Note 11 - Equity Incentive Plan

9 Months Ended

Sep. 30, 2024

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, June 8, 2022 and June 14, 2023. On June 14, 2023, the Company’s stockholders approved an amendment to the 2017 Plan increasing the number of shares by 435,000 shares from 4,850,000 shares to 5,285,000 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 4.6 million shares of common stock may be issued under the 2017 Plan. There were 0.7 million shares available for future grant at September 30, 2024 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 and subsequently amended on December 22, 2023 and May 2, 2024. On May 2, 2024, the Company’s board of directors approved an amendment to the Inducement Plan increasing the number of shares by 100,000 shares. The Inducement Plan reserves 350,000 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 0.1 million shares available for future grant at September 30, 2024 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:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Cost of revenue	$	92	$	181	$	391	$	532
Research & development		485		304		1,587		1,474
Selling, general & administrative		2,817		3,076		8,897		9,422
Total stock-based compensation expense	$	3,394	$	3,561	$	10,875	$	11,428

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, 2023		1,812,729		$	33.42			$	127
Granted		541,100		$	28.13
Exercised		(3,556	)	$	21.96			$	14
Forfeited and canceled		(127,008	)	$	37.50			$	30
Outstanding as of September 30, 2024		2,223,265		$	31.92		7.5	$	248
Vested, September 30, 2024		1,276,640		$	34.57		6.5	$	102
Vested or expected to vest, September 30, 2024		2,223,265		$	31.92		7.5	$	248

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 nine months September 30, 2024 and 2023, along with the weighted-average grant-date fair values, were as follows:

	Nine Months Ended
	September 30,
	2024			2023
Risk free interest rate		3.6% - 4.6	%		3.5% - 4.4	%
Expected volatility		44.5% - 48.2	%		48.2% - 49.4	%
Expected life (years)		4.5			4.5
Expected dividend yield		0.0	%		0.0	%
Fair value per option	$	10.53		$	11.46

As of September 30, 2024, there was $7.4 million of unrecognized compensation cost related to unvested stock options. This expense is expected to be recognized over a weighted average period of 2.0 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 nine-month period ended September 30, 2024 was as follows:

				Weighted
	Number of			Average
	Shares			Fair Value
Outstanding as of December 31, 2023		771,358		$	27.19
Granted		491,541		$	26.62
Vested		(308,634	)	$	27.73
Forfeited and cancelled		(74,874	)	$	26.43
Outstanding as of September 30, 2024		879,391		$	26.74

The weighted-average grant-date fair value per share of RSUs granted was $26.62 and $26.66 for the nine-month periods ended September 30, 2024 and 2023, respectively. The total fair value of RSUs vested was $9.6 million and $6.8 million for the nine-month periods ended September 30, 2024 and 2023, respectively. As of September 30, 2024, there was $7.1 million of unrecognized compensation cost related to time-based RSUs that are expected to settle in shares, which was expected to be recognized over a weighted-average period of 1.3 years.

The Company’s annual grant of RSU awards in March 2024 can be settled at vesting in cash or shares at the Company’s election. The Company has recorded these RSUs as a liability due to the expectation that the Company will settle the vesting of the March 2024 RSU awards in cash due to a potential shortage of shares in the 2017 Plan at the time of vesting. As a result, these RSUs will be subject to change in value at the time of each reporting period. As of September 30, 2024, the Company had 381,029 shares outstanding in which a liability of $1.6 million was recorded in Accrued Expenses and Other Liabilities. There was $7.7 million of unrecognized compensation cost for these RSUs recorded as a liability which was expected to vest over a weighted-average period of 2.4 years.