<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

  X  ANNUAL REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF
---- 1934

For Fiscal year ended       December 31, 1997
                      ----------------------------

     TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT
---- OF 1943

For the transition period from _____________  to _______________

Commission File Number          000-21326
                      ---------------------------------------------------

                            Anika Therapeutics, Inc.
--------------------------------------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

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

236 West Cummings Park, Woburn, Massachusetts                01801
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                (Zip Code)

Issuer's Telephone Number, Including Area Code (781) 932-6616
                                               --------------
Securities registered under Section 12 (b) of the Exchange Act:
      None
Securities registered under Section 12 (g) of the Exchange Act:
      Common Stock, par value $.01 per share

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 and 15 (d) of the Exchange Act during the past 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 last 90 days.
      Yes   X      No
          ------      ------

      Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB{ }

      Anika's revenues for year ended December 31, 1997 were $11,955,338.

      The aggregate market value of voting stock held by non-affiliates of
the Registrant as of March 12, 1998 was $79,282,071 based on the last sale
price of Common Stock of $10.125 as reported by the NASDAQ National Market.
At March 19, 1998 there were issued and outstanding 9,906,458 shares of
Common Stock, par value $.01 per share.

             DOCUMENTS INCORPORATED BY REFERENCE

      Certain information required in response to Items 9, 10, 11,and 12 of Part
III are hereby incorporated by reference from the Company's Proxy Statement for
the Annual Meeting to be held on June 3, 1998. Such Proxy Statement shall not be
deemed to be "filed" as part of this Report on Form 10-KSB except for the parts
therein which have been specifically incorporated by reference herein.

                                    Page 1 of
                         Exhibit Index begins on page 58
<PAGE>

                                   FORM 10-KSB
                            Anika Therapeutics, Inc.
                     FOR FISCAL YEAR ENDED December 31, 1997

      This Form 10-KSB contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward-looking statements. Certain factors that might
cause such a difference are discussed throughout this Form 10-KSB and are
discussed in the section entitled "Certain Factors Affecting Future Operating
Results" on page 21 of this Form 10-KSB.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

      Anika Therapeutics, Inc. ("Anika" or the "Company") develops,
manufactures and commercializes therapeutic products and devices intended to
promote the protection and healing of bone, cartilage and soft tissue. These
products are based on hyaluronic acid ("HA"), a naturally-occurring,
biocompatible polymer found throughout the body. Due to its unique
biophysical and biochemical properties, HA plays an important role in a
number of physiological functions such as the protection and lubrication of
soft tissues and joints, the maintenance of the structural integrity of
tissues, and the transport of molecules to and within cells. The Company has
been developing HA and HA based products since 1983. The Company's currently
marketed products consist of ORTHOVISC(R), which is an HA product used in the
treatment of some forms of osteoarthritis ("OA") in humans and HYVISC(R),
which is an HA product used in the treatment of equine osteoarthritis.
ORTHOVISC is currently approved for marketing in Canada and Europe; in the
U.S. ORTHOVISC is currently limited to investigational use only. The Company
manufactures AMVISC(R)(1) and AMVISC Plus(R), which are HA products used as
viscoelastic supplements in ophthalmic surgery, for Bausch & Lomb Surgical, a
subsidiary of Bausch & Lomb. The Company is currently developing INCERT(R),
which is an HA based product designed for use in the prevention of
post-surgical adhesions. In addition, the Company is collaborating with
Orquest, Inc. to develop OSSIGEL(TM), an injectable formulation of basic
fibroblast growth factor combined with HA designed to accelerate the healing
of bone fractures.

      AMVISC

      AMVISC is a high molecular weight HA product that is used as a
viscoelastic agent in ophthalmic surgical procedures such as cataract extraction
and intraocular lens implantation. AMVISC coats, lubricates and protects
sensitive tissues and maintains the space between them, thereby facilitating
ophthalmic surgical procedures.


(1)   AMVISC is a registered trademark of Bausch & Lomb Surgical


<PAGE>

      Anika currently manufactures the AMVISC product line for Bausch & Lomb
Surgical under a five year supply agreement with fixed selling prices and stated
minimum annual purchase obligations. This supply contract became effective
January 1, 1997.

      ORTHOVISC

      ORTHOVISC is a high molecular weight injectable HA product for the
treatment of osteoarthritis in humans. Osteoarthritis causes pain, inflammation
and restricted movement in joints.

      Osteoarthritis occurs when the cartilage in a joint gradually deteriorates
due to the effects of mechanical stress which can be caused by a variety of
factors including the normal aging process. In an osteoarthritic joint,
particular regions of articulating surfaces are exposed to irregular forces,
which result in the remodeling of tissue surfaces that disrupt the normal
equilibrium or mechanical function. As osteoarthritis advances, the joint
gradually loses its ability to regenerate cartilage tissue and the cartilage
layer attached to the bone deteriorates to the point where eventually the bone
becomes exposed. Advanced osteoarthritis often requires surgery such as the
implantation of artificial joints.

      The current treatment options for osteoarthritis before joint replacement
surgery include anti-inflammatories, pain medication, and as a last resort,
steroid injections. By supplementing the body's own production of hyaluronic
acid which is secreted by the synovial membrane and is responsible for
lubricating and cushioning within joints, an injection of ORTHOVISC is designed
to relieve pain and improve joint function.

      ORTHOVISC received Communautee European ("CE mark") approval in October
1996. The CE mark, a certification required under European Community ("EC")
medical device regulation, allows ORTHOVISC to be marketed without further
approvals in most of the EC nations as well as countries that recognize EC
device regulation. ORTHOVISC has also been approved for sale in Canada, Turkey
and Israel. Registrations for marketing approval have been filed in Australia,
New Zealand and Egypt.

      In the U.S., ORTHOVISC is limited to investigational use only. The
Company received FDA approval of an investigation device exemption ("IDE") to
conduct a clinical trial in the U.S. for treatment of OA of the knee in 1996.
The Company completed its pivotal clinical trial in August 1997. The trial
was a randomized, double-blind, placebo-controlled study of 226 patients at
10 centers in the United States. Patients in the study received three
injections of ORTHOVISC over a two week period and the patients were then
evaluated for a twenty-six week period. The Company filed a Pre-Market
Approval ("PMA") Application in December 1997 and the PMA was accepted for
filing in February 1998.

<PAGE>

      In November 1997, the Company entered into a long-term distribution
agreement with Zimmer, Inc., a subsidiary of Bristol-Myers Squibb Company ("The
Zimmer Distribution Contract"). The Zimmer Distribution Contract provides Zimmer
with exclusive marketing and distribution rights to ORTHOVISC in the United
States, Canada, Australia, Hong Kong, Indonesia, Malaysia, New Zealand, the
Philippines, Singapore, Taiwan and Thailand. Zimmer also has the option under
the agreement to seek regulatory approval for and market ORTHOVISC in Japan and
has right of first offer in China. Upon signing of the agreement, the Company
received an up-front non-refundable payment of $2.5 million. Zimmer has also
agreed to make payments aggregating up to $20.5 million upon the achievement of
certain regulatory approval and enumerated sales milestones. As an alternative
to a $2.5 million milestone payment, Zimmer has the right to elect to acquire
shares of the Company's Common Stock equal to the greater of $2.5 million or
9.9% of the then outstanding Common Stock (but not to exceed 19.9% of the then
outstanding Common Stock) at a premium to the then current market price. The
Company has also entered into third-party arrangements for the distribution of
ORTHOVISC in Spain, Portugal, Israel, Turkey and Egypt. See "Management
Discussion and Analysis."

