Note 6 - Equity Incentive Plan

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

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

6. Equity Incentive Plan

The Company estimates the fair value of stock options and stock appreciation rights (“SARs”) using the Black-Scholes valuation model. Fair value of restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) are measured by the grant-date price of the Company’s shares. The fair value of each stock option award during the three- and nine-month periods ended September 30, 2016 and 2015, respectively, was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Nine Months Ended September 30,
	2016			2015
Risk free interest rate	0.94%	-	1.40%	1.15%	-	1.46%
Expected volatility	48.84%	-	51.61%	53.15%	-	54.65%
Expected life (years)		4.5			4.5
Expected dividend yield		0.00%			0.00%

The Company recorded $0.8 million and $0.5 million of share-based compensation expense for the three-month periods ended September 30, 2016 and 2015, respectively, for equity compensation awards. The Company recorded $2.3 million and $1.6 million of share-based compensation expense for the nine-month periods ended September 30, 2016 and 2015, respectively, for equity compensation awards. The Company presents the expenses related to stock-based compensation awards in the same expense line items as cash compensation paid to the respective recipients.

During the three-month period ended September 30, 2016, the Company granted under the Anika Therapeutics Second Amended and Restated 2003 Stock Option and Incentive Plan (the “Plan”) a total of 60,300 shares of stock options. During the nine-month period ended September 30, 2016, the Company granted under the Plan a total of 392,005 shares of stock options including 46,300 RSAs and 11,805 RSUs. All of the RSUs were granted to directors of the Company and vest over a one-year period. The stock options and RSAs granted to employees generally become exercisable or vest ratably over a four-year period.

A portion of the stock options granted during the nine-month period ended September 30, 2016 contained certain performance features, as compared to established targets, in addition to time-based vesting conditions. For performance-based awards with financial achievement targets, the Company recognizes expense using the graded vesting methodology based on the number of shares expected to vest. Compensation cost associated with performance grants is estimated using the Black-Scholes valuation method multiplied by the expected number of shares to be issued, which is adjusted based on the estimated probabilities of achieving the performance goals. Changes to the probability assessment and the estimated shares expected to vest will result in adjustments to the related share-based compensation expense that will be recorded in the period of the change. If the performance targets are not achieved, no compensation cost is recognized and any previously recognized compensation cost is reversed.