Equity

12 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

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, 2018, 2017 and 2016 the Company used and intends to use only the 2016 Plan to make future 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, 2018, 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, 2018	9,953,575		$	3.28
Granted	—		—
Exercised	(786,708	)	4.52
Unvested options forfeited	—		—
Vested options expired	(5,469,720	)	2.22
Outstanding at December 31, 2018	3,697,147		4.59		3.57	$	595,684
Exercisable at December 31, 2018	3,697,147		$	4.59	3.57	$	595,684

The intrinsic values of the options exercised during the years ended December 31, 2018, 2017 and 2016 were $7.9 million, $18.5 million, and $6.5 million, respectively. Cash received from option exercise under all share-based payment arrangements for the years ended December 31, 2018, 2017, and 2016, was $3.6 million, $12.0 million, and $3.5 million, respectively. The actual tax benefit for the tax deductions from option exercise of the share-based payment arrangements totaled $5.9 million, $12.5 million, and $4.6 million, respectively, for the years ended December 31, 2018, 2017, and 2016. 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, 2018, 2017 and 2016 were $0.1 million, $3.7 million, and $7.8 million, respectively. There were no options granted during the years ended December 31, 2018, 2017 and 2016 and no unrecognized compensation expense at December 31, 2018.

The fair value of the options granted in prior years was 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 were based on historical volatility of peer companies and other factors estimated over the expected term of the options. The term of employee options granted was derived using the “simplified method” which computes expected term as the midpoint between the weighted average time to vesting and the contractual maturity of ten years. 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 had been publicly traded. The term for non-employee options was generally based upon the contractual term of the option. The risk-free rate was 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.

Restricted Stock Awards

Following is summary information for restricted stock awards for the year ended December 31, 2018. Shares vest over a one to three year period in equal annual increments and require continuous service. For the time-based awards with service vesting conditions, the Company recognizes stock-based compensation expense using the straight-line expense attribution method.

As of December 31, 2018, there was approximately $17.0 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 1.7 years, which approximates the remaining vesting period of these grants. All shares noted below as unvested are considered issued and outstanding at December 31, 2018.



	Number of Shares		Weighted-Average Grant Date Fair Value
Unvested at January 1, 2018	5,181,405		$	9.18
Granted	1,947,475		8.52
Vested	(2,268,431	)	9.26
Forfeited	(1,861,314	)	8.96
Unvested at December 31, 2018	2,999,135		$	8.83

The total fair value of restricted stock awards vested during the years ended December 31, 2018, 2017, and 2016, was $17.9 million, $17.3 million, and $9.5 million, respectively.

For the years ended December 31, 2018, 2017, and 2016 the Company recognized share-based compensation as follows (in thousands):



	Years Ended December 31,
	2018			2017			2016
							(Restated)
Cost of sales	$	705		$	539		$	439
Research and development	584			604			621
Selling, general and administrative	13,479			20,052			16,672
Total share-based compensation	$	14,768		$	21,195		$	17,732
Income tax benefit	(3,803		)	(5,345		)	(6,756		)
Total share-based compensation, net of tax benefit	$	10,965		$	15,850		$	10,976

Treasury Stock

On May 8, 2014, the Board authorized the repurchase of up to $10 million of shares of Company 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, 2017 and 2016 the Company purchased 507,600, 5,635,077, and 1,338,616 shares of its common stock, respectively, for an aggregate purchase price of approximately $7.6 million, $68.3 million and $10.4 million, respectively, exclusive of commissions of approximately $0.0 million, $0.2 million and $0.0 million, respectively.

Repurchases of shares of Company common stock in connection with the satisfaction of employee tax withholding obligations upon vesting of restricted stock for the years ended December 31, 2018, 2017 and 2016 were 614,123, 419,928 and 141,658, respectively, for an aggregate purchase price of approximately $4.9 million, $4.1 million, and $1.2 million, respectively.