      HYVISC

      HYVISC is a high molecular weight injectable HA product for the treatment
of joint dysfunction in horses due to non-infectious synovitis associated with
equine osteoarthritis. HYVISC has viscoelastic properties that lubricate and
protect the tissues in horse joints. HYVISC is distributed for Anika by
Boehringer Ingelheim Animal Health, Inc. for distribution in the United States
under an agreement terminating in 2002. The Company and Boehringer Ingelheim
have entered into an agreement to distribute HYVISC internationally.

PRODUCTS UNDER DEVELOPMENT

      INCERT

      INCERT is a chemically modified, cross-linked form of HA designed to
prevent surgical adhesions. Surgical adhesions occur when fibrous bands of
tissues form between adjacent tissue layers during the wound healing process.
Although surgeons attempt to minimize the formation of adhesions, nevertheless
they occur quite frequently after surgery. Adhesions in the abdominal and
thoracic cavity can cause particularly serious problems such as intestinal
blockage following abdominal surgery and infertility following pelvic surgery.

      INCERT adheres to a wound site and serves as a barrier between adjacent
tissues. Anika co-owns an issued United States patent covering the use of
INCERT for adhesion prevention. The Company has received notification from
the U.S. Patent and Trademark Office ("PTO") that a third party is attempting
to provoke an interference with respect to the Company's patent covering
INCERT. The Company has tested INCERT in animal studies at Duke University,
has performed toxicology studies and has successfully conducted preclinical
tests of INCERT. Anika currently plans to commence human testing of INCERT
during 1999. In addition, Anika is seeking a strategic partner for the

<PAGE>

eventual marketing of INCERT.

      HA Oligosaccharides

      HA oligosaccharides are discrete pieces of the HA polysaccharide chain.
Because many different types of normal cells and cells in disease processes
contain HA receptors on the cell surface that interact with HA oligosaccharides,
the material may have the ability to influence cell behavior.

      One of the critical events in the metastasis of cancer is the interaction
between tumor cells and the host tissue stroma. This interaction is mediated by
certain cell surface receptors. Preclinical studies have indicated that the
interaction between one of the cell surface receptors, the hyaluronan receptor
CD44, and HA contained in the host tissue stroma enhances the growth of certain
tumors. Preclinical studies conducted by the Company, working in collaboration
with Tufts University and Massachusetts General Hospital,have indicated that HA
oligosaccharides, by binding to the CD44 receptor and blocking the interaction
with HA in the host tissue stroma, have inhibited the metastasis of human
melanoma cancer cells inserted in mice. In addition, studies in an in vitro
model have indicated that HA oligosaccharides inhibited the metastasis of human
ovarian cancer cells.

      The Company has obtained an exclusive worldwide license to this technology
from Tufts University. During 1998 the Company plans to continue the preclinical
testing of HA oligosaccharides and will seek a strategic partner to assist in
the further development of this technology. There is no assurance that the
Company will be able to find a strategic partner to assist in the future
development of this technology.

      Drug Delivery

      In June of 1997, the Company executed a multi-year collaboration
agreement with Orquest to develop and manufacture OSSIGEL, a formulation of
basic fibroblast growth factor and HA designed to accelerate the healing of
bone fractures. Orquest is a privately held orthobiologics company
headquartered in Mountain View, California, and was founded in 1994 to
develop products for bone and cartilage regeneration. OSSIGEL has been shown
in animal models to accelerate the healing of bone fractures. Orquest
completed preclinical testing of OSSIGEL in animals at the end of 1997 and
commenced human clinical testing of OSSIGEL in 1998. Orquest has filed an
application with the U.S. Patent and Trademark Office for a patent covering
the use of OSSIGEL in accelerating fracture healing.

MANUFACTURING OF HYALURONIC ACID

      The Company has been manufacturing HA since 1983 in its manufacturing
facility located in Woburn, Massachusetts. In 1996, the Company received an
International Standards Organization ("ISO") 9001 certification of its
manufacturing facility and HA manufacturing process. An ISO 9001 designation is
an internationally recognized certification for quality standards governed by
the International


<PAGE>

Organization for Standards based in Geneva, Switzerland. The certifications for
ISO 9001 were awarded to the Company after a rigorous assessment and audit of
the Company's quality system by a private third-party European accredited
Notified Body. ISO 9001 is the highest level of achievement possible in the ISO
certification system.

      The Company has developed a proprietary HA manufacturing process for the
extraction and purification of HA from rooster combs that yields an ultra-pure
high molecular weight HA.

      A substantial supply of rooster combs is available and the Company
believes that all the other materials required for the manufacture of its HA
products are also readily available from a number of sources. The Company
currently obtains rooster combs from two suppliers. The Company obtains syringes
used to deliver its HA products from a single supplier, however, it generally
keeps sufficient syringes in its inventory to meet anticipated demand for at
least six months. The Company employs strict quality control procedures to
ensure the quality of its products, inventory and raw materials. The Company
believes that its facility in Woburn, Massachusetts, has the present
manufacturing capacity to accommodate anticipated demand through 2001. The
Company anticipates that a new, larger manufacturing facility will be required
to meet increased demand beyond 2001. The Company expects that construction and
regulatory approval of a new facility would take between two and three years.

PATENT AND PROPRIETARY RIGHTS

      The Company has a policy of seeking patent protection for patentable
aspects of its proprietary technology. The Company co-owns certain United States
patents and a patent application which claim certain adhesion prevention uses
and certain drug delivery uses of HA, and the Company solely owns patents
covering certain manufacturing processes. The Company also holds an exclusive
license from Tufts University to use technologies claimed in a United States
patent application which has been granted a notice of allowance by the U.S.
Patent Office which relates to the anti-metastasis applications of HA
oligosaccharides. The Company's issued patents expire between 2007 and 2015 and
the license expires upon expiration of all related patents. The Company intends
to seek patent protection with respect to products and processes developed in
the course of its activities when it believes such protection is in its best
interest and when the cost of seeking such protection is not inordinate.
However, no assurance can be given that any patent application will be filed,
that any filed applications will result in issued patents or that any issued
patents will provide the Company with a competitive advantage or will not be
successfully challenged by third parties. The protections afforded by patents
will depend upon their scope and validity, and others may be able to design
around the Company's patents. The Company's issued patents and any patents which
arise from the Company's licensed application would provide competitive
protection, if at all, only in the United States. The Company has not, to date,
pursued foreign patents equivalent to those issued or applied for in the United
States.


<PAGE>

      Other entities have filed patent applications for or have been issued
patents concerning various aspects of HA-related products or processes. There
can be no assurance that the products or processes developed by the Company will
not infringe the patent rights of others in the future. Any such infringement
may have a material adverse effect on the Company's business, financial
condition and results of operations. In particular, the Company has received
notice from the PTO that a third party is attempting to provoke a patent
interference with respect to one of the Company's co-owned patents covering the
use of INCERT for post-surgical adhesion prevention. Although the Company
believes that an interference will be declared by the PTO, it is too early to
determine the merits of the interference or the effect, if any, the interference
will have on the Company's marketing of INCERT for this use. The existence of
the interference proceeding may have a negative impact on the marketing of the
INCERT product, and no assurance can be given that the Company would be
successful in any such interference proceeding. If the third party interference
were to be decided adversely to the Company, involved claims of the Company's
patent would be cancelled, the Company's marketing of the INCERT product may be
materially and adversely affected and the third party may enforce patent rights
against the Company which could prohibit the sale and use of the INCERT
products, which could have a material adverse effect on the Company's future
operating results.

