anik20230509

anik20230509_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-14027

Anika Therapeutics, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	04-3145961
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

32 Wiggins Avenue, Bedford, Massachusetts 01730

(Address of Principal Executive Offices) (Zip Code)

(781) 457-9000

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	ANIK	NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒	Non-accelerated filer ☐	Smaller reporting	Emerging growth
			company ☐	company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of April 30, 2023, there were 14,757,151 outstanding shares of Common Stock, par value $0.01 per share.

ANIKA THERAPEUTICS, INC.

TABLE OF CONTENTS

		Page
Part I	Financial Information	3
Item 1.	Condensed Consolidated Financial Statements (unaudited):	3
	Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022	3
	Condensed Consolidated Statement of Operations and Comprehensive Income for the three months ended March 31, 2023 and 2022	4
	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
Part II	Other Information	25
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 6.	Exhibits	27
Signatures		28

References in this Quarterly Report on Form 10-Q to “we,” “us,” “our,” “our company,” and other similar references refer to Anika Therapeutics, Inc. and its subsidiaries unless the context otherwise indicates.

ANIKA, ANIKA THERAPEUTICS, ANIKAVISC, ARTHROSURFACE, CINGAL, HYAFF, HYVISC, MONOVISC, ORTHOVISC, OVOMOTION, PARCUS MEDICAL, REVOMOTION, TACTOSET, WRISTMOTION and XTWIST are our registered trademarks that appear in this Quarterly Report on Form 10-Q. For convenience, these trademarks appear in this Quarterly Report on Form 10-Q without ® and ™ symbols, but that practice does not mean that we will not assert, to the fullest extent under applicable law, our rights to the trademarks. This Quarterly Report on Form 10-Q also contains trademarks and trade names that are the property of other companies and licensed to us.

PART I:	FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS

Anika Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

	March 31,			December 31,
ASSETS	2023			2022
Current assets:
Cash and cash equivalents	$	79,737		$	86,327
Accounts receivable, net		30,629			34,627
Inventories, net		41,319			39,765
Prepaid expenses and other current assets		8,646			8,828
Total current assets		160,331			169,547
Property and equipment, net		48,803			48,279
Right-of-use assets		30,175			30,696
Other long-term assets		18,131			17,219
Deferred tax assets		1,519			1,449
Intangible assets, net		72,653			74,599
Goodwill		7,462			7,339
Total assets	$	339,074		$	349,128

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	8,948		$	9,074
Accrued expenses and other current liabilities		19,745			18,840
Total current liabilities		28,693			27,914
Other long-term liabilities		399			398
Deferred tax liability		4,114			6,436
Lease liabilities		28,280			28,817
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.01 par value; 1,250 shares authorized, no shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		-			-
Common stock, $0.01 par value; 90,000 shares authorized, 14,741 and 14,625 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		147			146
Additional paid-in-capital		83,243			81,141
Accumulated other comprehensive loss		(6,171	)		(6,443	)
Retained earnings		200,369			210,719
Total stockholders’ equity		277,588			285,563
Total liabilities and stockholders’ equity	$	339,074		$	349,128

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Anika Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share data)

(unaudited)

	Three Months Ended March 31,
	2023			2022
Revenue	$	37,924		$	36,693
Cost of revenue		15,081			14,889
Gross Profit		22,843			21,804

Operating expenses:
Research and development		8,400			6,157
Selling, general and administrative		26,996			19,201
Total operating expenses		35,396			25,358
Loss from operations		(12,553	)		(3,554	)
Interest and other income (expense), net		539			(154	)
Loss before income taxes		(12,014	)		(3,708	)
Benefit from income taxes		(1,664	)		(775	)
Net loss	$	(10,350	)	$	(2,933	)

Net (loss) per share:
Basic	$	(0.71	)	$	(0.20	)
Diluted	$	(0.71	)	$	(0.20	)

Weighted average common shares outstanding:
Basic		14,653			14,466
Diluted		14,653			14,466

Net loss	$	(10,350	)	$	(2,933	)
Foreign currency translation adjustment		272			(81	)
Comprehensive loss	$	(10,078	)	$	(3,014	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Anika Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except per share data)

(unaudited)

