12.	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”) is 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,

compensation cost is recognized, and any previously recognized compensation cost is reversed.

The fair value of each stock option award during the

three

-month periods ended

March 31, 2020

and

2019

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

	Three Months Ended March 31,
	2020			2019
Risk free interest rate	0.35%	-	1.59%	2.44%	-	2.54%
Expected volatility	46.48%	-	49.39%	44.34%	-	44.41%
Expected life (years)		4.0			3.5
Expected dividend yield		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:

	Three Months Ended March 31,
	2020			2019
Cost of product revenue	$	146		$	92
Research & development		196			177
Selling, general & administrative		(549	)		1,117
Total stock-based compensation expense	$	(207	)	$	1,386

January 29, 2020,

the Company announced the unexpected death of its former President and Chief Executive Officer, Joseph Darling. According to the terms of Mr. Darling’s equity award grants and the Anika Therapeutics, Inc.

2017

Omnibus Incentive Plan (the

“2017

Plan”), the unvested portion of his stock-based compensation was forfeited upon his death, resulting in a

one

-time benefit of

$1.8

million that was fully recognized during the

three

-month period ended

March 31, 2020

within selling, general & administrative expenses.

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

three

-month periods ended

March 31, 2020

and

2019:

	Three Months Ended March 31,
	2020		2019
Grants:
Stock options		210,775		104,292
RSUs		100,631		165,507
PSUs		57,400		114,500
Exercises:
Stock options		-		500
Forfeitures:
Stock options		33,478		909
RSAs		8,574		3,333
RSUs		63,683		250
PSUs		63,000		-
Expirations:
Stock options		363		16,007

During the

three

-month period ended

March 31, 2020,

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

40%

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

2020

2022

fiscal years, while the financial targets, amounting to

60%

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

2020

2022

fiscal years. The Company recorded (

$0.5

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

three

-month period ended

March 31, 2020.