      The Company also relies upon trade secrets and proprietary know-how for
certain unpatented aspects of its technology. To protect such information, the
Company requires all employees, consultants and licensees to enter into
confidentiality agreements limiting the disclosure and use of such information.
There can be no assurance that these agreements provide meaningful protection or
that they will not be breached, that the Company would have adequate remedies
for any such breach, or that the Company's trade secrets, proprietary know-how,
and technological advances will not otherwise become known to others. In
addition, there can be no assurance that, despite precautions taken by the
Company, others have not and will not obtain access to the Company's proprietary
technology. Further, there can be no assurance that third parties will not
independently develop substantially equivalent or better technology.

      The Company has granted Bausch & Lomb Surgical a royalty-free, worldwide,
exclusive license to the Company's manufacturing and product inventions which
relate to AMVISC products, effective on December 31, 2001, the termination date
of the AMVISC supply contract which became effective on January 1, 1997. Upon
expiration of the AMVISC supply contract, there can be no assurance that Bausch
& Lomb Surgical will continue to use the Company to manufacture AMVISC and
AMVISC Plus. If Bausch & Lomb Surgical discontinues the use of the Company as a
manufacturer after such time, the Company's business, financial condition and
results of operations could be materially and adversely affected.


<PAGE>

GOVERNMENT REGULATION

      Anika's research, development, manufacturing activities and the future
marketing of products by Anika are subject to regulation for safety and efficacy
by numerous governmental authorities in the United States and other countries.
In the United States, devices and drugs are subject to rigorous FDA regulation.
The Federal Food, Drug and Cosmetic Act governs the testing, manufacture,
safety, efficacy, labelling, storage, record keeping, approval, advertising and
promotion of Anika's products.

      Product development and approval within the FDA regulatory framework takes
a number of years and involves the expenditure of substantial resources. There
can be no assurance that this regulatory framework will not change or that
additional regulation will not arise at any stage of Anika's product development
process which may affect approval of or delay an application or require
additional expenditures by Anika.

      Medical products regulated by the FDA are generally classified as drugs
and/or medical devices. AMVISC is approved as a Class III device in the
United States for ophthalmic surgical procedures in intraocular use in
humans. HYVISC is approved as an animal drug for intra-articular injection in
horse joints to treat degenerative joint disease associated with synovitis.
ORTHOVISC is currently considered a Class III device by the FDA. In the past,
most HA products have been regulated as medical devices. Anika believes that
its ORTHOVISC for osteoarthritis and INCERT products will be regulated as
Class III devices. However, no assurance can be given that such products will
not be classified as drugs or as both devices and drugs. Although it is not
known whether the regulatory status of HA oligosaccharides for use in the
treatment of certain proliferative diseases and in drug delivery will be
regulated as drugs, it is likely that it will be regulated as a drug.

      Devices

      The steps required to qualify a medical device for marketing in the United
States are complex. Medical devices are classified as Class I, II, or III
devices. In general, Class I devices require compliance with labelling and
record keeping regulations and are subject to other general controls. Class II
devices may be subject to special controls, such as market surveillance and are
subject to general controls. Class II devices also may be subject to clinical
testing for purposes of premarket notification to the FDA. Class III devices
require clinical testing to assure safety and effectiveness prior to marketing
and distribution.

      At least 90 days prior to marketing, devices must be subject to a
premarket notification to the FDA to determine the product's classification and
regulatory status. If a product is found to be "substantially equivalent" to a
Class I or Class II device, or a Class III device not subject to a PMA
requirement, it may be marketed without further FDA review. The FDA may require
the submission of clinical data as a basis for determining whether a device is
"substantially


<PAGE>

equivalent". If a device is found to be "not substantially equivalent", the
device manufacturer must file a PMA application with the FDA based on testing
intended to demonstrate that the product is both safe and effective. HA-based
products may require the issuance of a PMA from the FDA prior to commercial
sale.

      The PMA process requires the performance of human clinical studies
under an IDE. Upon completion of required clinical studies, results are
presented to the FDA in a PMA application. In addition to the results of
clinical investigations, the PMA applicant must submit other information
relevant to the safety and effectiveness of the device, including the results
of non-clinical tests; a full description of the device and its components; a
full description of the methods, facilities and controls used for
manufacturing; and proposed labelling. The FDA staff then determines whether
to accept the application for filing. If accepted for filing, the application
is further reviewed by the FDA and then often reviewed by an FDA scientific
advisory panel of physicians and others with expertise in the relevant field.
The FDA will also conduct an inspection to determine whether an applicant
conforms with the FDA's current Good Manufacturing Practices. If the FDA's
evaluation is favorable, the FDA will subsequently publish an order granting
the PMA for the device. Although the initial PMA review process is required
to be completed within 180 days from the date of the PMA application is
accepted for filing, the FDA routinely raises additional issues which must be
addressed prior to the approval of a PMA, which significantly extends the
review process.

      Drugs

      Medical devices may meet both the definition of a medical device and a
drug. In these instances, the FDA may regulate these products as drugs or as
both medical devices and drugs. The steps required before a drug may be marketed
in the United States include (i) preclinical laboratory and animal tests, (ii)
submission to the FDA of an Investigational New Drug application ("IND"), which
must become effective before human clinical trials may commence, (iii) adequate
and well-controlled human clinical trials to establish the safety and efficacy
of the drug, (iv) submission of a New Drug Application ("NDA") to the FDA and
(v) FDA approval of the NDA prior to any commercial sales or shipment of the
drug. A clinical study program designed to demonstrate the safety and
effectiveness of a drug usually proceeds in three phases:

o     Phase I involves testing the drug for safety and tolerance in a small
      group of healthy volunteers.

o     Phase II involves testing for efficacy and identifying possible side
      effects in a target patient group.

o     Phase III involves additional testing for efficacy, optimal dosage and
      safety with an expanded patient group, preferably using a comparative
      control agent.


<PAGE>

      The results of the clinical testing, together with manufacturing
information, are then submitted to the FDA in the form of an NDA. In the event
Anika's products are classified as drugs, it may take five to ten years to
complete this process, which typically would be substantially longer than the
review process for devices. The extended review process is also substantially
more expensive.

      Furthermore, Anika or the FDA may suspend clinical trials at any time upon
a determination that the subjects or patients are being exposed to an
unacceptable adverse health risk ascribable to Anika's products. If clinical
studies are suspended, Anika may be unable to continue the development of the
investigational products affected.

      In addition to the FDA approval processes for products, manufacturing
facilities are subject to approval by the FDA. Among the conditions for such
approval is the requirement that quality control and manufacturing procedures
conform to the FDA's Good Manufacturing Practices regulations, which must be
followed at all times. In complying with standards set forth in these
regulations, manufacturers must continue to expend time, monies and effort in
the area of production and quality control to ensure full technical compliance.
Manufacturing establishments also are subject to inspections by or under the
authority of the FDA and by other federal, state or local agencies.

