Note 11 - Equity Incentive Plan

3 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

11. Equity Incentive Plan

Equity Incentive Plan

The Anika Therapeutics, Inc. 2017 Omnibus Incentive Plan (the “2017 Plan”) was approved by the Company’s stockholders on June 13, 2017 and subsequently amended on June 18, 2019, June 16, 2020, June 16, 2021 and June 8, 2022. On June 8, 2022, the Company’s stockholders approved an amendment to the 2017 Plan increasing the number of shares by 250,000 shares from 4.6 million shares to 4.85 million shares. The 2017 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted stock awards, performance restricted stock units (“PSUs”), restricted stock units (“RSUs”), total shareholder return options (“TSRs”) and performance options that may be settled in cash, stock, or other property. In accordance with the 2017 Plan approved by the Company’s stockholders, including the amendments thereto, each share award other than stock options or SARs will reduce the number of total shares available for grant by two shares. Subject to adjustment for specified types of changes in the Company’s capitalization, no more than 4.85 million shares of common stock may be issued under the 2017 Plan. There were 0.4 million shares available for future grant at March 31, 2023 under the 2017 Plan.

The Anika Therapeutics, Inc. 2021 Inducement Plan (the “Inducement Plan”) was adopted by the Company’s board of directors on November 4, 2021. The Inducement Plan reserves 125,000 shares of common stock for issuance pursuant to equity-based awards granted under the Inducement Plan. Such awards may be granted only to an individual who was not previously the Company’s employee or director with the Company. The Inducement Plan provides for the grant of awards under terms substantially similar to the 2017 Plan (as amended). There were 4,883 shares available for future grant at March 31, 2023 under the Inducement Plan.

The Company may satisfy the awards upon exercise, or upon fulfillment of the vesting requirements for other equity-based awards, with either newly issued shares or shares reacquired by the Company. Stock-based awards are granted with an exercise price equal to or greater than the market price of the Company’s stock on the date of grant. Awards contain service conditions or service and performance conditions, and they generally become exercisable ratably over three years with a maximum contractual term of ten years.

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 (in thousands):

	Three Months Ended March 31,
	2023		2022
Cost of revenue	$	184	$	176
Research and development		517		367
Selling, general and administrative		3,016		2,002
Total stock-based compensation expense	$	3,717	$	2,545

Stock Options

Stock options are granted to purchase common shares at prices that are equal to the fair market value of the shares on the date the options are granted or, in the case of premium options, are granted with an exercise price at 110% of the market price of the Company’s common stock on the date of grant. Options generally vest in equal annual installments over a period of three years and expire 10 years after the date of grant. The grant-date fair value of options is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period.

The following summarizes the activity under the Company’s stock option plans:

						Weighted
						Average
				Weighted		Remaining		Aggregate
				Average		Contractual		Intrinsic
	Number of			Exercise		Term		Value
	Options			Price		(in years)		(in thousands)
Outstanding as of December 31, 2022		1,530,703		$	34.93
Granted		339,145		$	29.68
Exercised		(637	)	$	10.87			$	13
Forfeited and canceled		(11,212	)	$	39.77
Outstanding as of March 31, 2023		1,857,999		$	33.95		8.2	$	632
Vested, March 31, 2023		915,798		$	37.08		7.4	$	82
Vested or expected to vest, March 31, 2023		1,857,999		$	33.95		8.2	$	632

The aggregate intrinsic value of options exercised for the three-month period ended March 31, 2023 was immaterial. The Company granted 339,145 stock options during the three-month ended March 31, 2023.

The Company uses the Black-Scholes pricing model to determine the fair value of options granted. The calculation of the fair value of stock options is affected by the stock price on the grant date, the expected volatility of the Company’s common stock over the expected term of the award, the expected life of the award, the risk-free interest rate and the dividend yield.

The assumptions used in the Black-Scholes pricing model for options granted during the three months ended March 31, 2023 and 2022, along with the weighted-average grant-date fair values, were as follows:

		Three Months Ended
		March 31,
	2023									2022
Risk free interest rate		3.5	%		-			4.3	%		1.3	%		-		1.9	%
Expected volatility		48.7	%		-			49.4	%		53.8	%		-		54.6	%
Expected life (years)					4.5									4.5
Expected dividend yield					0.0	%								0.0	%
Fair value per option				$	11.71		$						$	11.37

As of March 31, 2023, there was $9.9 million of unrecognized compensation cost related to unvested stock options. This expense is expected to be recognized over a weighted average period of 2.1 years.

Restricted Stock Units

RSUs generally vest in equal annual installments over a three-year period. The grant-date fair value of RSUs is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The Company determines the fair value of RSUs based on the closing price of its common stock on the date of grant.

RSU activity for the three-month period ended March 31, 2023 was as follows:

				Weighted
	Number of			Average
	Shares			Fair Value
Outstanding as of December 31, 2022		675,405		$	28.40
Granted		368,169		$	26.91
Vested		(177,611	)	$	28.98
Forfeited and cancelled		(15,010	)	$	27.34
Outstanding as of March 31, 2023		850,953		$	27.65

The weighted-average grant-date fair value per share of RSUs granted was $26.91 and $25.75 for the three-month periods ended March 31, 2023 and 2022, respectively. The total fair value of RSUs vested was $5.7 million and $3.3 million for the three-month periods ended March 31, 2023 and 2022, respectively.

As of March 31, 2023, there was $19.4 million of unrecognized compensation cost related to time-based RSUs, which was expected to be recognized over a weighted-average period of 2.3 years.

Performance Stock Units

PSU activity for the three-month ended March 31, 2023 was as follows:

	Number of Shares			Weighted Average Fair Value
Outstanding as of December 31, 2022		117,897		$	34.98
Forfeited and cancelled		(117,897	)	$	34.98
Outstanding as of March 31, 2023		-		$	-

The total fair value of PSUs vested was $0 and $0.6 million for the three-month period ended March 31, 2023 and 2022. As of March 31, 2023, there are no outstanding PSUs.