UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2008

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

For the transition period from                      to                     

MIMEDX GROUP, INC.

(Exact name of registrant as specified in its charter)

Florida (State or other jurisdiction of incorporation)		26-2792552 (I.R.S. Employer Identification Number)
1234 Airport Road, Suite 105 Destin, Florida (Address of principal executive offices)		32541 (Zip Code)

(850) 269-0000
Registrant’s telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

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

As of August 10, 2008, there were 37,282,128 shares outstanding of the registrant’s common stock.

 

 

MIMEDX GROUP, INC.

TABLE OF CONTENTS

Part I FINANCIAL INFORMATION
Item 1. Financial Statements			1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			12
Item 3. Quantitative and Qualitative Disclosures About Market Risk			16
Item 4T. Controls and Procedures			16
Part II OTHER INFORMATION
Item 1. Legal Proceedings			17
Item 6. Exhibits			18
Exhibit 10.8
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

MIMEDX GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED BALANCE SHEETS

		June 30,				March 31,
		2008				2008
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	3,875,106			$	6,749,609
Prepaid expenses and other current assets			67,577				189,253
Total current assets			3,942,683				6,938,862
Property and equipment, net of accumulated depreciation of $288,878 (June) and $191,588 (March)			1,582,818				1,452,436
Goodwill			857,597				857,597
Intangible assets, net of accumulated amortization of $490,552 (June) and $323,848 (March)			5,616,449				5,783,153
Deposits			150,114				146,433
Total assets		$	12,149,661			$	15,178,481
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	841,898			$	948,478
Total current liabilities		$	841,898			$	948,478
Commitments and contingency (Notes 4 and 8)
Stockholders’ equity:
Preferred stock; $.001 par value; 5,000,000 shares authorized and 0 (June and March) shares issued and outstanding			—				—
Common stock; $.001 par value; 100,000,000 shares authorized and 37,282,128 (June) and 36,864,534 (March) shares issued and outstanding			37,282				36,864
Additional paid-in capital			32,456,207				32,226,983
Deficit accumulated during the development stage			(21,185,726	)			(18,033,844	)
Total stockholders’ equity			11,307,763				14,230,003
Total liabilities and stockholders’ equity		$	12,149,661			$	15,178,481

MIMEDX GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

										Period from
										Inception
		Three Months Ended								(November 22, 2006)
		June 30,								through
		2008				2007				June 30, 2008
Research and development expenses		$	953,546			$	137,649			$	3,080,445
Acquired in-process research and development			—				—				7,177,000
General and administrative expenses			2,236,321				747,242				11,466,352
Loss from operations			(3,189,867	)			(884,891	)			(21,723,797	)
Other income (expense)			37,985				195,565				549,663
Loss before income taxes			(3,151,882	)			(689,326	)			(21,174,134	)
Income taxes			—				—				—
Net loss		$	(3,151,882	)		$	(689,326	)		$	(21,174,134	)
Net loss per common share
Basic and diluted		$	(0.09	)		$	(0.05	)
Shares used in computing net loss per common share
Basic and diluted			37,073,595				14,000,000

MIMEDX GROUP, INC. AND SUBSIDARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
PERIOD FROM INCEPTION (NOVEMBER 22, 2006) THROUGH JUNE 30, 2008