      In addition to regulations enforced by the FDA, Anika is subject to
regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other existing and potential future federal, state and local
regulations of foreign governments. Federal, state and foreign regulations
regarding the manufacture and sale of medical products are subject to change.
Anika cannot predict what impact, if any, such changes might have on its
business.

      For marketing outside the United States, Anika will be subject to FDA
regulations regarding the export of products within its jurisdiction and to
foreign regulatory requirements governing human clinical trials and marketing
approval for drugs and devices. The requirements relating to the conduct of
clinical trials, product licensing, pricing and reimbursement vary widely from
country to country. The process of obtaining approvals from the FDA and other
regulatory authorities can be costly, time consuming, and subject to
unanticipated delays. There can be no assurance that approvals of Anika's
products, processes or facilities will be granted or that Anika will obtain the
financing needed to develop certain of such products. Any failure to obtain, or
delay in obtaining, such approvals could adversely affect the ability of Anika
to market its products.

COMPETITION

      The Company competes with many companies, including large pharmaceutical
companies and specialized medical products companies. Many of these companies
have substantially greater financial and other resources, larger research and
development staffs, more extensive marketing and manufacturing organizations and
more experience in the


<PAGE>

regulatory process than the Company. The Company also competes with academic
institutions, governmental agencies and other research organizations which may
be involved in research, development and commercialization of products. Because
a number of companies are developing HA products for similar applications, the
successful commercialization of a particular product will depend in part upon
the ability of the Company to complete clinical studies and obtain FDA marketing
and foreign regulatory approvals prior to its competitors. There can be no
assurance that the Company will be able to compete against current or future
competitors or that competition will not have a material adverse effect on the
Company's business, financial condition and results of operations.

      The Company is aware of several companies, including Genzyme, Biomatrix,
Inc., Hyal Pharmaceutical Corp., Fidia S.P.A. LifeCore and Seikagaku, that are
developing and/or marketing products utilizing HA for a variety of human
applications. In some cases, competitors have obtained product approvals,
submitted for approval or have commenced human clinical studies, either in the
United States or in certain foreign countries. Major competing products for the
use of HA in ophthalmic surgery include Healon (manufactured by Pharmacia) and
Provisc and Viscoat (manufactured by Alcon). The FDA has recently approved for
marketing two HA products for the treatment of osteoarthritis in the knee,
Hyalgan and Synvisc. Hyalgan is manufactured by Fidia S.P.A. and is distributed
in the United States by Sanofi Pharmaceuticals and OrthoLogic Corp. Fidia S.P.A.
is selling Hyalgan throughout Europe. Synvisc is manufactured by Biomatrix Inc.
and is distributed in the United States by Wyeth-Ayerst Laboratories, a division
of American Home Products Corp. Biomatrix, Inc. is also marketing this product
in Canada, Italy and Sweden. Artz is manufactured by Seikagaku Corporation and
is distributed in Japan, Spain and Sweden. Genzyme has received marketing
approvals in Europe and the U.S. for a chemically modified HA for the prevention
of post-surgical adhesions. LifeCore is conducting a Phase III human clinical
trial testing HA to prevent surgical adhesions.

RESEARCH AND DEVELOPMENT

      The Company intends to continue development of its existing product
candidates, ORTHOVISC, INCERT and HA oligosaccharides, to expand the
therapeutic application of its existing products and to develop new
therapeutic applications for HA-based products. The Company will seek to
expand the use of ORTHOVISC as a therapy for OA for other joints such as the
hip and shoulder and to develop ORTHOVISC as a treatment for TMJ dysfunction.

      The Company's research and development efforts consist primarily of
research relating to new medical applications for its HA-based products and the
management of clinical trials for product candidates and the preparation and
processing of applications for regulatory approvals at all relevant stages of
development. The Company's development of new products is accomplished primarily
through in-house research and development personnel and resources as well as
with collaboration with other companies and scientific researchers. For the


<PAGE>

fiscal years August 31, 1996, the four-month transitional year ended December
31, 1996 and the year ended December 31, 1997, research and development expenses
were $1.6 million, $1.3 million and $2.0 million, respectively. The Company
anticipates that it will continue to commit substantial resources to research
and development in the future. As of December 31, 1997 the company had seven
employees engaged primarily in research and development.

EMPLOYEES

      As of December 31, 1997, the Company had approximately 48 full-time
employees. The Company considers its relations with its employees to be good. No
employees are represented by labor unions.

ENVIRONMENTAL LAWS

   The Company believes that it is in compliance with all federal, state and
local environmental regulations with respect to its manufacturing facilities and
that the cost of ongoing compliance with such regulations does not have a
material effect on the Company's operations. The Company's manufacturing
facility is located within the Wells G&H Superfund site in Woburn MA. The
Company has not been named and is not a party to any such legal proceedings
regarding the Wells G&H Superfund site.

PRODUCT LIABILITY

   The testing, marketing and sale of human health care products entail an
inherent risk of allegations of product liability, and there can be no assurance
that substantial product liability claims will not be asserted against the
Company. Although the Company has not received any material product liability
claims to date and has coverage under its insurance policy of $1,000,000, as of
December 31, 1997 there can be no assurance if material claims arise in the
future, that the Company's insurance will be adequate to cover all situations.
Moreover, there can be no assurance that such insurance, or additional
insurance, if required, will be available in the future or, if available, will
be available on commercially reasonable terms. Any product liability claim, if
successful, could have a material adverse effect on the Company's business,
financial condition and results of operation.


<PAGE>

ITEM 2. DESCRIPTION OF PROPERTIES

   The Company leases its corporate headquarters at 236 West Cummings Park,
Woburn, Massachusetts. The Company leases approximately 22,000 square feet of
manufacturing space at this location for the manufacture of HA products and for
its corporate headquarters. This facility has received all FDA and state
regulatory approvals to operate as a sterile device and drug manufacturer. The
lease for this facility terminates in February 2001. The Company also leases
approximately 15,000 square feet of administrative and research and development
space in Woburn, Massachusetts. The lease for this facility terminates in
October 2001. For the year ended December 31, 1997 the Company had aggregate
lease costs of approximately $353,000. Anika believes that its existing
facilities are adequate to meet its requirements through 2001.

ITEM 3. LEGAL PROCEEDINGS

   The Company has no material pending litigation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   No matter was submitted to a vote of a security holders during the fourth
quarter of the fiscal year covered by this report.

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

COMMON STOCK INFORMATION

   The Company's Common Stock has traded on the Nasdaq National Market since
November 25, 1997 under the symbol "ANIK". Prior to that the Company's stock was
traded under the Nasdaq Small-Cap Market. The following table sets forth, for
the periods indicated, the high and low sale prices of the Common Stock on the
Nasdaq Small-Cap and the Nasdaq National Market. These prices represent prices
between dealers and do not include retail mark-ups, markdowns or commissions and
may not represent actual transactions.

