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Note 13 - Equity Incentive Plan | 12 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
Share-based Payment Arrangement [Text Block] | 13. 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 provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), performance restricted stock units (“PSUs”), restricted stock units (“RSUs”), 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, each share award other than stock options or SAR’s will reduce the number of total shares available for grant by 2.0 shares. Subject to adjustment for specified types of changes in the Company’s capitalization, no more than 1.2 million shares of common stock may be issued under the 2017 Plan. 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. There are 1.7 million shares available for future grant at December 31, 2019. The 2017 Plan replaced the Anika Therapeutics, Inc. Stock Option and Incentive Plan, as amended, (the “2003 Plan”), as the plan under which future grants to employees, directors, officers, and consultants will be made. The terms of the 2003 Plan provide for grants of nonqualified and incentive stock options, common stock, RSAs, RSUs, and SARs to employees, directors, officers, and consultants. The 2003 Plan was approved by the Company’s stockholders on June 4, 2003 and subsequently amended by the Board of Directors on May 29, 2009 and by the Company’s stockholders on June 7, 2011 and June 18, 2013 to increase the number of shares reserved for issuance. Pursuant to the 2011 amendment, each share award issued after June 7, 2011, other than stock options or SARs, reduced the number of total shares available for grant by 1.9 shares. Pursuant to the 2013 amendment, each share award issued after June 18, 2013, other than stock options or SARs, reduced the number of total shares available for grant by 1.5 shares. 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 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 one to four years with a maximum contractual term of ten years. The following table sets forth share information for stock-based compensation awards granted and exercised during the periods ended December 31, 2019 and 2018:
|  | December 31,
|  | 2019 |  | 2018
Grants: |  |  |  |
Stock options |  |  | 254,517 |  |  |  | 199,970 |
RSAs |  |  | - |  |  |  | 64,578 |
RSUs |  |  | 189,507 |  |  |  | 15,457 |
PSUs |  |  | 123,500 |  |  |  | - |
Exercises: |  |  |  |  |  |  |  |
Stock options |  |  | 518,991 |  |  |  | 284,548 |
SARs |  |  | 35,250 |  |  |  | - |
Stock Options The combined stock options and SARs activity for the year ended December 31, 2019 is as follows:
|  | 2019
|  |  |  | Weighted
|  |  |  | Average
|  |  |  | Exercise
|  | Number of |  | Price Per
|  | Shares |  | Share
Options and SARs outstanding at beginning of year |  |  | 1,136,914 |  |  | $ | 42.06 |
Granted |  |  | 254,517 |  |  | $ | 41.92 |
Cancelled |  |  | (97,575 | ) |  | $ | 48.40 |
Expired |  |  | (48,647 | ) |  | $ | 51.18 |
Exercised |  |  | (554,241 | ) |  | $ | 40.37 |
Options and SARs outstanding at end of year |  |  | 690,968 |  |  | $ | 41.65 |
All the 690,968 stock options outstanding at December 31, 2019 are vested or are expected to vest, with a weighted-average exercise price of $41.65 and as an aggregate intrinsic value of $8.6 million. The weighted average remaining contractual term of the vested and expected to vest stock options is 5.0 years as of December 31, 2019. As of December 31, 2019, total unrecognized compensation costs related to non-vested stock options was approximately $4.7 million and is expected to be recognized over a weighted average period of 2.3 years. The options exercisable at December 31, 2019 are as follows:
|  | Number Outstanding |  | Weighted Avg Exercise Price |  | Weighted Average Remaining Term (in years)
Incentive stock options |  |  | 115,871 |  |  | $ | 22.90 |  |  |  | 3.7 |
Non-qualified stock options |  |  | 158,601 |  |  | $ | 38.82 |  |  |  | 5.8 |
Performance awards |  |  | 23,269 |  |  | $ | 46.51 |  |  |  | 6.6 |