																																														Deficit
		Convertible								Convertible								Convertible																												Accumulated
		Preferred Stock								Preferred Stock								Preferred Stock																Additional				Stock				Note				During the
		Series A								Series B								Series C								Common Stock								Paid-in				Subscriptions				Receivable,				Development
		Shares				Amount				Shares				Amount				Shares				Amount				Shares				Amount				Capital				Receivable				Related party				Stage				Total
Balances, November 22, 2006			—			$	—				—			$	—				—			$	—				—			$	—			$	—			$	—			$	—			$	—			$	—
Issuance of common stock at inception			—				—				—				—				—				—				12,880,000				12,880				—				—				—				(11,592	)			1,288
Employee share-based compensation expense			—				—				—				—				—				—				—				—				13,409				—				—				—				13,409
Other share-based compensation expense			—				—				—				—				—				—				—				—				17,980				—				—				—				17,980
Common stock issued in connection with purchase of license agreement			—				—				—				—				—				—				1,120,000				1,120				894,880				—				—				—				896,000
Issuance of note receivable, related party			—				—				—				—				—				—				—				—				—				—				(2,000,000	)			—				(2,000,000	)
Sale of Series A Preferred stock			11,212,800				14,016,000				—				—				—				—				—				—				(918,806	)			(1,233,750	)			—				—				11,863,444
Accrued interest income			—				—				—				—				—				—				—				—				—				—				(7,644	)			—				(7,644	)
Net loss for the period			—				—				—				—				—				—				—				—				—				—				—				(650,777	)			(650,777	)
Balances, March 31, 2007			11,212,800				14,016,000				—				—				—				—				14,000,000				14,000				7,463				(1,233,750	)			(2,007,644	)			(662,369	)			10,133,700
Employee share-based compensation expense			—				—				—				—				—				—				—				—				649,783				—				—				—				649,783
Other share-based compensation expense			—				—				—				—				—				—				—				—				158,247				—				—				—				158,247
Collection of stock subscription receivable			—				—				—				—				—				—				—				—				—				1,233,750				—				—				1,233,750
Accrued interest income			—				—				—				—				—				—				—				—				—				—				(41,250	)			—				(41,250	)
SpineMedica Corp. acquisition			—				—				5,922,397				7,402,996												2,911,117				2,911				2,316,908				—				2,048,894								11,771,709
Sale of Series C Preferred stock			—				—				—				—				1,285,001				3,855,000				—				—				—				—				—				—				3,855,000
Stock options issued in connection with purchase of intellectual property			—				—				—				—				—				—				—				—				116,000				—				—				—				116,000
Exercise of stock options			—				—				—				—				—				—				1,200				1				2,159				—				—				—				2,160
Alynx Merger — Recapitalization			7,207,398				11,257,996				(5,922,397	)			(7,402,996	)			(1,285,001	)			(3,855,000	)			926,168				926				(926	)			—				—				—				—
Alynx Merger — Transaction Costs (expensed)			—				—				—				—				—				—				205,851				206				1,126,173				—				—				—				1,126,379
Conversion of Preferred stock			(18,420,198	)			(25,273,996	)			—								—								18,420,198				18,420				25,255,576				—				—				—				—
Common stock issued in connection with purchase of license agreement			—				—				—				—				—				—				400,000				400				2,595,600				—				—				—				2,596,000
Net loss for the period			—				—				—				—				—				—				—				—				—				—				—				(17,371,475	)			(17,371,475	)
Balances, March 31, 2008			—				—				—				—				—				—				36,864,534				36,864				32,226,983				—				—				(18,033,844	)			14,230,003
Employee share-based compensation expense (unaudited)			—				—				—				—				—				—				—				—				193,058				—				—				—				193,058
Other share-based compensation expense (unaudited)			—				—				—				—				—				—				—				—				36,584				—				—				—				36,584
Cashless exercise of stock warrants (unaudited)			—				—				—				—				—				—				417,594				418				(418	)			—				—				—				—
Net loss for the period (unaudited)																																															(3,151,882	)			(3,151,882	)
Balances, June 30, 2008 (unaudited)			—			$	—				—			$	—				—			$	—				37,282,128			$	37,282			$	32,456,207			$	—			$	—			$	(21,185,726	)		$	11,307,763

See notes to condensed consolidated financial statements

MIMEDX GROUP, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

										Period from
										Inception
		Three Months Ended								(November 22, 2006)
		June 30,								through
		2008				2007				June 30, 2008
Cash flows from operating activities:
Net loss		$	(3,151,882	)		$	(689,325	)		$	(21,174,134	)
Adjustments to reconcile net loss to net cash flows from operating activities, net of effects of acquisition:
Acquired in-process research and development			—				—				7,177,000
Depreciation			97,290				1,993				289,445
Amortization of intangible assets			166,704				30,627				490,551
Employee share-based compensation expense			193,058				23,925				856,250
Other share-based compensation expense			36,584				30,315				212,811
Issuance of common stock for transaction fees			—				—				1,126,379
Accrued interest on notes receivable, related party			—				(84,450	)			(48,894	)
Change in fair value of investment, related party			—				—				41,775
Increase (decrease) in cash resulting from changes in:
Prepaid expenses and other current assets			121,676				(464,327	)			(48,499	)
Accounts payable and accrued expenses			(106,580	)			(940,738	)			(56,216	)
Deferred interest income			—				—				(43,200	)
Net cash flows from operating activities			(2,643,150	)			(2,091,980	)			(11,176,732	)
Cash flows from investing activities:
Purchase of equipment			(227,672	)			(555,649	)			(1,408,474	)
Cash paid for intangible asset			—				—				(100,000	)
Cash paid for security deposits			(3,681	)			(21,412	)			(116,312	)
Cash received in acquisition of SpineMedica Corp.			—				—				1,957,405
Cash paid for acquisition costs of SpineMedica Corp.			—				8,235				(227,901	)
Payments from (advances to) related party			—				—				(2,008,522	)
Net cash flows from investing activities			(231,353	)			(568,826	)			(1,903,804	)
Cash flows from financing activities:
Proceeds from Series A preferred stock			—				1,233,750				14,016,000
Proceeds from Series C preferred stock			—				—				3,855,000
Proceeds from common stock sale			—				—				1,288
Proceeds from exercise of stock options			—				—				2,160
Offering costs paid in connection with Series A preferred stock offering			—				—				(918,806	)
Net cash flows from financing activities			—				1,233,750				16,955,642
Net change in cash			(2,874,503	)			(1,427,056	)			3,875,106
Cash, beginning of period			6,749,609				10,456,708				—
Cash, end of period		$	3,875,106			$	9,029,652			$	3,875,106

MIMEDX GROUP, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIODS ENDED JUNE 30, 2008 AND 2007 AND THE PERIOD FROM
INCEPTION (NOVEMBER 22, 2006)
THROUGH JUNE 30, 2008

1.