		Three Months Ended March 31, 2023
		Common Stock											Accumulated
							Additional						Other			Total
	*Number of*			*$.01 Par*			*Paid*			*Retained*			*Comprehensive*			*Stockholders'*
	*Shares*			*Value*			*in Capital*			*Earnings*			*Loss*			*Equity*
Balance, January 1, 2023		14,625		$	146		$	81,141		$	210,719		$	(6,443	)	$	285,563
Issuance of common stock for equity awards		1			-			7			-			-			7
Vesting of restricted stock units		177			2			(2	)		-			-			-
Stock-based compensation expense		-			-			3,717			-			-			3,717
Retirement of common stock for minimum tax withholdings		(62	)		(1	)		(1,620	)		-			-			(1,621	)
Net loss		-			-			-			(10,350	)		-			(10,350	)
Other comprehensive loss		-			-			-			-			272			272
Balance, March 31, 2023		14,741		$	147		$	83,243		$	200,369		$	(6,171	)	$	277,588

		Three Months Ended March 31, 2022
		Common Stock										Accumulated
						Additional						Other			Total
	*Number of*			*$.01 Par*		*Paid*			*Retained*			*Comprehensive*			*Stockholders'*
	*Shares*			*Value*		*in Capital*			*Earnings*			*Loss*			*Equity*
Balance, January 1, 2022		14,441		$	144	$	67,081		$	225,578		$	(5,718	)	$	287,085
Issuance of common stock for equity awards		1			-		15			-			-			15
Vesting of restricted stock units		106			1		(1	)		-			-			-
Stock-based compensation expense		-			-		2,545			-			-			2,545
Retirement of common stock for minimum tax withholdings		(30	)		-		(844	)		-			-			(844	)
Net loss		-			-		-			(2,933	)		-			(2,933	)
Other comprehensive loss		-			-		-			-			(81	)		(81	)
Balance, March 31, 2022		14,518		$	145	$	68,796		$	222,645		$	(5,799	)	$	285,787

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Anika Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(10,350	)	$	(2,933	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		1,605			1,671
Amortization of acquisition related intangible assets		1,946			1,946
Non-cash operating lease cost		542			403
Stock-based compensation expense		3,717			2,545
Deferred income taxes		(2,373	)		(273	)
Provision for credit losses		24			5
Provision for inventory		629			586
Changes in operating assets and liabilities:
Accounts receivable		4,057			383
Inventories		(3,063	)		(602	)
Prepaid expenses, other current and long-term assets		(462	)		(1,189	)
Accounts payable		(713	)		(473	)
Operating lease liabilities		(523	)		(387	)
Accrued expenses, other current and long-term liabilities		665			(2,929	)
Income taxes		681			(622	)
Net cash used in operating activities		(3,618	)		(1,869	)

Cash flows from investing activities:
Purchases of property and equipment		(1,389	)		(1,326	)
Net cash used in investing activities		(1,389	)		(1,326	)

Cash flows from financing activities:
Cash paid for tax withheld on vested restricted stock awards		(1,620	)		(846	)
Proceeds from exercises of equity awards		7			15
Payments made on finance leases		-			(31	)
Net cash used in financing activities		(1,613	)		(862	)

Exchange rate impact on cash		30			(4	)

Decrease in cash and cash equivalents		(6,590	)		(4,061	)
Cash and cash equivalents at beginning of period		86,327			94,386
Cash and cash equivalents at end of period	$	79,737		$	90,325
Supplemental disclosure of cash flow information:
Non-cash investing activities:
Purchases of property and equipment included in accounts payable and accrued expenses	$	729		$	728

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Anika Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(amounts in thousands, except share and per share amounts or as otherwise noted)

(unaudited)

1.	Nature of Business

Anika Therapeutics, Inc. (the “Company”) is a global joint preservation company that creates and delivers meaningful advancements in early intervention orthopedic care, including in the areas of osteoarthritis (“OA”) pain management, regenerative solutions, sports medicine and Arthrosurface joint solutions.

In early 2020, the Company expanded its overall technology platform through its strategic acquisitions of Parcus Medical, LLC (“Parcus Medical”), a sports medicine implant and instrumentation solutions provider focused on sports medicine and soft tissue repair, and Arthrosurface, Inc. (“Arthrosurface”), a company specializing in less invasive, bone preserving partial and total joint replacement solutions. These acquisitions broadened the Company's product portfolio, developed over its 30 years of expertise in hyaluronic acid technology, into joint preservation and restoration space with higher market potential, added new revenue streams, increased and accelerated its commercial capabilities, diversified its revenue base, and expanded its product pipeline and research and development expertise.