The total intrinsic value of stock options and SARs exercised was $8.5 million, $8.5 million and $0.5 million for the years ended December 31, 2019, 2018 and 2017, respectively. The 35,250 SARs exercised in 2019 resulted in the issuance of 31,541 shares of common stock. There are no remaining SARs outstanding as of December 31, 2019. The total grant-date fair value of stock options and SARs vested during the years ended December 31, 2019, 2018 and 2017 was approximately $2.7 million, $6.7 million and $2.1 million, respectively. Restricted Stock The RSA, RSU and PSU activity for the year ended December 31, 2019 is as follows:
|  | 2019
|  |  |  | Weighted
|  |  |  | Average
|  | Number of |  | Grant Date
|  | Shares |  | Fair Value
Unvested at Beginning of year |  |  | 59,083 |  |  | $ | 47.26 |
Granted |  |  | 313,007 |  |  | $ | 33.64 |
Cancelled |  |  | (49,258 | ) |  | $ | 34.65 |
Vested/Released |  |  | (33,734 | ) |  | $ | 48.39 |
Unvested at end of year |  |  | 289,098 |  |  | $ | 34.53 |
The total fair value of RSAs, RSUs, and PSUs vested during the years ended December 31, 2019, 2018 and 2017 was $1.4 million, $6.8 million and $2.3 million, respectively. The weighted-average grant-date fair value of PSUs, RSAs and RSUs granted during the years ended December 31, 2019, 2018 and 2017 was $33.64, $58.84 and $52.03, respectively. Stock Compensation Expense The Company estimates the fair value of stock options and SARs using the Black-Scholes valuation model. Fair value of restricted stock is measured by the grant-date price of the Company’s shares. The PSUs granted to employees contained performance conditions with business and financial targets. The business target, amounting to 30% of the total performance condition awards, was measured and achieved in the 2019 fiscal year, while the financial targets, amounting to 70% of the total performance condition awards, will ultimately vest depending on the financial operating results in with respect to the Company’s operating results in the 2021 fiscal year. The Company recorded $1.2 million, $0.7 million, and $0.8 million related to performance-based units and options in the years ending 2019, 2018, and 2017, respectively. Key input assumptions used to estimate the fair value of stock options and SARs include the exercise price of the award, the expected award term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate over the award’s expected term, and the Company’s expected annual dividend yield. The expected volatility assumption is evaluated against the historical volatility of the Company’s common stock over a 3.5 year average, and it is adjusted if there are material changes in historical volatility. The risk-free interest rate assumption is based on U.S. Treasury interest rates at the time of grant. The weighted-average grant-date fair value per share of stock options granted in 2019, 2018 and 2017 was $14.73, $20.01 and $16.87, respectively. The fair value of each stock option during 2019, 2018, and 2017 was estimated on the grant-date using the Black-Scholes option-pricing model with the following assumptions:
|  | 2019 |  | 2018 |  | 2017
Risk free interest rate |  | 1.41% | - | 2.54% |  | 2.15% | - | 2.82% |  | 1.60% | - | 1.86%
Expected volatility |  | 44.27% | - | 48.52% |  | 37.12% | - | 45.61% |  | 38.74% | - | 44.31%
Expected life (years) |  |  | 3.5 |  |  | 4.0 | - | 4.5 |  |  | 4.0 |
Expected dividend yield |  |  | 0.00% |  |  |  | 0.00% |  |  |  | 0.00% |
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:
|  | 2019 |  | 2018 |  | 2017
Cost of product revenue |  | $ | 412 |  |  | $ | (160 | ) |  | $ | 439 |
Research & development |  |  | 424 |  |  |  | 851 |  |  |  | 564 |
Selling, general & administrative |  |  | 5,251 |  |  |  | 10,355 |  |  |  | 4,804 |
Total stock-based compensation expense |  | $ | 6,087 |  |  | $ | 11,046 |  |  | $ | 5,807 |
Tax benefits of $0.1 million, $1.5 million and $0.4 million, respectively, are associated with the annual stock compensation expense above. The decrease in stock-based compensation expense within the cost of product revenue line item for the year ended December 31, 2018 is due to forfeitures associated with unvested stock option awards from the resignation of a former executive. Upon the retirement of the Company’s former Chief Executive Officer , Charles H. Sherwood, Ph.D., 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.

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