<TABLE>
<CAPTION>
                                 Price Range
                                 -----------
                                 High        Low
                                 ----        ---
<S>                              <C>         <C>
   Fiscal Year Ended
   Aug. 31, 1996
   First Quarter                 $3 1/8      $2 5/8
   Second Quarter                 4 5/8       2 7/8
   Third Quarter                  7 7/8       3 1/2
   Fourth Quarter                 6 5/8       3 3/8

   Transitional Year Ended
   Dec. 31, 1996                  6 1/4       3 3/8
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
                                 Price Range
                                 -----------
                                 High        Low
                                 ----        ---
<S>                              <C>         <C>
   Fiscal Year Ended
   Dec. 31, 1997
   First Quarter                 $6 1/4      $3 1/2
   Second Quarter                 7           5
   Third Quarter                  9 1/4       6 3/8
   Fourth Quarter                 10 5/8      6 7/8
</TABLE>


   At December 31, 1997, there were 289 holders of record of the Common Stock.

   The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently intends to retain earnings, if any, for use in its
business and does not anticipate paying cash dividends on its Common Stock in
the foreseeable future. Payment of future dividends, if any, on the Common Stock
will be at the discretion of the Company's Board of Directors after taking into
account various factors, including the Company's financial condition, operating
results, anticipated cash needs and plans for expansion.

   During the past fiscal year, the Company has issued unregistered
securities to a limited number of persons, as described below. No
underwriters or underwriting discounts or commissions were involved. There
was no public offering in any such transaction, and the Company believes that
each transaction was exempt from the registration requirements of the
Securities Act of 1933 as amended (the "Securities Act"), pursuant to the
section of the Securities Act listed below.

     (1)  In December 1997, in connection with the consummation of a
secondary offering of common stock, the Company converted, in accordance
with its terms, all 177,353 outstanding shares of Series A Preferred Stock
("Series A stock"), including accrued dividends, into 1,773,530 shares of
common stock. The common stock was issued to holders of Series A stock in
reliance upon the exemption from registration under Section 3(a)(9) of the
Securities Act.

     (2)  In May 1995, the Company issued warrants, to holders of Series A
stock, to purchase additional shares of Series A stock. The warrants were
issued in reliance upon the exemption from registration under Section 4(2) of
the Securities Act. In October 1997, the Company issued a notice of mandatory
exercise to all holders of warrants to purchase Series A stock. The warrants
were exercisable at any time by the holder thereof or upon demand by the
Company if certain conditions were met. In connection with the exercise of
the warrants the Company issued 46,777 shares of Series A stock in November
1997 at an exercise price of $20.00 per share. The Series A stock was issued
to warrant holders in reliance upon the exemption from registration under
Section 4(2) of the Securities Act.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

   The Company develops, manufactures and commercializes therapeutic products
and devices intended to promote the protection and healing of bone, cartilage
and soft tissue. These products are based on hyaluronic acid, a
naturally-occurring, biocompatible polymer found throughout the


<PAGE>

body. Due to its unique biophysical and biochemical properties, HA plays an
important role in a number of physiological functions such as the protection and
lubrication of soft tissues and joints, the maintenance of the structural
integrity of tissues, and the transport of molecules to and within cells. The
Company has been developing HA and HA based products since 1983. The Company's
currently marketed products consist of ORTHOVISC, which is an HA product used in
the treatment of some forms of osteoarthritis in humans, and HYVISC, which is an
HA product used in the treatment of equine osteoarthritis. ORTHOVISC is
currently approved for marketing in Canada and Europe; in the U.S. ORTHOVISC is
currently limited to investigational use only. The Company manufactures AMVISC
and AMVISC Plus, which are HA products used as viscoelastic supplements in
ophthalmic surgery, for Bausch & Lomb Surgical. The Company is currently
developing INCERT, which is an HA based product designed for use in the
prevention of post-surgical adhesions. In addition, the Company is collaborating
with Orquest, Inc. to develop OSSIGEL(TM), an injectable formulation of basic
fibroblast growth factor combined with HA designed to accelerate the healing of
bone fractures.

   The Company receives a substantial portion of its revenue from the sale of
AMVISC and AMVISC Plus to Bausch & Lomb Surgical. For the years ended
December 31, 1997 and 1996, AMVISC sales accounted for 84% and 94% of total
revenue, respectively. In addition, sales of ORTHOVISC to the Company's
marketing partner in Turkey accounted for 11% of net sales for the year ended
December 31, 1997. The Company also sells ORTHOVISC in Canada through Zimmer,
Inc., and sells HYVISC in the United States through Boehringer Ingelheim
Animal Health, Inc.

   The Company manufactures AMVISC for Bausch & Lomb Surgical under a five-year
supply contract (the "AMVISC Supply Contract") that expires in December 2001.
Bausch & Lomb Surgical assumed the AMVISC Supply Contract when it purchased
Chiron Vision in January 1998. The current AMVISC Supply Contract has stated
minimums with substantially higher unit selling prices than a previous six-year
supply contract with Chiron Vision which expired on December 31, 1996. Under the
previous supply contract, the Company was obligated to supply AMVISC at unit
selling prices that approximated the Company's unit manufacturing cost. This
previous supply contract was a component of MedChem's sale of the AMVISC product
line to IOLAB in connection with the settlement in January 1991 of patent
litigation between Pharmacia, IOLAB and MedChem. The Company has no additional
obligations to Chiron Vision as a result of the settlement of such litigation.

   In November 1997, the Company entered into a long-term distribution agreement
with Zimmer, Inc., a subsidiary of Bristol-Myers Squibb Company (the "Zimmer
Distribution Contract"). The Zimmer Distribution Contract provides Zimmer with
exclusive marketing and distribution rights to ORTHOVISC in the United States,
Canada, Australia, Hong Kong, Indonesia, Malaysia, New Zealand, the Philippines,
Singapore, Taiwan and Thailand. Zimmer also has the option under the agreement
to seek regulatory approval for and market ORTHOVISC in Japan and has a right of
first offer with respect to China. Upon signing of the agreement, the Company
received an up-front non-refundable payment of $2.5 million.


<PAGE>

Zimmer has also agreed to make payments aggregating up to $20.5 million upon the
achievement of certain regulatory approval and enumerated sales milestones. As
an alternative to a $2.5 million milestone payment, Zimmer has the right to
elect to acquire shares of the Company's Common Stock equal to the greater of
$2.5 million or 9.9% of the then outstanding Common Stock (but not to exceed
19.9% of the then outstanding Common Stock) at a premium to the then current
market price. There can be no assurance that any of such milestones will be met
on a timely basis or at all. In addition, Zimmer has the right to terminate the
agreement on August 1, 1998 if certain specified events occur prior to that date
and upon payment to Anika of $1.0 million in cash. These circumstances include
(i) the failure of Zimmer to sell a stated minimum number of units of ORTHOVISC
during the second quarter of 1998 or the failure of a competitor of the Company
to report enumerated sales minimums during the first two quarters of 1998, (ii)
an FDA requirement of additional clinical trials for ORTHOVISC or the FDA
acceptance for filing by a party other than Anika or its primary competitors of
a PMA for an injectable HA product for the treatment of OA in humans without
requiring submission of an IDE clinical study to support the application, (iii)
both Synvisc and Hyalgan are either voluntarily or involuntarily withdrawn from
the U.S. market, or (iv) if Zimmer undergoes a company-wide restructuring prior
to June 30, 1998 which results in Zimmer's determination that the knee implant
product line is not a core product. There can be no assurance that any of these
events will not occur or, if any such event does occur, that Zimmer will not
elect to terminate the agreement. Any such termination would have a material
adverse effect on the Company's ability to market ORTHOVISC, which may have a
material adverse effect on the Company's future operating results.