Basis of Presentation:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulations S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results of operations for the periods presented have been included. Operating results for the three months ended June 30, 2008 and 2007 are not necessarily indicative of the results that may be expected for the fiscal year. The balance sheet at March 31, 2008 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements.

You should read these condensed consolidated financial statements together with the historical consolidated financial statements of the Company for the years ended March 31, 2008 and period from inception (November 22, 2006) through March 31, 2008 and 2007 included in our Annual Report on Form 10-K for the year ended March 31, 2008, filed with the Securities and Exchange Commission (“SEC”) on June 27, 2008.

MiMedx, Inc. (“MiMedx”) was incorporated in Florida in 2006. MiMedx entered into an Agreement and Plan of Merger (“Merger Agreement”) on January 29, 2008 with a publicly-traded Nevada Corporation, Alynx, Co. (“Alynx”), a public shell company, which was consummated on February 8, 2008. As a result of this transaction, MiMedx shareholders owned approximately 97% of the outstanding shares, thus giving MiMedx substantial control.

Under GAAP, MiMedx was deemed to be the accounting acquirer since the shareholders of MiMedx own a substantial majority of the issued and outstanding shares, and thus this reverse merger was accounted for as a capital transaction. The historical financial statements are a continuation of the financial statements of the accounting acquirer and the capital structure of the consolidated enterprise is now different from that appearing in the historical financial statements of the accounting acquirer in earlier periods due to the recapitalization.

On March 31, 2008, MiMedx Group, Inc. a Florida corporation, and Alynx merged. As a result of this transaction, MiMedx Group, Inc. became the surviving corporation. The “Company” refers to MiMedx Group, Inc., a development stage company, as well as its two operating subsidiaries: MiMedx, Inc. and SpineMedica, LLC.

The financial statements include the accounts of MiMedx Group, Inc. and its wholly-owned subsidiaries MiMedx, Inc. and SpineMedica, LLC. All significant inter-company balances and transactions have been eliminated.

2.

Significant accounting policies:

Net loss per share

Basic net loss per common share is computed using the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is typically computed using the weighted-average number of common and dilutive common equivalent shares from stock options, warrants and convertible preferred stock using the treasury stock method.

For all periods presented, diluted net loss per share is the same as basic net loss per share, as the inclusion of equivalent shares from outstanding common stock options, warrants and convertible preferred stock would be anti-dilutive.

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

		Three Months Ended
		June 30,
		2008				2007
Net loss		$	(3,151,882	)		$	(689,326	)
Denominator for basic earnings per share-weighted average shares			37,073,595				14,000,000
Effect of dilutive securities: Stock options and warrants outstanding (a)			—				—
Denominator for diluted earnings per share—weighted average shares adjusted for dilutive securities			37,073,595				14,000,000
Loss per common share—basic and diluted		$	(.09	)		$	(.05	)

		Three Months Ended
		June 30,
		2008				2007
Stock options, warrants, and convertible preferred stock			4,581,501				13,437,131

Recently issued accounting pronouncements:

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Effective April 1, 2008 the Company adopted the provisions of SFAS 157. The adoption of the Standard had no effect on the consolidated financial statements.

In April 2008, FASB Staff Position No. 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3) was issued. This standard amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement 142, Goodwill and Other Intangible Assets. FASP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The Company has not determined the impact on its financial statements of this accounting standard.

3.

Liquidity and management’s plans:

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. For the period from inception (November 22, 2006) through June 30, 2008 the Company experienced net losses of $21,174,134 (unaudited) and cash used in operations of $11,176,732 (unaudited). As of June 30, 2008, the Company has not emerged from the development stage. In view of these matters, the ability of the Company to continue as a going concern is dependent upon the Company’s ability to secure additional financing sufficient to support its research and development activities, approval of developed products for sale by regulatory authorities, including the FDA, and ultimately to generate revenues sufficient to cover all costs. Since inception, the Company has financed its activities principally from the sale of equity securities and related party advances. The Company is currently attempting to raise additional funds and such funds may not be available on favorable terms, or at all. Furthermore, if the Company issues equity or debt securities to raise additional funds, existing shareholders may experience dilution and the new equity or debt securities it issues may have rights, preferences and privileges senior to those of existing shareholders. In addition, if the Company raises additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to products or proprietary technologies, or grant licenses on terms that are not favorable. If the Company cannot raise funds on acceptable terms, the Company may not be able to develop or enhance products, obtain the required regulatory clearances or approvals, execute the Company’s business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements. Any of these events could adversely affect the Company’s ability to achieve the Company’s development and commercialization goals, which could have a material and adverse effect on the Company’s business, results of operations and financial condition.

