Stock-Based Incentive Plans |
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| Equity Compensation Plans | Stock-Based Incentive Plans The Company maintains two stock-based incentive plans: the Axogen, Inc. 2019 Amended and Restated Long-Term Incentive Plan, as amended ("2019 Plan") and the Axogen 2017 Employee Stock Purchase Plan (“2017 ESPP”).
Long-Term Incentive Plan
At the 2019 Annual Meeting of Shareholders held on August 14, 2019, the shareholders approved the 2019 Plan, which allows for the award of incentive stock options, non-qualified stock options, PSUs and RSUs to employees, directors, and consultants. Awards under the 2019 Plan are priced at, or above, the fair market value of the Company's common stock on the date of grant. At the 2021 Annual Meeting of Shareholders held on May 10, 2021, the shareholders approved an additional 2,500,000 shares to be allocated for issuance under the 2019 Plan. The number of shares of common stock authorized for issuance under the 2019 Plan is (a) 5,885,482 shares, comprised of (i) 5,500,000 new authorized shares and (ii) 385,482 unallocated shares of common stock available for issuance as of August 14, 2019 pursuant to the Company’s 2010 Stock Incentive Plan, as amended and restated (the “2010 Plan”), that were not then subject to outstanding awards; plus (b) shares under the 2010 Plan and the 2019 Plan that are cancelled, forfeited, expired, unearned or settled in cash, in any such case that does not result in the issuance of common stock. No future awards will be made under the 2010 Plan. As of December 31, 2021, 3,630,823 shares of common stock were available for issuance under the 2019 Plan.
The Company recognized stock-based compensation expense, which consisted of compensation expense related to employee stock options, PSUs and RSUs based on the value of stock-based payment awards that are ultimately expected to vest during the period and stock-based compensation expense related to the 2017 ESPP of $10,919, $8,470 and $10,304 for the years ended December 31, 2021, 2020 and 2019, respectively.
As of December 31, 2021, there was $19,502 of unrecognized compensation costs related to non-vested stock options and restricted stock awards. This cost is expected to be recognized over a weighted-average period of 2.09 years for stock options and 2.04 years for restricted stock awards.
Stock Options
The options granted to employees prior to July 1, 2017 typically vest 25% one year after the grant date and 12.5% every six months thereafter for the remaining three-year period until fully vested after four years. The options granted to employees after July 1, 2017 typically vest 50% two years after the grant date and 12.5% every six months thereafter for the remaining two-year period until fully vested after four years. The options granted to directors and certain options granted from time to time to certain executive officers have vested ratably over three years or 25% per quarter over one year. Options typically have terms ranging from to ten years.
A summary of the stock option activity is as follows:
The exercise price per share of each option is equal to the fair market value of the underlying share on the date of grant. For the years ended December 31, 2021, 2020 and 2019, $5,467, $3,300 and $4,002, respectively, in cash proceeds were included in the Company’s consolidated statements of cash flows as a result of the exercise of stock options and Employee Stock Purchase Plan stock purchases. The intrinsic value of equity awards exercised during the years ended December 31, 2021, 2020 and 2019 was $14,167, $5,595 and $9,553, respectively.
The following weighted-average assumptions were used for stock options granted during the years ended December 31:
Restricted and Performance Stock Units
RSUs granted to employees have a requisite service period of four years. The RSUs granted to directors and certain RSUs granted from time to time to certain executive officers have a requisite service period of three years, while certain of these RSUs have a requisite service period of one year. The Company expenses the fair value of RSUs on a straight-line basis over the requisite service period.
A summary of the status of non-vested RSUs and PSUs as of December 31, 2021 and 2020 and the changes during the years then ended are as follows:
The total fair value of restricted stock vested during the years ended December 31, 2021, 2020 and 2019 was $4,481, $3,811 and $1,467, respectively. The Company issues registered shares of common stock to satisfy stock option exercises and restricted stock grants.