   On October 28, 1997, the Company amended the Stock Option Plan to reserve an
additional 1,000,000 shares of Common Stock for issuance under the Stock Option
Plan, and granted to certain executive officers and employees options to acquire
269,000 shares of Common Stock at an exercise price of $7.625 per share, vesting
over a four-year period. Such grants are subject to stockholder approval of the
amendment to the Stock Option Plan. The amendment to the Plan will be submitted
for stockholders' approval at the Company's next annual meeting of stockholders.
If the amendment is approved by stockholders, the Company will be required to
record compensation expense with respect to the 269,000 options granted October
28, 1997 over the four-year vesting period equal to the difference, if any,
between the exercise price and the market value of the Common Stock at the time
of such shareholder approval.

   The Company changed its year end from an August 31 to a calendar year end
effective December 31, 1996. The following table and discussion compares
audited results for the year ended December 31, 1997 against unaudited
pro-forma results for the comparable period ended December 31, 1996.

<PAGE>

Twelve months ended December 31, 1997 compared to twelve months ended December
31, 1996

Statement of Operations
Detail

<TABLE>
<CAPTION>
                                                        Twelve Months ended
                                                   Dec 31, 1997   Dec 31, 1996
                                                   ------------   ------------
                                                               (unaudited)
<S>                                                <C>            <C>
   Product revenue                                 $9,255,338     $ 4,633,743
   Licensing fees                                   2,700,000              --
                                                   ----------     -----------
      Net sales                                    11,955,338       4,633,743
   Cost of product revenue                          4,744,123       4,517,591
                                                   ----------     -----------
      Gross profit                                  7,211,215         116,152
   Operating expenses:
      Research and development                      1,957,796       2,488,657
      Selling, general and administrative           2,092,467       2,393,623
                                                   ----------     -----------
         Total operating expenses                   4,050,263       4,882,280
                                                   ----------     -----------
         Income (loss) from operations              3,160,952      (4,766,128)
         Interest income, net                        (262,162)       (166,908)
                                                   ----------     ------------
         Income (loss) before income taxes          3,423,114      (4,599,220)
      Income taxes                                     78,677              --
                                                   ----------     -----------
         Net income (loss)                         $3,344,437     ($4,599,220)
                                                   ==========     ===========
</TABLE>


   Product revenue. Product revenue for the year ended December 31, 1997
totalled $9,255,000 an increase of $4,621,000 or 100% increase over the
$4,634,000 recorded in the prior year. The increase was primarily attributable
to increased AMVISC sales. Sales of AMVISC as measured in units increased by
6.5% while the average selling price of AMVISC increased by 70% under the new
AMVISC supply contract. Future increased selling prices under the AMVISC supply
contract will be limited to annual adjustment based on the producer price index.

   Licensing payments. Licensing payments of $2,700,000 were recorded for the
year ended December 31, 1997. The Company recorded a $2.5 million licensing
payment from Zimmer for ORTHOVISC distribution rights and $200,000 from Orquest
for the development of OSSIGEL.

   Gross profit. The Company's gross profit of product revenues increased as a
percentage of sales to 48.7% for the year ended December 31, 1997 versus 2.5% in
the prior year. The increase in the gross profit was primarily due to a 70%
increase in the average unit selling price of AMVISC under the new AMVISC Supply
Contract and increased sales volume of ORTHOVISC, which has a higher gross
margin per unit than AMVISC.

   Research and development. Research and development expenses for the year
ended December 31, 1997 decreased by $531,000, or 21.3% to $1,958,000 from
$2,489,000 recorded in the prior year. The decrease was primarily due to a
reduction in expenses associated with the ORTHOVISC clinical trial which was
completed in June 1997.

   Selling, general and administrative. Selling, general and administrative
expenses for the year ended December 31, 1997, decreased by $302,000, or 12.6%,
to $2,092,000 from $2,394,000 in the prior year. The staffing level was
substantially the same. The decrease is primarily attributable to the fact that
during 1996 the Company incurred severance


<PAGE>

payments to the former president and had a $544,000 writeoff of leasehold
improvements and lease expenses resulting from the close of one of the Company's
facilities.

   Net interest income. The Company's net interest income increased to $262,000,
or 57%, in the year ended December 31, 1997 from $167,000 in the prior year. The
increase is attributable to the Company having more cash to invest on average in
the year ended December 31, 1997 as compared to 1996.

   Tax expense. The Company recorded tax expense for the year ended December 31,
1997 of $78,677 which consisted of current tax expense of $1,375,000 (tax rate
of 40.2%) offset by a tax benefit of $1,297,000 from net operating loss
carryforwards. At December 31, 1997 the company has a remaining tax benefit of
$3,256,000 from net operating loss carryforwards to offset future tax expense.

Four months ended December 31, 1996 compared to four months ended December 31,
1995

Statement of Operations
Detail

<TABLE>
<CAPTION>
                                             Four Months ended
                                          Dec 31, 1996   Dec 31, 1995
                                          ------------   ------------
                                                         (unaudited)
<S>                                       <C>            <C>
   Net sales                              $ 1,212,041    $1,191,215
   Cost of sales                            1,308,625     1,263,249
                                          -----------     ---------
      Gross loss                              (96,584)      (72,034)
   Operating expenses:
      Research and development              1,310,330       456,315
      Selling, general and administrative   1,308,583       384,215
                                          -----------    ----------
         Total operating expenses           2,618,913       840,530
                                          -----------     ---------
         Loss from operations              (2,715,497)     (912,564)
         Interest income                      (57,898)       (5,303)
                                          ------------   -----------
         Loss before income taxes          (2,657,599)     (907,261)
      Income taxes                                 --            --
   Net loss                               $(2,657,599)   $ (907,261)
                                          ===========    ==========
</TABLE>

   Net Sales. Net sales of HA products for the four month transitional period
ended December 31, 1996 totaled $1.2 million, which was substantially unchanged
from the net sales recorded for the comparable four month period of the prior
year.

   Gross loss. The Company's gross loss as a percentage of net sales was 8.0%
for the four month transitional year ended December 31, 1996, an increase of two
percentage points from the 6.0% gross loss for the same period in 1995. The
increase was primarily attributable to increased sales of HA products with lower
margins.

   Research and development. Research and development expenses for the
four-month transitional year ended December 31, 1996 increased by $854,000, or
187.3%, to $1.3 million from $456,000 for the same period in 1995. The
increase was primarily attributable to $600,000 in expenses related to the
clinical trial for ORTHOVISC and the amortization of $375,000 of unearned stock
option compensation related to the amendment of the employment agreement of the
Company's chief


<PAGE>

scientist.

   Selling, general and administrative. Selling, general and administrative
expenses for the four-month transitional year ended December 31, 1996 increased
by $925,000, or 240.9%, to $1.3 million from $384,000 for the same period in
1995. The increase was primarily attributable to the hiring of additional
marketing and administrative staff, a $544,000 write-off of leasehold
improvements and lease expenses resulting from closing one of the Company's
facilities, and $200,000 in severance costs associated with the departure of the
Company's former president.