4.

Intangible assets and royalty agreement:

Intangible assets activity is summarized as follows:

														Intellectual
		License				License				License				Property
		(a)				(b)				(c)				(d)				Total
April 1, 2008			881,466				2,195,487				2,596,000				110,200				5,783,153
Additions			—				—				—				—				—
Amortization			(24,900	)			(74,004	)			(64,900	)			(2,900	)			(166,704	)
June 30, 2008			856,566				2,121,483				2,531,100				107,300				5,616,449

Expected future amortization of intangible assets is as follows:

Year ending June 30,
2009		$	666,821
2010			666,821
2011			666,821
2012			666,821
2013			666,821
Thereafter			2,282,344
		$	5,616,449

5.

Stock Options and Warrants:

Stock Options:

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

						Weighted-
						average Exercise				Intrinsic
		Shares				Prices				Value
Options outstanding at April 1, 2008			4,446,250			$	2.20
Granted			50,000				5.38
Forfeited/Cancelled			(100,000	)			2.10
Exercised			—
Options outstanding at June 30, 2008			4,396,250				2.24			$	10,375,150
Options exercisable at June 30, 2008			2,440,208				1.83			$	5,758,891

Following is a summary of stock options outstanding and exercisable at June 30, 2008:

		Options Outstanding												Options Exercisable
						Weighted-
Range of						Average				Weighted-								Weighted-
Exercise		Number				Remaining				Average				Number				Average
Prices		Outstanding				Contractual Life				Exercise Price				Exercisable				Exercise Price
$.0001 — 1.00			1,270,000				3.69			$	.89				819,166			$	.91
1.80 — 2.40			2,476,250				6.31				2.09				1,458,542				1.94
5.38 — 5.44			650,000				5.06				5.44				162,500				5.44
			4,396,250				5.36				2.24				2,440,208				1.83

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

						Weighted
						Average
						Grant Date
Unvested Stock Options		Shares				Fair Value
Unvested at April 1, 2008			2,300,626				.49
Granted			50,000				3.45
Expired			(37,500	)			.30
Vested			(357,084	)			.54
Unvested at June 30, 2008			1,956,042				.67

Total unrecognized compensation expense at June 30, 2008 was approximately $1,825,000 and will be charged to expense through June, 2011.

The fair value of the options granted was estimated on the date of grant using the Black-Scholes option-pricing model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on historical volatility of peer companies and other factors estimated over the expected term of the options. The term of employee options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the contract term. The term for non-employee options is generally based upon the contractual term of the option. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term or contractual term as described.

The assumptions used in calculating the fair value of options using the Black-Scholes option-pricing model are set forth in the following table:

		Three Months Ended
		June 30, 2008		June 30, 2007
Dividend yield		0%		0%
Expected volatility		70.05%		81.34% to 93.99%
Risk free interest rates		3.11%		4.54% to 4.74%
Expected lives		6 years		2.75 to 5 years

The weighted-average grant date fair value for options granted during the three months ended June 30, 2008, and 2007, was approximately $3.45, and $.38, respectively.

Warrants:

A summary of our common stock warrant activity for the three months ended June 30, 2008 is as follows:

						Weighted Average
						Exercise
		Number				Price per Share
Warrants outstanding at April 1, 2008			709,331			$	1.41
Cashless exercise of warrants (417,594 shares of common stock issued)			(524,080	)			(1.25	)
Warrants outstanding at June 30, 2008			185,251			$	1.86

The Company grants common stock warrants to placement agents in connection with direct equity share purchases by investors and as additional compensation to consultants and advisors. The warrants are granted at negotiated prices in connection with the equity share purchases and at the market price of the common stock in other instances. Warrants issued to date have terms of 5 years.

Warrants may be exercised in whole or in part by:

	•		notice given by the holder accompanied by payment of an amount equal to the warrant exercise price multiplied by the number of warrant shares being purchased; or
	•		election by the holder to exchange the warrant (or portion thereof) for that number of shares equal to the product of (a) the number of shares issuable upon exercise of the warrant (or portion) and (b) a fraction, (x) the numerator of which is the market price of the shares at the time of exercise minus the warrant exercise price per share at the time of exercise and (y) the denominator of which is the market price per share at the time of exercise.

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

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

All of our warrants are classified as equity.

Warrants totaling 175,251, with exercise prices of $1.80 per share and expiration dates of October 24, 2009, were assumed by the Company in conjunction with our acquisition of Spinemedica Corp. in July 2007.

Warrants for 10,000 shares, with an exercise price of $3.00 per share, were issued in October 2007 for services provided by a consultant. These warrants expire in October 2012 and have piggyback registration rights which expire on October 9, 2008 and do not require the Company to pay any consideration to the holder if a registration statement is not declared effective or maintained.

