The Series B Preferred Stock are convertible, cumulative securities which rank senior to the Company’s Series A Junior Participating Preferred Stock and the Company’s common stock. The Series B Preferred Stock accumulated dividends at a rate of 4.0% per annum through June 30, 2021, and 6.0% per annum thereafter. Dividends are declared at the sole discretion of the Board. Dividends are paid at the end of each quarter based on the dividend amounts that accumulate beginning of the last payment date through the day prior to the end of each quarter. In lieu of paying a dividend, the Company may elect to accrue the dividend owed to the holders of the Series B Preferred Stock. Accrued dividend balances accumulate dividends at the prevailing dividend rate for each dividend period for which they are outstanding.

Each share of Series B Preferred Stock is convertible into Company’s common stock at any time at the option of the Holder. Shares are converted based on the liquidation preference of $1,000 per share (the “Liquidation Preference”) plus any accrued or accumulated dividends through the date of the conversion at a conversion price of $3.85 per common share. The Series B Preferred Stock, including any accumulated and unpaid dividends, automatically converts into common stock at any time after July 2, 2023, provided that the common stock has traded at $7.70 per common share or more (i) for 20 out of 30 consecutive trading days and (ii) on such date of conversion.

The holders of the Series B Preferred Stock, voting as a class, are entitled to appoint two members to the board of directors. The holders of the Series B Preferred Stock are entitled to vote on all matters to be voted on by the Company’s shareholders on an as-converted basis as a single class with the common stock; provided that the votes represented by a single holder of Series B Preferred Stock cannot exceed 19.9% of the total voting stock of the Company and no share of Series B Preferred Stock held can entitle the holder to a number of votes that exceeds the quotient of the Liquidation Preference divided by $5.25 per share.

If the Company undergoes a change of control (as defined), the Company will have the option to repurchase some or all of the then-outstanding shares of Series B Preferred Stock for cash in an amount equal to the Liquidation Preference plus any accumulated and unpaid dividends, subject to the rights of the holders of the Series B Preferred Stock in connection with such change in control. If the Company does not exercise such repurchase right, holders of the Series B Preferred Stock will have the option to (1) require the Company to repurchase any or all of their then-outstanding shares of Series B Preferred Stock for cash in an amount equal to the Liquidation Preference plus accumulated and unpaid dividends or (2) convert the Series B Preferred Stock into common stock and receive their pro rata consideration thereunder. Since the contingent redemption of the Series B Preferred Stock by the holders in the event of a change in control is outside the Company’s control, the Series B Preferred Stock is classified as temporary equity.

At the time of the issuance of the Series B Preferred Stock, the Company’s common stock, into which the Company’s Series B Preferred Stock is convertible, had an estimated fair value exceeding the effective conversion price of the Series B Preferred Stock, giving rise to a beneficial conversion feature in the amount of $31.1 million. This amount was immediately recognized as a deemed dividend on the commitment date since there is no stated redemption date and the Series B Preferred Stock is immediately convertible.

The Series B Preferred Stock instrument contains an increasing-rate cumulative dividend feature. The Company determined the present value of the difference between the (1) dividends that will be payable in the period preceding commencement of the perpetual dividend and (2) the perpetual dividend amount for a corresponding number of periods in order to ascribe a fair value to this feature. These amounts were discounted to present value using a market rate for dividend yield as of the date on which the Series B Preferred Stock was issued. The Company calculated the amount of the increasing-rate dividend feature as $1.8 million. This amount was amortized as a deemed dividend to preferred shareholders using the effective interest method through June 30, 2021. During each of the years ended December 31, 2021 and 2020, the Company recognized $0.9 million of deemed dividends related to the amortization of the increasing-rate dividend feature.


	Series B Preferred Stock
	Shares	Amount
Balance at December 31, 2019	—	$	—
Issuance of Series B Preferred Stock	100,000	59,540
Deemed dividends	—	32,028
Balance at December 31, 2020	100,000	$	91,568
Deemed dividends	—	926
Balance at December 31, 2021	100,000	$	92,494
Activity	—	—
Balance at December 31, 2022	100,000	$	92,494

The Company has not declared or paid any dividends on the Series B Preferred Stock since issuance. Dividends in arrears as of December 31, 2022 were $13.8 million. As this amount has not been declared, the Company has not recorded this amount on its consolidated balance sheet as of December 31, 2022.

