8.	Contingent Consideration

The Agreement and Plan of Merger between the Company and the former owners of Surgical Biologics (“the Merger”) dated January 5, 2011 involves the potential for the payment of future contingent consideration in MiMedx common stock. Payment of the additional consideration is contingent on the acquired company reaching sixty percent (60%) of the excess of the amniotic tissue based gross revenues in calendar year 2011 over gross revenues in calendar year 2010 minus any FDA approval costs. The payment shall be made as the aggregate number of shares of MiMedx Common Stock per a specified formula in the Agreement and Plan of Merger. In addition the Company shall deliver to the former owners of Surgical Biologics an aggregate number of shares of the Company equal to thirty percent (30%) of the Gross Revenues in calendar year 2012 over the Gross Revenues in calendar year 2011 minus any FDA approval costs. The Company shall deliver the contingent consideration no later than 30 days after the Company files its Form 10-K. The contingent consideration was originally recorded at the estimated fair value of the contingent milestone payment on the acquisition date. The fair value of the contingent milestone consideration was remeasured at the estimated fair value as of December 31, 2011 with the change in fair value recognized as income or expense within Other Income (Expense) in the condensed consolidated statements of earnings. The Company measured the initial liability and remeasured the liability as of December 31, 2011, using Level 1 inputs as defined under authoritative guidance for fair value measurements. See Note 9 for further information regarding fair value measurements.

At December 31, 2011, the fair value of the contingent consideration tied to 2011 revenue was calculated to be approximately $3,185,000 and the liability adjusted and recorded as a current liability in the consolidated balance sheet and is due to be paid in MiMedx common stock not more than 30 days following the filing of our Form 10-K. The estimated maximum potential amount of undiscounted future contingent consideration tied to revenue for calendar year 2012 was approximately $4,225,000 and was recorded in the non-current liability section of the consolidated balance sheet.