6.

Income taxes:

The Company has incurred net losses since its inception and, therefore, no current income tax liabilities have been incurred for the periods presented. Due to the Company’s losses, management has established a valuation allowance equal to the amount of net deferred tax assets since management cannot determine that realization of these benefits is more likely than not.

7.

Related party transactions:

The Company incurred expenses of approximately $16,000 and $5,300 during the three months ended June 30, 2008 related to aircraft usage and the lease of office space, respectively, from entities owned by the Chairman of the Board.

8.

Contractual Commitments:

The table below sets forth our known contractual obligations as of June 30, 2008:

		Payments due by period
						Less than
Contractual Obligations		Total				1 year				2-3 years				4-5 years
Consulting Agreements		$	575,000			$	306,000			$	269,000			$	—
Employment Agreements			1,957,000				1,227,000				730,000				—
Operating Lease Obligations			1,013,000				272,000				562,000				179,000
Total		$	3,545,000			$	1,805,000			$	1,561,000			$	179,000

In May 2008, the Company entered into agreements with a consultant/shareholder which require payments in the event the Company receives proceeds from the sale or disposition of certain intellectual property contributed by the consultant/shareholder. As of June 30, 2008 no commitments have been paid or accrued under these agreements due to their contingent nature.

Registration rights:

Certain shareholders of the Company have registration rights covering 18,420,200 shares of the Company’s common stock pursuant to an agreement dated July 23, 2007. The rights will be effective nine months after the Company either closes an underwritten public offering or receives in the aggregate a minimum of $10,000,000 in cash from the sale or a series of related sales of the Company’s securities at a time when its equity securities are registered under Section 12 of the Exchange Act. As such, these are contingent rights subject to events within the Company’s control. When and if these events occur and the nine month period expires, the majority of the holders of the registration rights can demand that the Company use its best efforts to register such shares on up to two occasions but not more than once in any 12-month period, subject to certain restrictions. The holders of those shares also have certain piggyback registration rights. The various registration rights expire upon the earlier of the fifth anniversary from when the Company has its first underwritten public offering or the date when the holder of such shares is able to sell the registrable shares under Rule 144. Pursuant to a separate registration rights agreement, dated February 8, 2008, the holders of approximately 17,600 additional shares of the Company’s common stock have piggyback registration rights which are substantially the same as those granted in July 2007. The registration rights agreements do not require the Company to pay any consideration to holders if an SEC registration statement is not declared effective or maintained. Beginning February 9, 2009, most, if not all, of the shares subject to the registration rights agreements will be eligible for sale pursuant to Rule 144. Approximately 966,667 of the shares are held by persons who are affiliates. Affiliates will be subject to the condition that the Company be current in its filings before they may utilize Rule 144, and to Rule 144 volume limitations.

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

Forward-Looking Statements

This Form 10-Q and certain information incorporated herein by reference contain forward-looking statements and information within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. This information includes assumptions made by, and information currently available to management, including statements regarding future economic performance and financial condition, liquidity and capital resources, acceptance of the Company’s products by the market, and management’s plans and objectives. In addition, certain statements included in this and our future filings with the Securities and Exchange Commission (“SEC”), in press releases, and in oral and written statements made by us or with our approval, which are not statements of historical fact, are forward-looking statements. Words such as “may,” “could,” “should,” “would,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “seeks,” “plan,” “project,” “continue,” “predict,” “will,” “should,” and other words or expressions of similar meaning are intended by us to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are found at various places throughout this report and in the documents incorporated herein by reference. These statements are based on our current expectations about future events or results and information that is currently available to us, involve assumptions, risks, and uncertainties, and speak only as of the date on which such statements are made.

All forward-looking statements are subject to the risks and uncertainties inherent in predicting the future. Our actual results may differ materially from those projected, stated or implied in these forward-looking statements as a result of many factors, including our critical accounting policies and risks and uncertainties related, but not limited to, overall industry environment, delay in the introduction of products, regulatory delays, negative clinical results, and our financial condition. These and other risks and uncertainties are described in more detail in our most recent Annual Report on Form 10-K, as well as other reports that we file with the SEC.

Forward-looking statements speak only as of the date they are made and should not be relied upon as representing our views as of any subsequent date. We undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by applicable laws, and you are urged to review and consider disclosures that we make in this and other reports that we file with the SEC that discuss factors germane to our business.

Background of MiMedx Group, Inc.

The predecessor to MiMedx Group, Inc. was originally formed as a Utah corporation on July 30, 1985 under the name Leibra, Inc. We later changed domicile, through a merger, to Nevada, and later changed our name to Alynx, Co. We had several additional name changes in connection with various business acquisitions, all of which were discontinued or rescinded. We were an inactive shell corporation for at least the past 10 years, seeking to acquire an interest in a business with long-term growth potential. On March 6, 2007, we (then Alynx, Co.) filed a registration statement with the SEC on Form 10-SB to register our common stock under the Securities Exchange Act of 1934. We have filed periodic reports with the SEC since that time.