The Company is subject to risks common to companies in the life sciences industry including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, commercialization of existing and new products, and compliance with U.S. Food and Drug Administration (“FDA”) and foreign regulations and approval requirements, as well as the ability to grow the Company’s business through appropriate commercial strategies.

2.	Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The financial statements include the accounts of Anika Therapeutics, Inc. and its subsidiaries. Inter-company transactions and balances have been eliminated. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been or omitted pursuant to SEC rules and regulations relating to interim financial statements. The December 31, 2022 balances reported herein were derived from the audited consolidated financial statements. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to fairly state the condensed consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s annual financial statements filed with its Annual Report on Form 10-K for the year ended December 31, 2022. The results of operations for the three-month period ended March 31, 2023 are not indicative of the results to be expected for the year ending December 31, 2023.

Segment Information

Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker as of March 31, 2023 was its President and Chief Executive Officer. Based on the criteria established by Accounting Standards Codification 280, Segment Reporting, the Company has one operating and reportable segment.

3.	Accounts Receivable

The Company estimates an allowance for credit losses with its accounts receivable resulting from the inability of its customers to make required payments, which is included in selling, general and administrative expenses in the accompanying consolidated statements of operations. In determining the adequacy of the allowance, management specifically analyzes individual accounts receivable, historical bad debts, customer concentrations, customer creditworthiness, current and reasonable and supportable forecasts of future economic conditions, accounts receivable aging trends, and changes in the Company’s customer payment terms.

The components of the Company’s accounts receivable are as follows:

	As of		As of
	March 31,		December 31,
	2023		2022
Accounts Receivable	$	32,166	$	36,235
Allowance for credit losses		1,537		1,608
Net balance, end of period		30,629		34,627

A summary of activity in the allowance for credit losses is as follows:

	As of March 31,
	2023			2022
Balance, beginning of the period	$	1,608		$	1,442
Amounts provided		102			33
Amounts recovered		(78	)		(28	)
Amounts written off		(106	)		(79	)
Translation adjustments		11			(18	)
Balance, end of period	$	1,537		$	1,350

4.	Fair Value Measurements

The Company has certain cash equivalents in money market funds that are classified within Level 1 of the fair value hierarchy and are valued based on quoted prices in active markets. For cash, accounts receivables, accounts payable, and accrued interest, the carrying amounts approximate fair value, because of the short maturity of these instruments, and therefore fair value information is not included in the table below. There were no transfers between fair value levels during the three-month periods ended March 31, 2023 or 2022.

The classification of the Company’s cash equivalents within the fair value hierarchy was as follows:

	March 31,		Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Amortized
	2023		(Level 1)		(Level 2)		(Level 3)		Cost
Cash equivalents:
Money Market Funds	$	63,450	$	63,450	$	-	$	-	$	63,450

	December 31,		Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs			Amortized
	2022		(Level 1)		(Level 2)		(Level 3)		Cost
Cash equivalents:
Money Market Funds	$	67,801	$	67,801	$	-	$	-	$	67,801

5.	Inventories

Inventories consist of the following:

	March 31,		December 31,
	2023		2022
Raw materials	$	19,027	$	20,535
Work-in-process		14,974		10,648
Finished goods		24,946		25,306
Total	$	58,947	$	56,489


Inventories	$	41,319	$	39,765
Other long-term assets		17,628		16,724
Total	$	58,947	$	56,489

Inventories are stated net of inventory reserves of approximately $11.3 million and $9.9 million, as of March 31, 2023 and December 31, 2022, respectively.

6.	Intangible Assets

Intangible assets as of March 31, 2023 and December 31, 2022 consisted of the following:

											December 31,
			Three Months Ended March 31, 2023								2022
			*Less:*
			*Accumulated*										*Weighted*
			*Currency*			*Less:*							*Average*
	*Gross*		*Translation*			*Accumulated*			*Net Book*		*Net Book*		*Useful*
	*Value*		*Adjustment*			*Amortization*			*Value*		*Value*		*Life*
Developed technology	$	89,580	$	(1,608	)	$	(25,135	)	$	62,837	$	64,286		15
IPR&D		2,656		(1,006	)		-			1,650		1,650	Indefinite
Customer relationships		9,000		-			(2,852	)		6,148		6,373		10
Distributor relationships		4,700		(415	)		(4,285	)		-		-		5
Patents		1,000		(189	)		(692	)		119		131		16
Tradenames		5,200		-			(3,301	)		1,899		2,159		5
Total	$	112,136	$	(3,218	)	$	(36,265	)	$	72,653	$	74,599		13

The aggregate amortization expense related to intangible assets was $1.9 million for the three-month periods ended March 31, 2023 and 2022.

