Equity

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Equity

Equity

Stock Incentive Plans

The Company has two share-based compensation plans which provide for the granting of equity awards, including qualified incentive and non-qualified stock options, stock appreciation awards and restricted Common Stock awards: the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan (the “2016 Plan”), which was approved by shareholders on May 18, 2016 and the MiMedx Group, Inc. Assumed 2006 Stock Incentive Plan (the “Prior Incentive Plan”). During the years ended December 31, 2019, 2018 and 2017 the Company used only the 2016 Plan to make grants.

The 2016 Plan permits the grant of equity awards to the Company’s employees, directors, consultants and advisors for up to 5,000,000 shares of the Company’s Common Stock plus (i) the number of shares of the Company’s Common Stock that remain available for issuance under the Prior Incentive Plan, and (ii) the number of shares that are represented by outstanding awards that later become available because of the expiration or forfeiture of the award without the issuance of the underlying shares. The awards are subject to a vesting schedule as set forth in each individual agreement. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant, and those option awards generally vest based on three years of continuous service and have 10-year contractual terms. Restricted Common Stock awards generally vest over three years. Certain option and restricted stock awards provide for accelerated vesting if there is a change in control and upon death or disability.

A summary of stock option activity as of December 31, 2019, and changes during the year then ended are presented below:

	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2019	3,697,147		$	4.59
Granted	—		—
Exercised	(150,000	)	0.72
Unvested options forfeited	—		—
Vested options expired	(661,813	)	6.21
Outstanding at December 31, 2019	2,885,334		4.42		2.73	$	9,191,697
Exercisable at December 31, 2019	2,885,334		$	4.42	2.73	$	9,191,697

The intrinsic values of the options exercised during the years ended December 31, 2019, 2018 and 2017 were $0.6 million, $7.9 million, and $18.5 million, respectively. Cash received from option exercise under all share-based payment arrangements for the years ended December 31, 2019, 2018, and 2017, was $0.1 million, $3.6 million, and $12.0 million, respectively. The actual tax benefit for the tax deductions from option exercise of the share-based payment arrangements totaled $0.2 million, $5.9 million, and $12.5 million, respectively, for the years ended December 31, 2019, 2018, and 2017. The Company has a policy of using its available repurchased treasury stock to satisfy option exercises.

The fair value of options vested during the years ended December 31, 2019, 2018 and 2017 were $1.4 million, $0.1 million, and $3.7 million, respectively. There were no options granted during the years ended December 31, 2019, 2018 and 2017 and no unrecognized compensation expense at December 31, 2019.

During the year ended December 31, 2019, the Company extended the contractual life of 612,000 fully vested share options held by 7 members of the Board and 278,916 fully vested share options held by a former employee. As a result of that modification, the Company recognized incremental share-based compensation expense of $0.4 million for the year ended December 31, 2019.

The incremental fair value of the modified options in 2019 was estimated on the modification date using the Black-Scholes-Merton option-pricing model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate.  Expected volatilities were the blend of the Company’s historical stock price volatility as well as that of market comparable publicly traded peer companies and other factors estimated over the expected term of the options.  The term of the modified options was the remaining time until the end of the contractual maturity of ten years. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of modification for the period of the expected term.

2019 Option Modification
Expected volatility	65% - 95%
Expected life (in years)	0.28 - 5.12
Expected dividend yield	—
Risk-free interest rate	1.56% - 2.02%

Restricted Stock Awards

Following is summary information for restricted stock awards for the year ended December 31, 2019. Shares vest over a one to three year period in equal annual increments and require continuous service.

As of December 31, 2019, there was approximately $11.4 million of total unrecognized stock-based compensation related to non-vested restricted stock.  That expense is expected to be recognized over a weighted-average period of 1.8 years, which approximates the remaining vesting period of these grants. All shares noted below as unvested are considered issued and outstanding at December 31, 2019.

	Number of Shares		Weighted-Average Grant Date Fair Value
Unvested at January 1, 2019	2,999,135		$	8.83
Granted	3,084,875		3.35
Vested	(1,474,998	)	8.58
Forfeited	(1,084,971	)	5.31
Unvested at December 31, 2019	3,524,041		$	5.21

The total fair value of restricted stock awards vested during the years ended December 31, 2019, 2018, and 2017, was $5.2 million, $17.9 million, and $17.3 million, respectively.

During the year ended December 31, 2019, the Company granted a fixed dollar value restricted share unit award to the members of its Board in the amount of $1.6 million. The restricted share unit awards vest upon the earlier of one year or the date of the 2019 Annual Meeting and will be settled in Common Stock with the number of shares of Common Stock to be determined based on the Company’s closing share price on the future settlement date. During the year ended December 31, 2019, the Company recognized $0.4 million of share-based compensation expense, with an offsetting liability recorded in Accrued compensation in the consolidated balance sheets.

For the years ended December 31, 2019, 2018, and 2017 the Company recognized share-based compensation as follows (in thousands):

 

	Years Ended December 31,
	2019			2018			2017
Cost of sales	$	477		$	705		$	539
Research and development	265			584			604
Selling, general and administrative	11,322			13,479			20,052
Total share-based compensation	$	12,064		$	14,768		$	21,195
Income tax benefit	(3,081		)	(3,803		)	(5,345		)
Total share-based compensation, net of tax benefit	$	8,983		$	10,965		$	15,850

Treasury Stock

On May 8, 2014, the Board authorized the repurchase of up to $10 million of shares of Common Stock from time to time through December 31, 2014. The Board increased the authorization during the year ended December 31, 2015 to $60 million, during the year ended December 31, 2016 to $66 million, and during the year ended December 31, 2017 to $130 million. In January 2018 the Board announced that it had increased the total authorization to $140 million. The share repurchase program subsequently expired during the year ended December 31, 2018.

For the years ended December 31, 2018 and 2017, the Company purchased 507,600, and 5,635,077 shares of its Common Stock, respectively, for an aggregate purchase price of approximately $7.6 million, and $68.3 million, respectively, exclusive of commissions of approximately $0.0 million, and $0.2 million, respectively.

Repurchases of shares of Common Stock in connection with the satisfaction of employee tax withholding obligations upon vesting of restricted stock for the years ended December 31, 2019, 2018 and 2017 were 429,918, 614,123, and 419,928, respectively, for an aggregate purchase price of approximately $1.5 million, $4.9 million, and $4.1 million, respectively.