Performance Stock Units
The Company estimates the fair value of the PSUs based on its closing stock price at the time of grant and its estimate of achieving such performance target and records compensation expense as the milestones are achieved. PSUs generally have a requisite service period of three years and are subject to graded vesting conditions based on revenue goals of the Company. The Company expenses their fair value over the requisite service period. Over the performance period, the number of shares of common stock that will ultimately vest and be issued and the related compensation expense will be adjusted based upon the Company’s estimate of achieving such performance target. The number of shares delivered to recipients and the related compensation cost recognized as an expense will be based on the actual performance metrics as set forth in the applicable PSU award agreement. The amount actually awarded will be based upon achievement of the performance measures.
On December 18, 2017, December 27, 2018 and December 17, 2019, the Compensation Committee of the Board of Directors approved PSU awards to certain employees related to their work on the Company’s Biologics License Application ("BLA"). The PSU awards consist of a targeted total award of 378,863 shares, of which 298,587 shares remain available as of December 31, 2021. The number of shares is allocated to certain milestones related to the BLA submission to and approval by the FDA. These awards are expected to vest beginning when the BLA is submitted to the FDA, which is not expected to be until 2023. The performance measure is based upon achieving each of the specific milestones and will vest 50% upon achieving each of the milestones and 50% one year later. No expense has been recognized on these awards yet.
On December 18, 2017, the Compensation Committee of the Board of Directors approved PSU awards of 114,700 shares tied to 2019 revenue. The award was issued at 72.3% of achievement and therefore, 27.7% of the stock compensation expense or $536 relating to this grant, was forfeited or reversed in the first quarter of 2020.
On December 27, 2018, the Compensation Committee of the Board of Directors approved PSU awards of 130,400 tied to 2020 revenue. As a result of COVID-19, it was determined these PSU awards would not be granted and therefore stock compensation related to these awards of $1,161 was forfeited in 2020. No expense related to these awards was recorded in 2021 and the awards were forfeited.
On March 16, 2020, the Compensation Committee of the Board of Directors approved PSU awards of 357,000 shares tied to 2021 revenue. In June 2020, the Company concluded that the performance metrics relating to these awards with performance metrics tied to 2021 revenue were no longer probable and therefore stock compensation expense related to these awards of $340 was reversed in 2020. Subsequently, in the fourth quarter of 2020, it became probable that the Company would achieve 50% of these performance metrics and therefore adjusted stock compensation expense. In the third quarter of 2021, it was determined that the performance metrics tied to 2021 revenue were no longer probable; therefore, stock compensation expense related to these awards of $804 was reversed in 2021 and the awards were forfeited.
On July 17, 2020, the Compensation Committee of the Board of Directors approved PSU awards of 144,300 shares tied to 2020 revenue. These awards were granted in mid-year with certain revenue targets adjusted for the impact of COVID-19. These 2020 awards granted in July reached 110% achievement of revenue targets.
On March 16, 2021, the Compensation Committee of the Board of Directors approved PSU awards of 332,200 shares tied to 2022 revenue, with a payout ranging from 0% to 200% upon achievement of specific revenue goals. In the fourth quarter of 2021, it was determined that the performance metrics tied to 2022 revenue were no longer probable; therefore, stock compensation expense related to these awards of $1,831 was reversed in 2021.
At December 31, 2021, the total future stock compensation expense related to non-vested performance awards is expected to be $484 for those awards issued on December 18, 2017 and July 17, 2020. Future stock compensation expense has not been calculated on those awards for which expensing has not yet begun which include the BLA awards and the awards tied to 2022 revenue.
Employee Stock Purchase Plan
The 2017 ESPP allows eligible employees to acquire shares of the Company's common stock through payroll deductions at a discount to market price (currently15.00%) of the lesser of the closing price of the Company’s common stock on the first day or last day of the offering period. The offering period is currently 6 months and the offering prices are subject to change. Participants may not purchase more than $25 of the Company’s common stock in a calendar year. Stock-based compensation expense related to the 2017 ESPP, included in total stock-based compensation expense, was $401, $493 and $744 for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, there were 600,000 shares of the Company's common stock authorized for issuance under the 2017 ESPP and 223,678 shares remain available for issuance.
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