The Company has two share-based compensation plans which provide for the granting of equity awards, including qualified incentive and non-qualified stock options and restricted stock awards: the MiMedx Group, Inc. 2016 Equity and Cash Incentive Plan Amended and Restated through October 2, 2020 (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, 2022, 2021, and 2020 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 8,400,000 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. Awards granted under the 2016 Plan are subject to a vesting schedule as set forth in each individual agreement.


	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2022	1,444,845	$	5.18
Granted	—	—
Exercised	(312,001)	2.09
Unvested options forfeited	—	—
Vested options expired	(198,950)	4.02
Outstanding at December 31, 2022	933,894	6.46		0.87	—
Exercisable at December 31, 2022	933,894	$	6.46	0.87	$	—

The intrinsic values of the options exercised during the years ended December 31, 2022, 2021 and 2020 were $0.6 million, $3.3 million, and $1.9 million, respectively. Cash received from option exercise under all share-based payment arrangements for the years ended December 31, 2022, 2021 and 2020 was $0.7 million, $1.4 million, and $0.4 million, respectively. The actual tax

benefit for the tax deductions from option exercise of the share-based payment arrangements totaled $0.2 million, $2.0 million, and $1.6 million, respectively, for the years ended December 31, 2022, 2021 and 2020. The Company has a policy of using its available repurchased treasury stock to satisfy option exercises prior to the issuance of new shares of common stock.

During 2021 and 2020, certain stock option holders elected to return restricted shares to the Company as consideration to exercise stock options. In total, 41,810 and 148,972 shares were returned to the Company during the year ended December 31, 2021 and 2020, respectively, for an aggregate fair value of $0.4 million and $0.9 million, respectively. There were no similar transactions for the year ended December 31, 2022.

The Company has issued several classes of stock awards to employees: restricted stock (“RSAs”), restricted stock unit awards (“RSUs”), and performance stock unit awards (“PSUs”, collectively the “Equity Incentive Awards”). The following is summary information for such awards for the year ended December 31, 2022.

Restricted stock and RSUs generally vest over a one- to three-year period in equal annual increments and require the recipient to provide continuous service through each vesting date. PSUs vest based on the achievement of specific performance targets subject to agreements with employees and also require the recipient to provide continuous service through a specified date or event.

As of December 31, 2022, there was $19.8 million of total unrecognized stock-based compensation related to unvested Equity Incentive Awards. That expense is expected to be recognized over a weighted-average period of 1.72 years, which approximates the remaining vesting period of these grants. RSAs are considered common shares issued and outstanding upon grant, while shares underlying the RSUs and PSUs are considered issued and outstanding only upon vesting. Therefore, all RSAs noted below as unvested are considered issued and outstanding as of December 31, 2022, while unvested RSUs and PSUs are not considered issued and outstanding as of December 31, 2022. RSAs, RSUs, and PSUs are not reflected in weighted average common shares outstanding for purposes of calculated basic net loss per common share.


	RSA			RSU			PSU
	Number of Shares	Weighted-Average Grant Date Fair Value		Number of Shares	Weighted-Average Grant Date Fair Value		Number of Shares	Weighted-Average Grant Date Fair Value
Unvested at January 1, 2022	877,197	$	4.26	4,228,919	$	8.64	—	$	—
Granted	—	—		4,232,390	4.80		441,965	4.62
Vested	(749,104)	3.95		(1,724,530)	8.33		—	—
Forfeited	(5,338)	5.11		(1,961,808)	6.37		(200,893)	4.62
Unvested at December 31, 2022	122,755	$	6.13	4,774,971	$	6.28	241,072	$	4.62


	Years Ended December 31,
	2022		2021		2020
Cost of sales	$	1,213	$	813	$	520
Selling, general and administrative expenses	9,578		13,108		14,549
Research and development expense	1,875		836		288
Total share-based compensation	12,666		14,757		15,357
Income tax benefit, before consideration of valuation allowance	(3,132)		(3,649)		(3,792)
Total share-based compensation, net of tax benefit	$	9,533	$	11,108	$	11,565

Achievement of the performance targets allow for vesting of 50% to 150% of the PSUs granted. If performance is below 50%, the PSUs do not vest. To the extent that the vesting percentage in a subsequent period exceeds the vesting percentage achieved in a previous period, a recipient is eligible to receive the amount of shares from the previous period based on the vesting percentage in the subsequent period. If total shareholder return (“TSR”), as defined below, is negative, vesting is limited to 100% of the award for all periods, regardless of actual achievement against the stipulated net sales targets.

