Equity

Stock Incentive Plans

The Company has four 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 stock awards to employees, directors, consultants and advisors: the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan (the "2016 Plan"), which was approved by shareholders on May 18, 2016; the MiMedx Group, Inc. Assumed 2006 Stock Incentive Plan (the “Assumed 2006 Plan”); the MiMedx Inc. 2007 Assumed Stock Plan (the “Assumed 2007 Plan”); and the MiMedx Group Inc. Amended and Restated Assumed 2005 Stock Plan (the “Assumed 2005 Plan”). The awards are subject to a vesting schedule as set forth in each individual agreement. The Company currently intends to use only the 2016 Plan to make future grants.

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



	Number of Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2016	14,019,629		$	3.62
Granted	—		$	—
Exercised	(926,010	)	$	2.76
Unvested options forfeited	(93,097	)	$	6.52
Vested options expired	(38,354	)	$	6.77
Outstanding at September 30, 2016	12,962,168		$	3.65	5.77	$	64,153,271
Vested at September 30, 2016	11,818,559		$	3.30	5.62	$	62,449,678
Vested or expected to vest at September 30, 2016 (a)	12,937,248		$	3.30	5.62	$	64,120,370


(a)	Includes forfeiture adjusted unvested shares.

The intrinsic value of the options exercised during the nine months ended September 30, 2016, was approximately $5,283,449.

Following is a summary of stock options outstanding and exercisable at September 30, 2016:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number outstanding	Weighted-Average Remaining Contractual Term (in years)	Weighted- Average Exercise Price		Number Exercisable	Weighted- Average Exercise Price
$0.50 - $0.76	441,429	2.6	$	0.72	441,429	$	0.72
$0.87 - $1.35	4,397,970	4.9	1.19		4,397,970	1.19
$1.40 - $2.45	1,442,424	4.2	1.92		1,442,424	1.92
$2.66 - $3.99	889,430	6.1	3.06		889,430	3.06
$4.19 - $6.38	3,253,783	6.7	5.36		2,997,303	5.32
$6.45 - $9.78	2,431,132	7.4	7.30		1,614,677	7.23
$9.90- $10.99	106,000	8.2	10.43		35,326	10.43
	12,962,168	5.8	$	3.65	11,818,559	$	3.30

Total unrecognized compensation expense related to granted stock options at September 30, 2016, was approximately $2,150,652 and will be charged to expense ratably through May 2017.

The fair value of options granted by the Company is estimated on the date of grant 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 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 mid point between the weighted average time to vesting and the contractual maturity. The simplified method was used due to the Company's lack of sufficient historical data to provide a reasonable basis upon which to estimate the expected term due to the limited period of time its equity shares have been publicly traded. 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-Merton option-pricing model are set forth in the following table:



	Nine Months Ended September 30,
	2016	2015
Expected volatility	n/a	54.4 - 58.1 %
Expected life (in years)	n/a	6.0
Expected dividend yield	n/a	—
Risk-free interest rate	n/a	1.51 - 1.68%

There were no options granted during the nine months ended September 30, 2016.

Restricted Stock Awards

Activity with respect to restricted stock awards for the nine months ended September 30, 2016 is summarized as follows:



	Number of Shares		Weighted-Average Grant Date Fair Value
Unvested at January 1, 2016	2,613,267		$9.14
Granted	2,369,876		7.98
Vested	(952,910	)	8.75
Forfeited	(137,575	)	8.73
Unvested at September 30, 2016	3,892,658		$8.54

As of September 30, 2016, there was approximately $23,767,731 of total unrecognized stock-based compensation related to time-based, nonvested restricted stock. That expense is expected to be recognized on a straight-line basis over a weighted-average period of 2.0 years, which approximates the remaining vesting period of these grants. All shares noted above as unvested are considered issued and outstanding at September 30, 2016.

For the three and nine months ended September 30, 2016 and 2015, the Company recognized stock-based compensation as follows (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Cost of sales	$	109	$	85	$	300	$	270
Research and development	159		202		520		591
Selling, general and administrative	4,433		4,091		13,006		11,703
	$	4,701	$	4,378	$	13,826	$	12,564

Treasury Stock

On May 12, 2014, our Board of Directors authorized the repurchase of up to $10 million of our common stock from time to time, through December 31, 2014. The Board subsequently extended the program until December 31, 2016. In December 2014, the Board increased the authorization to $20 million and further increased the authorization in 2015 to $60 million. The timing and amount of repurchases will depend upon the Company's stock price, economic and market conditions, regulatory requirements, and other corporate considerations. The Company may initiate, suspend or discontinue purchases under the stock repurchase program at any time.

For the nine months ended September 30, 2016, the Company purchased 1,338,616 shares of its common stock for a purchase price of approximately $10,338,000 before brokerage commissions of approximately $40,000. As of September 30, 2016, the Company had approximately $3,936,000 of availability remaining under the repurchase program.

Additionally, for the nine months ended September 30, 2016, the Company reissued 2,854,189 shares from the Treasury for restricted stock grants and stock option exercises, net of forfeitures, and as partial consideration to the shareholders of Stability, with an aggregate carrying value of approximately $23,257,728.