Note 6 - Equity Incentive Plan

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Share-based Payment Arrangement [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. Fair value of performance restricted stock units (“PSUs”) is measured by the grant-date price of the Company’s shares with corresponding compensation cost recognized over the requisite service period. Compensation cost is recognized 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 compensation cost 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. 

The fair value of each stock option award during the

six

-month periods ended

June 30, 2019

and

2018

was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Six Months Ended June 30,
	2019			2018
Risk free interest rate	2.18%	-	2.54%	2.15%	-	2.75%
Expected volatility	44.05%	-	44.72%	37.12%	-	40.81%
Expected life (years)		3.5		4.0	-	4.5
Expected dividend yield		0.00%			0.00%

The Company recorded

$1.4

million and

$1.3

million of stock-based compensation expense for the

three

-month periods ended

June 30, 2019

and

2018,

respectively. The Company recorded

$2.8

million and

$8.9

million of stock-based compensation expense for the

six

-month periods ended

June 30, 2019

and

2018,

respectively. Upon the retirement of the Company’s former Chief Executive Officer on

March 9, 2018,

all of his outstanding stock-based compensation awards vested in full and became exercisable in accordance with their terms, resulting in a

one

-time expense of

$6.2

million that was fully recognized during the

three

-month period ended

March 31, 2018.

The Company presents the expenses related to stock-based compensation awards in the same expense line items as cash compensation paid to each of its employees as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018
Cost of product revenue	$	82	$	(28	)	$	174	$	(244	)
Research & development		91		241			268		451
Selling, general & administrative		1,270		1,109			2,387		8,680
Total stock-based compensation expense	$	1,443	$	1,322		$	2,829	$	8,887

On

June 18, 2019,

the Company’s stockholders approved an amendment to the Anika Therapeutics, Inc.

2017

Omnibus Incentive Plan (the

“2017

Plan”). The amendment increased the number of shares of common stock reserved under the

2017

Plan by

1,500,000

from

1,200,000

to

2,700,000.

Additionally, the amendment provided greater clarity with respect to the sections governing minimum vesting and tax withholding to facilitate plan administration.

No

other provisions of the

2017

Plan were amended.

The following table sets forth share information for stock-based compensation awards granted and exercised during the

three

and

six

-month periods ended

June 30, 2019

and

2018:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Grants:
Stock Options		27,325		17,500		131,617		209,800
RSAs		-		-		-		64,578
RSUs		8,000		-		173,507		8,130
PSUs		-		-		114,500		-
Exercises:
Stock Options		22,400		273,123		22,900		284,548
SARs		-		-		-		-

 During the

three

- and

six

-month periods ended

June 30, 2019,

the Company granted stock-based compensation awards in the form of stock options, PSUs and RSUs to employees and RSUs to non-employee directors, the majority of which become exercisable or vest ratably over a

three

-year period. The PSUs granted to employees contained performance conditions with business and financial targets. The business target, amounting to

30%

of the total performance conditions, will be measured based on achievement in the

2019

fiscal year, while the financial targets, amounting to

70%

of the total performance conditions, will ultimately be measured with respect to the Company’s operating results in the

2021

fiscal year. The Company recorded

$0.3

million and

$0.4

million of stock-based compensation expense associated with PSUs for the

three

- and

six

-month periods ended

June 30, 2019,

respectively.