As used herein, the terms “the Company,” “we,” “our” and “us” refer to MiMedx Group, Inc., a Florida corporation (formerly Alynx, Co., a Nevada corporation), and our consolidated subsidiaries as a combined entity, except where it is clear that the terms mean only MiMedx Group, Inc.

On February 8, 2008, MiMedx Group, Inc. (then Alynx, Co.), MMX Acquisition Corp., a Florida corporation wholly-owned by Alynx, Co., and MiMedx, Inc., a Florida-based, privately-held, development-stage medical device company (“MiMedx”), consummated the arrangement set forth in an Agreement and Plan of Merger between the parties (the “Merger”), whereby (i) MMX Acquisition Corp. merged with and into MiMedx; (ii) MiMedx became a wholly-owned subsidiary of the Company; and (iii) former MiMedx shareholders received approximately 97.25% of the post-merger company’s outstanding shares. On March 31, 2008, we merged into a Florida entity, thereby becoming MiMedx Group, Inc. and also effected a reverse split so that each former MiMedx shareholder owned the same number of shares in the Company as such shareholder held in MiMedx prior to the Merger.

Under U.S. generally accepted accounting principles (“GAAP”), MiMedx was deemed to be the accounting acquirer since the shareholders of MiMedx own a substantial majority of the issued and outstanding shares, and thus this reverse merger was accounted for as a capital transaction. As a result, the financial statements presented are the historical financial statements of MiMedx.

Overview

We are a development stage enterprise based in Tampa, Florida. The Company has generated no operating revenue and has a history of losses since its inception in November 2006.

We currently operate in one business segment, musculoskeletal products, which will include the design, manufacture and marketing of four major market categories: soft-tissue reconstructive products, fixation devices, spinal products and joint reconstruction products including tendons and ligaments of the hand and upper and lower extremity joint markets, and procedure-specific instrumentation required to implant our reconstructive systems. Fixation devices may include internal, bone-to-bone fixation devices that do not address the spine. Spinal products may include artificial spinal discs to treat cervical pain and degeneration as well as lumbar indications, facet arthroplasty, intervertebral spacers, spinous process spacers, and other spinal systems and implants, as well as orthobiologics. Other product categories may include arthroscopy products, general surgical implants and instruments, operating room supplies and other surgical products and implants.

MiMedx’s core technology is a unique cross-linking process that utilizes nordihydroguaiaretic acid (“NDGA”), a naturally occurring compound. Initial bench testing shows that collagen cross-linked with NDGA produces a very strong, biocompatible, and durable material which could possibly be used to treat a number of orthopedic and general soft-tissue trauma and disease disorders. The core technology is licensed to us and is embodied in two patents. It covers the polymerization chemistry of NDGA as applied to biological materials, bioprostheses, or devices created through its application. It covers chemistries and compounds that have the reactive groups that are responsible for the effectiveness of NDGA, including a variety of organically synthesized NDGA analogs and natural compounds. Multiple medical products could potentially be developed and patented that are all tied to the core patented technology.

Characteristics and benefits of products that we believe could possibly be developed using this licensed technology are:

•

Initial tests of fibers cross-linked with NDGA appear to demonstrate they are stronger than existing collagenous tissue, including healthy tendons and ligaments. These fibers form the fundamental unit from which a variety of devices could be configured as follows:

	•		Linear arrays of fibers for tendons
	•		Fiber braids for ligament bioprostheses
	•		Woven meshes for general surgical use;

	•		NDGA-treated biomaterials have been tested and results preliminarily suggest that the materials are biocompatible and biodegradable;
	•		Biocompatibilization (making a material biocompatible that may otherwise not be) of in-dwelling medical devices by coating with NDGA polymerized collagen;
	•		NDGA treatment of xenograft (animal in origin) and allograft (human in origin) materials could make them more biocompatible and possibly improve functional lifetime; and
	•		NDGA-treated collagen-based biorivets have the potential to be used for bone repair.

MiMedx’s efforts presently focus on development of the potential products identified and designing a manufacturing process for those products. We are planning to initially pursue linear arrays and braided constructs for tendon repair as the first products to enter clinical development.