7.	Goodwill

The Company assesses goodwill for impairment annually, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment.

Changes in the carrying value of goodwill for the three-month ended March 31, 2023 were as follows:

	Three Months Ended March 31,
	2023
Balance, beginning of period	$	7,339
Effect of foreign currency adjustments		123
Balance, ending of period	$	7,462

8.	Accrued Expenses

Accrued expenses consist of the following:

	March 31,		December 31,
	2023		2022
Compensation and related expenses	$	7,715	$	11,303
Professional fees		4,152		3,145
Parcus arbitration settlement		3,250		-
Operating lease liability - current		2,105		2,073
Clinical trial costs		1,059		999
Income taxes payable		889		810
Other		575		510
Total	$	19,745	$	18,840

9.	Commitments and Contingencies

In certain of its contracts, the Company warrants to its customers that the products it manufactures conform to the product specifications as in effect at the time of delivery of the specific product. The Company may also warrant that the products it manufactures do not infringe, violate, or breach any U.S. or international patent or intellectual property right, trade secret, or other proprietary information of any third party. On occasion, the Company contractually indemnifies its customers against any and all losses arising out of, or in any way connected with, any claim or claims of breach of its warranties or any actual or alleged defect in any product caused by the negligent acts or omissions of the Company. The Company maintains a products liability insurance policy that limits its exposure to these risks. Based on the Company’s historical activity, in combination with its liability insurance coverage, the Company believes the estimated fair value of these indemnification agreements is immaterial. The Company had no accrued warranties as of March 31, 2023 or December 31, 2022 and has no history of claims paid.

The Company is also involved from time-to-time in various legal proceedings arising in the normal course of business. Although the outcomes of these legal proceedings are inherently difficult to predict, the Company does not expect the resolution of these occasional legal proceedings to have a material adverse effect on its financial position, results of operations, or cash flow.

On October 21, 2021, the Company received notice that the former unitholders of Parcus Medical had filed an arbitration request regarding the earnout provisions of up to $60 million, of which the Company paid $4.3 million, agreed to in the Parcus Medical Merger Agreement. On April 20, 2023, the Company and the former unitholders of Parcus Medical entered into a settlement agreement to end the arbitration case. The Company recorded a liability of $3.25 million at March 31, 2023 which was paid to the former unitholders of Parcus Medical in April 2023.

10.

Revenue and Geographic Information

Revenue by product family is as follows:

	Three Months Ended March 31,
	2023		2022
OA Pain Management	$	22,633	$	20,964
Joint Preservation and Restoration		13,453		12,139
Non-Orthopedic		1,838		3,590
Total	$	37,924	$	36,693

Effective January 1, 2023, the Company beganto report revenue from product sales to veterinary customers within the Non-Orthopedic product family whereas such revenue had been previously reported within the OA Pain Management product family. Revenue from product sales to veterinary customers amounted to $0.5 million and $1.8 million for the three months ended March 31, 2023 and 2022, respectively, and are included within the Non-Orthopedic product family for all periods presented. Accordingly, revenue from product sales to veterinary customers in the prior period have been reclassified to conform to the current period presentation.

Revenue from the Company’s sole significant customer, DePuy Synthes Mitek Sports Medicine, part of the Johnson & Johnson Medical Companies, as a percentage of the Company’s total revenue was 43% and 39% for the three months ended March 31, 2023 and 2022, respectively.

Total revenue by geographic location based on the location of the customer in total and as a percentage of total revenue were as follows:

		Three Months Ended March 31,
	2023					2022
			*Percentage of*					*Percentage of*
	*Revenue*		*Revenue*			*Revenue*		*Revenue*
Geographic Location:
United States	$	27,288		72	%	$	26,773		73	%
Europe		5,662		15	%		5,796		16	%
Other		4,974		13	%		4,124		11	%
Total	$	37,924		100	%	$	36,693		100	%

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

SEC Form 10-Q filed by Anika Therapeutics Inc.