Year ended August 31, 1996 compared to year ended August 31, 1995

   Net sales. Net sales of HA products totaled $4.6 million in the fiscal year
ended August 31, 1996 representing an increase of $1.3 million, or 38.2%, from
the $3.4 million for fiscal 1995. The increase was primarily attributable to an
increase in the unit volume of AMVISC sales.

   Gross profit. The Company's gross profit as a percentage of net sales
declined to 3% in the fiscal year ended August 31, 1996, from 7% in fiscal 1995.
During the year ended August 31, 1996 the balance in the AMVISC manufacturing
reserve of $521,000 was written off to cost of goods sold since the previous
AMVISC supply contract was marginally profitable and it expired on December 31,
1996. The Company determined that the reserve was no longer required because the
previous AMVISC supply contract was expected to remain marginally profitable
through the end of the contract period. The decrease in gross profit as a
percentage of net sales is attributable to higher manufacturing costs per unit
in the fiscal year ended August 31, 1996 versus fiscal 1995 and an unfavorable
mix of product sales in the fiscal year ended August 31, 1996 versus fiscal
1995.

   Research and development. Research and development expenses increased by
$317,000, or 24.0%, to $1.6 million in the fiscal year ended August 31, 1996
from $1.3 million in fiscal 1995. The increase was attributable primarily to
the commencement of the ORTHOVISC clinical trial in the United States.

   Selling, general and administrative. Selling, general and administrative
expenses for the fiscal year ended August 31, 1996 increased by $565,000, or
62.5%, to $1.5 million from $904,000 in fiscal 1995. The increase was
attributable primarily to additions to administration staffing for the fiscal
year ended August 31, 1996, increased selling and marketing costs associated
with the international commercialization of ORTHOVISC and severance payments to
the Company's former president.

   Net interest income. The Company's net interest income increased to $114,000,
or 293.0%, in the fiscal year ended August 31, 1996 from $29,000 in fiscal 1995.
The increase is attributable to the Company having higher cash balances on
average in the fiscal year ended August 31, 1996 as compared to fiscal 1995.


<PAGE>

   Income tax benefit. The Company has not recorded income tax benefits for the
fiscal years ended August 31, 1996 and 1995. The Company will not be able to
record income tax benefits from the operating losses incurred after May 1, 1993
until the Company has operating profits, since the realization of these benefits
cannot be reasonably assured.

LIQUIDITY AND CAPITAL RESOURCES

   In December 1997, the Company completed a secondary public offering of
2,725,000 shares of Common Stock that raised net proceeds of approximately $17
million.

   At December 31, 1997, the Company had cash and cash equivalents of $22.7
million and working capital of $25.3 million. The Company believes that its cash
on hand will be sufficient to meet its operating requirements for at least
another 24 months. Thereafter, the Company may require additional financing to
fund its operations and for the construction of a new manufacturing facility.
The Company's future capital requirements and the adequacy of available funds
will depend, however, on numerous factors, including market acceptance of its
existing and future products, the successful commercialization of products in
development, progress in its product development efforts, the magnitude and
scope of such efforts, progress with preclinical studies, clinical trials and
product clearances by the FDA and other agencies, the cost and timing of its
efforts to expand its manufacturing capabilities, the cost of filing,
prosecuting, defending and enforcing patent claims and other intellectual
property rights, competing technological and market developments, and the
development of strategic alliances for the marketing of certain of its products.
Although the Company achieved profitability for the year ended December 31, 1997
there can be no assurance that the Company will continue to record profits in
future periods. For 1997, the Company's unit sales of AMVISC substantially
exceeded the minimum obligations under the AMVISC Supply Agreement. For 1998,
the Company can provide no assurance that unit sales of AMVISC for 1998 will
exceed minimum annual purchase obligations. The terms of any future equity
financings may be dilutive to the Company's stockholders and the terms of any
debt financings may contain restrictive covenants which limit the Company's
ability to pursue certain courses of action. The ability of the Company to
obtain financing is dependent on the status of the Company's future business
prospects as well as conditions prevailing in the relevant capital markets. No
assurance can be given that any additional financing will be
made available to the Company or will be available on acceptable terms should
such a need arise. The Company's estimate of the time period for which cash and
cash equivalents, will be adequate to fund operations is a forward looking
statement within the meaning of the Private Securities Litigation Reform Act of
1995 and is subject to risks and uncertainties. Actual results may differ
materially from those contemplated in such forward looking statements. In
addition to those described above, factors which may cause such a difference are
set forth under the caption "Risk Factors" as well as in this 10-KSB generally.



   In March 1996, the Company completed a financing involving the private
placement of 1,455,000 shares of newly issued Common Stock to institutional and
accredited investors. Total gross proceeds were approximately $4.0
million and net proceeds to the Company after fees and expenses were
approximately $3.5 million. In connection with the private placement, the
Company issued to the private placement agent warrants to purchase 57,036 shares
of Common Stock at $4.00 per share and warrants to purchase 146,664 shares of
Common Stock at $3.00 per share. The proceeds from the private placement were
used to repay $1.0 million of indebtedness and for working capital.


<PAGE>


RECENTLY ISSUED ACCOUNTING STANDARDS

      New Accounting Standards

      In June 1997, the Financial Accounting Standards Board Issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related Information". SFAS No. 130 establish standards for reporting and display
of comprehensive income and its components in a full-set of general purpose
financial statements. SFAS No. 131 establishes standards for the way that public
business enterprises report selected information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial statements. Both
statements, which are effective for the Company in its year ending December 31,
1998, are not expected to have a material impact on the Company's financial
position or results of operations.

      Year 2000

      The Year 2000 issue is the result of computer programs that are not able
to differentiate between the year 1900 and the year 2000 because they were
written using two digits instead of four digits to define the applicable year. A
review of the Company's computer system has been performed to identify the
systems and software that could be affected by this issue. The Company currently
believes that with the conversion to new software systems, the Year 2000 problem
will not pose an operational problem to the Company. However, there can be no
assurance that the Company will not experience unexpected costs and delays in
achieving Year 2000 compliance for its computer systems, which could result in a
material adverse effect on the operations and financial position of the Company.

CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS

   This Form 10-KSB contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The Company's actual results could differ materially from
those set forth in the forward-looking statements. Certain factors that might
cause such a difference include, among other factors noted herein, the
following:


<PAGE>

   History of Losses; Uncertainty of Future Profitability. The Company has
incurred annual operating losses since its inception in May 1993 and had an
accumulated deficit of approximately $6.0 million as of December 31, 1997. The
continued development of the Company's products will require the commitment of
substantial resources to conduct research and preclinical and clinical
development programs, and to establish sales and marketing capabilities. The
Company incurred substantial and increasing operating losses through December
31, 1996 and, although the Company had net income of $3,344,000 for the year
ended December 31, 1997, the ability of the Company to reach sustained
profitability is highly uncertain. To achieve sustained profitability the
Company must, among other things, successfully complete development of certain
of its products, obtain regulatory approvals and establish sales and marketing
capabilities for certain of its products. There can be no assurance that the
Company will be able to achieve sustained profitability.