All of the PSUs require recipients to continue employment with the Company through the vesting date, which will occur upon approval of the results with respect to the established targets by the Compensation Committee of the Board of Directors after December 31, 2024, but no later than March 15, 2025.

The TSR is calculated as the average trading price of the Company’s common stock during the final 30 trading days of 2024, adjusted for dividends paid on the Company’s common stock, less the average trading price during the final 30 trading days of 2021. Since TSR is based on the Company’s share price, it represents a market condition, which is incorporated in the grant date fair value of the shares in excess of 100% vesting. These awards are not reflected in the table above.

The fair value of these awards on the date of grant was estimated using a Monte Carlo simulation, the inputs for which were informed by a Black-Scholes option pricing model. The assumptions used in determining the fair value of these PSUs were as follows:

The expected term was derived from the date of the grant through the latest date of the resolution of the market condition. The risk-free interest rate was derived based on the U.S. Treasury Yield curve in effect at the date of grant for maturities of similar periods to the concluded term. The expected volatility was based on the Company’s historical daily stock price movements for a term similar in length to the expected term. The dividend yield was based on the Company’s history of dividends on its common stock.

Expense related to PSUs is recognized, straight-line, based on the grant date fair value of the relevant shares, over the requisite service period related to each individual tranche, limited to the extent that the achievement of the associated performance condition associated with that tranche is probable. These expectations are derived from the Company’s actual results, latest budget, and forecasts for net sales in the associated periods. Subsequent adjustments to the expectation for vesting are reflected as a cumulative adjustment to expense. The fair value of the portion of the award subject to a market condition and expense recognized on such awards are not subsequently reconsidered based on the probability of or actual achievement of the market condition. Accordingly, the Company may recognize share-based compensation expense for awards that do not ultimately vest.

On June 7, 2022, the Company adopted the Employee Stock Purchase Plan of MiMedx Group, Inc. (the “ESPP”). The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. All regular full-time employees of the Company (including officers) and all other employees who meet the eligibility requirements of the plan may participate in the ESPP. The ESPP provides eligible employees an opportunity to acquire the Company’s common stock on a semi-annual basis at a purchase price of 85% of the lower of the closing price per share of the Company’s common stock on the first day and the last day of each six-month purchase period (the “Purchase Period”). The aggregate number of shares which may be issued and sold under the ESPP is 3 million shares of common stock. The first Purchase Period under the ESPP commenced on August 1, 2022 and resulted in a purchase of shares on January 31, 2023.

For the year ended December 31, 2022, the Company recorded $0.2 million in stock-based compensation related to the ESPP. As of December 31, 2022, the Company had cumulative payroll deferrals under the ESPP for future share purchases of $0.6 million. This amount is included in accrued compensation in the consolidated balance sheet. No shares have been issued under the plan to date.

During the year ended December 31, 2019, the Company granted a fixed-dollar value RSU award to the members of its Board in the amount of $1.6 million. The RSU awards vested at the date of the 2019 Annual Meeting and were settled in common stock with the number of shares of common stock based on the closing price of the Company’s share price on August 5, 2020, a date thirty days after the Company became current on its SEC filings. Upon this event, these awards were modified from a fixed dollar-amount of awards to be settled in a variable number of shares to a fixed number of shares based on the closing price of the Company’s common stock on August 5, 2020. This event constituted a modification of the awards from liability-based awards to equity-based awards. This event did not change the total amount of expense recognized. Prior to August 5, 2020, the Company recorded $1.3 million of expense, of which $0.9 million was recognized during the year ended December 31, 2020. The Company reclassified $1.3 million of recorded liability to additional paid-in capital to reflect this modification on August 5, 2020. Subsequent to the modification, $0.3 million of expense was recognized as additional paid-in capital during the year ended December 31, 2020.

Repurchases of shares of Common Stock in connection with the satisfaction of employee tax withholding obligations upon vesting of restricted stock and exercise of stock options for the years ended December 31, 2022, 2021, and 2020 were 249,442, 469,239, and 435,492, respectively, for an aggregate purchase price of $1.2 million, $4.8 million, and $2.3 million, respectively.