SpineMedica is currently developing two products in addition to a surgical sheet discussed below: a cervical total disc replacement and a posterior interbody fusion device market. SpineMedica owns specific rights to a poly-vinyl alcohol (“PVA”) and water-based biomaterial that can be manufactured with a wide range of mechanical properties, including those that appear to closely mimic the mechanical and physical properties of natural, healthy human tissue. We believe the intervertebral disc space and the normal mobility of the spine can be preserved using a biomimetic material like this specific hydrogel. This hydrogel, in a form called Salubria^®, has been used in other medical device applications and we believe it has demonstrated biocompatibility and durability inside the human body. In the United States, the FDA has cleared the material for use next to nerves and in the European Union and Canada it has been cleared for use next to nerves and to replace worn-out and lesioned cartilage in the knee. SpineMedica has recently begun developing a third product for the spine, a vessel guard made of the hydrogel material. This vessel guard, which is anticipated to be a 510(k) device with the FDA, would be designed to reduce the risk of potential vessel damage during a spinal revision surgery.

On March 31, 2008, we entered into an exclusive world-wide license with SaluMedica, LLC for a PVA-based hydrogel biomaterial for applications as a surgical sheet. The license covers both internal and external applications. Initially, SpineMedica plans to focus on developing the hydrogel surgical sheet technology for a spine surgery vessel guard used for anterior spinal surgeries. Additionally, we believe there is potential for this technology to be used in the prevention of scarring and as an anti-adhesive or in tissue repair.

Results of Operations for the Three Months Ended June 30, 2008 Compared to the Three Months Ended June 30, 2007

Research and Development Expenses

We incurred approximately $954,000 of research and development expenses during the three months ended June 30, 2008 compared to approximately $138,000 during the three months ended June 30, 2007. These costs consist primarily of fees paid to external consultants and service providers supporting our development efforts, internal personnel costs, and supplies and instruments used in our laboratories. Fees paid to external consultants and service providers approximated $432,000 and $93,000 for the three months ended June 30, 2008 and 2007, respectively. As of June 30, 2008 we employed 22 employees devoted to research and development, compared to 5 employees devoted to research and development at June 30, 2007. Supplies and instruments used for research and development increased significantly as we expanded the staff and undertook additional research and development of our technologies. We anticipate continued increases in the area of research and development in the foreseeable future as we progress our technologies into clinical development to obtain approval from the FDA to market our technologies.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2008 approximated $2,236,000 compared to approximately $747,000 for the three months ended June 30, 2007. General and administrative expenses primarily consist of personnel costs, professional fees consisting of legal and accounting fees, travel and entertainment expenses, and facilities costs. During the three months ended June 30, 2008, salaries and benefits approximated $1,107,000 compared to approximately $440,000 for the three months ended June 30, 2007. As of June 30, 2008,we employed 17 personnel not related to research and development functions as compared to 10 as of June 30, 2007. Professional fees of approximately $528,000 were incurred during the three months ended June 30, 2008 as compared to approximately $152,000 during the three months ended June 30, 2007. These professional fees are primarily attributed to general counsel merger and acquisition costs, costs incurred in filing patents, and accounting and reporting fees. Facility costs consist primarily of leasing office and lab space in Tampa, Florida and in Marietta, Georgia. The first lease we entered into was in April 2007. Prior to April 2007, we operated out of the offices of our founder, for no consideration.

During the three months ended June 30, 2008, we recorded $97,000 in depreciation expense and $167,000 in amortization expense as compared to recording less than $2,000 in depreciation expense and approximately $31,000 in amortization during the three months ended June 30, 2007. We depreciate our assets on a straight-line basis, principally over five to seven years and amortize our intangible assets over a period of 10 years, which we believe represents the remaining useful lives of the patents underlying the licensing rights and intellectual property. We do not amortize goodwill, but at least annually we test goodwill for impairment and periodically evaluate other intangibles for impairment based on events or changes in circumstances as they occur.

Share Based Compensation

We follow the provisions of Statement of Financial Accounting Standards No. 123R — Share-based Payments (“FAS123R”) which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (options). The total share based compensation recognized during the three months ended June 30, 2008 and 2007 approximated $230,000 and $54,000, respectively.

Other Income

We recorded net interest income of approximately $38,000 during the three months ended June 30, 2008 and approximately $204,000 during the three months ended June 30, 2007 as a result of our investment of the net proceeds of our Series A Preferred Stock, which occurred in March 2007.

Liquidity and Capital Resources

Since inception, we have funded our development, operating costs and capital expenditures through issuances of stock.

We had approximately $3,875,000 of cash and cash equivalents on hand as of June 30, 2008.

We estimate that the cash and cash equivalents on hand will be sufficient to fund operations for at least 3 to 4 months from June 30, 2008, but in order to fund on-going operating cash requirements beyond that point, or to further accelerate and execute our business plan, we will need to raise significant additional funds.

We are considering the possible issuance of additional shares of capital stock, in connection with a PIPE transaction, and are working toward such a financing transaction, but there can be no assurance that funds will be available, or that the price we can obtain will be acceptable.

Our working capital requirements will depend upon numerous factors, including the progress of our research and development programs, pre-clinical testing, clinical trials, timing and cost of seeking as well as achievement of regulatory milestones, and the ability to sell or license our technologies in the marketplace. In any event, we will require substantial funds in addition to those presently available to develop all of our programs to meet our business objectives. If we wish to acquire another business or other intellectual property or products, we will require additional capital to fund those acquisitions.

