumptions
previously disclosed.

Recent Accounting Pronouncements

For the effect of recent accounting pronouncements, see Note 2 to the unaudited condensed consolidated financial statements contained herein.

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