We expect to incur losses from operations for the foreseeable future. We expect, assuming we are successful in completing a financing transaction, that general and administrative expenses will continue to increase as we expand our finance and administrative staff, add infrastructure, and incur additional costs related to being an operating public company in the United States, including the costs of directors’ and officers’ insurance, investor relations programs and increased professional fees.

Contractual Obligations

Contractual obligations associated with our ongoing business activities are expected to result in cash payments in future periods. A table summarizing the amounts and estimated timing of these future cash payments as of June 30, 2008 is provided in Note 8 of the unaudited condensed consolidated financial statements included in Item 1.

Critical Accounting Policies

We follow accounting principles generally accepted in the United States in preparing our financial statements, which require us to make certain estimates and apply judgments that affect our financial position and results of operations. We continually review our accounting policies and financial information disclosures. A summary of our significant accounting policies that require the use of estimates and judgments in preparing the financial statements was provided in our Annual Report on Form 10-K for the year ended March 31, 2008. During the first three months of fiscal 2009, there were no material changes to the accounting policies and assumptions previously disclosed.

Recent Accounting Pronouncements

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Effective April 1, 2008 the Company adopted the provisions of SFAS 157. The adoption of the Standard had no effect on the condensed consolidated financial statements.

In April 2008, FASB Staff Position No. 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3) was issued. This standard amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement 142, Goodwill and Other Intangible Assets. FASP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The Company has not determined the impact, if any, of this accounting standard on its financial statements.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

In the normal course of doing business we are not exposed to the risks associated with foreign currency exchange rates and changes in interest rates. We do not engage in trading market risk sensitive instruments or purchasing hedging instruments or “other than trading” instruments that are likely to expose us to significant market risk, whether interest rate, foreign currency exchange, commodity price or equity price risk.

Our exposure to market risk relates to our cash and investments.

The primary objective of our investment activities is to preserve principal while at the same time maximizing yields without significantly increasing risk. To achieve this objective, we invest our excess cash in debt instruments of the U.S. Government and its agencies, bank obligations, repurchase agreements and high-quality corporate issuers, and, by policy, restrict our exposure to any single corporate issuer by imposing concentration limits. To minimize the exposure due to adverse shifts in interest rates, we maintain investments at an average maturity of generally less than three months.

Item 4T. Controls and Procedures.

Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer. Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer concluded that our controls and procedures were effective as of the end of the period covered by this report.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer, as appropriate, to allow timely decisions regarding disclosures.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the three months ended June 30, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

We have confidence in our internal controls and procedures. Nevertheless, our management, including our Chief Executive Officer and Principal Financial Officer, does not expect that our disclosure procedures and controls or our internal controls will prevent all errors or intentional fraud. An internal control system, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of such internal controls are met. Further, the design of an internal control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all internal control systems, no evaluation of controls can provide absolute assurance that all our control issues and instances of fraud, if any, have been detected.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 6. Exhibits.

Exhibit
Number				Reference				Description
	3.1				(1	)		Articles of Incorporation of MiMedx Group, Inc.
	3.2				(1	)		Bylaws of MiMedx Group, Inc.
	10.1				(2	)		Cost Recovery and Revenue Sharing Letter Agreement between MiMedx, Inc. and Thomas J. Graham, M.D., dated May 22, 2008
	10.2				(2	)		Finder’s Fee Letter Agreement between MiMedx, Inc. and Thomas J. Graham, M.D., dated May 22, 2008
	10.3	*			(3	)		Assignment and Assumption of Employment Agreement of Steve Gorlin between MiMedx Group, Inc. and MiMedx, Inc. dated June 20, 2008
	10.4	*			(3	)		Assignment and Assumption of Employment Agreement of Thomas W. D’Alonzo between MiMedx Group, Inc. and MiMedx, Inc. dated June 21, 2008
	10.5	*			(3	)		Assignment and Assumption of Employment Agreement of John C. Thomas, Jr. between MiMedx Group, Inc. and MiMedx, Inc. dated June 24, 2008
	10.6	*			(3	)		Assignment and Assumption of Employment Agreement of Matthew J. Miller between MiMedx Group, Inc. and MiMedx, Inc. dated June 23, 2008
	10.7	*			(3	)		Assignment and Assumption of Employment Agreement of Brian J. Splan between MiMedx, Inc. and MiMedx Group, Inc. dated June 20, 2008
	10.8	*			#			Amendment to Employment Agreement of Matthew Miller, dated September 25, 2007
	31.1				#			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2				#			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1				#			Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32.2				#			Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

EXHIBIT INDEX

Exhibit
Number				Description
	10.8	*		Amendment to Employment Agreement of Matthew Miller, dated September 25, 2007
	31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
	32.1			Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
	32.2			Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002