      Competition. The Company competes with many companies, including large
pharmaceutical companies and specialized medical products companies. Many of
these companies have substantially greater financial and other resources, larger
research and development staffs, more extensive marketing and manufacturing
organizations and more experience in the regulatory process than the Company.
The Company also competes with academic institutions, governmental agencies and
other research organizations which may be involved in research, development and
commercialization of products. Because a number of companies are developing HA
products for similar applications, the successful commercialization of a
particular product will depend in part upon the ability of the Company to
complete clinical studies and obtain FDA marketing and foreign regulatory
approvals prior to its competitors. There can be no assurance that the Company
will be able to compete against current or future competitors or that
competition will not have a material adverse effect on the Company's business,
financial condition and results of operations.

      Comprehensive Government Regulation; No Assurance of FDA Approval. The
Company's products, product development activities, manufacturing processes, and
current and future sales and marketing are subject to extensive and rigorous
regulation by the FDA and comparable agencies in foreign countries. In the
United States, the FDA regulates the marketing, advertising, promotion, and
distribution of medical devices, drugs, and biologics, as well as testing,
manufacturing, labeling, recordkeeping, and reporting activities for such
products.

   Medical products regulated by the FDA are generally classified as devices
and/or drugs and/or biologics. Product development and approval within the FDA
framework takes a number of years and involves the expenditure of substantial
resources. There can be no assurance that the FDA will grant approval for the
Company's new products on a timely basis if at all, or that FDA review will not
involve delays that will adversely affect the Company's ability to commercialize
additional products or expand permitted uses of existing products, or that the
regulatory framework will not change, or that additional regulation will not
arise at any stage of the Company's product development process which may
adversely affect approval of or delay an application or


<PAGE>

require additional expenditures by the Company. In the event the Company's
future products are regulated as human drugs or biologics, the FDA's review
process typically would be substantially longer and more expensive than the
review process for devices.

   The Company's ORTHOVISC product is currently regulated as a Class III device
by the FDA. Class III devices are those that generally must receive pre-market
approval by the FDA to ensure their safety and effectiveness (e.g.
life-sustaining, life-supporting and implantable or new devices which have not
been found to be substantially equivalent to legally marketed devices) and
require clinical testing to ensure safety and effectiveness and FDA approval
prior to marketing and distribution. In order for the Company to commercially
distribute ORTHOVISC in the U.S., it must obtain FDA approval of a PMA. The
Company has submitted a PMA for ORTHOVISC and it was accepted for filing by the
FDA in February 1998. The PMA approval process can be expensive, uncertain and
lengthy. A number of devices for which pre-market approval has been sought have
never been approved for marketing. The review of an application often occurs
over a protracted time period and may take two years or more from the filing
date to complete. There can be no assurance that the FDA will approve a PMA
application for ORTHOVISC on a timely basis, if at all, or that the FDA review
will not involve delays that will affect the Company's ability to commercialize
additional products or expand permitted uses of existing products. Furthermore,
even if granted, the approval may include significant limitations on the
indications for use for which the product may be marketed.

   The Company's developmental HA products, including INCERT and HA
oligosaccharides, have not obtained regulatory approval in the U.S. for
investigational use and/or commercial marketing and sale. The Company believes
that INCERT will be regulated as a Class III medical device and HA
oligosaccharides will be regulated as a drug, although there can be no assurance
that such products will not be otherwise classified. Before undertaking clinical
trials in the U.S. to support a PMA, the Company must apply for and obtain FDA
and/or institutional review board ("IRB") approval of an investigation device
exemption ("IDE"). There can be no assurance that the Company will be permitted
to undertake clinical trials of these or other future products in the U.S. or
that clinical trials will demonstrate that the products are safe and effective
or otherwise satisfy the FDA's pre-market approval requirements. Orquest has not
received regulatory approval in the U.S. for the investigational use and/or
commercial marketing and sale of OSSIGEL. OSSIGEL may be regulated as a Class
III medical device, a biologic, a drug or a combination thereof. There can be no
assurance that Orquest will be permitted to undertake clinical trials of OSSIGEL
or, if clinical trials are permitted, that such clinical trials will demonstrate
that OSSIGEL is safe and effective or otherwise satisfy FDA requirements.

   Once obtained, marketing clearance can be withdrawn by the FDA due to failure
to comply with regulatory standards or the occurrence of unforeseen problems
following initial clearance. The Company may be required to make further filings
with the FDA under certain circumstances. The FDA's regulations require agency
approval of a PMA supplement for certain changes if they affect the safety and


<PAGE>

effectiveness of an approved device, including, but not limited to, new
indications for use, labeling changes, the use of a different facility to
manufacture, process or package the device, changes in manufacturing methods or
quality control systems and changes in performance or design specifications.
Failure by the Company to receive approval of a PMA supplement regarding the use
of a different manufacturing facility or any other change affecting the safety
or effectiveness of an approved device on a timely basis, or at all, would have
a material adverse effect on the Company's business, financial condition and
results of operations. The FDA could also limit or prevent the manufacture or
distribution of the Company's products and has the power to require the recall
of such products. Significant delay or cost in obtaining, or failure to obtain
FDA clearance to market products, any FDA limitations on the use of the
Company's products, or any withdrawal or suspension of clearance by the FDA
could have a material adverse effect on the Company's business, financial
condition and results of operations.

   In addition, all FDA-approved products manufactured by the Company must be
manufactured in compliance with FDA's Good Manufacturing Practices ("GMP")
regulations or, for medical devices, FDA's Quality System Regulations ("QSR").
Ongoing compliance with GMP, QSR and other applicable regulatory requirements is
monitored through periodic inspection by state and federal agencies, including
the FDA. The FDA may inspect the Company and its facilities from time to time to
determine whether the Company is in compliance with regulations relating to
medical device and manufacturing companies, including regulations concerning
manufacturing, testing, quality control and product labeling practices. There
can be no assurance that the Company will be able to comply with current or
future FDA requirements applicable to the manufacture of products.

   FDA regulations depend heavily on administrative interpretation and there can
be no assurance that the future interpretations made by the FDA or other
regulatory bodies, with possible retroactive effect, will not adversely affect
the Company. In addition, changes in the existing regulations or adoption of new
governmental regulations or policies could prevent or delay regulatory approval
of the Company's products.

   Failure to comply with applicable regulatory requirements could result in,
among other things, warning letters, fines, injunctions, civil penalties, recall
or seizure of products, total or partial suspension of production, refusal of
the FDA to grant pre-market clearance or pre-market approval for devices,
withdrawal of approvals and criminal prosecution.

   In addition to regulations enforced by the FDA, the Company is subject to
other existing and potential future federal, state, local and foreign
regulations. International regulatory bodies often establish regulations
governing product standards, packing requirements, labeling requirements, import
restrictions, tariff regulations, duties and tax requirements. To enable the
Company to market its products in Europe, the Company was required to receive a
"CE" marking certification, an international symbol of quality and compliance
with the applicable European medical device directive. In October 1996, the
Company received


<PAGE>

an EC Design Examination and an EC Quality System Certificate from a European
Notified Body, which entitles the Company to affix a CE marking on ORTHOVISC for
the treatment of osteoarthritis in synovial joints. There can be no assurance
that the Company will be able to achieve and/or maintain compliance required for
CE marking or other foreign regulatory approvals for any or all of its products
or that it will be able to produce its products in a timely and profitable
manner while complying with applicable requirements. Federal, state, local and
foreign regulations regarding the manufacture and sale of medical products are
subject to change. The Company cannot predict what impact, if any, such changes
might have on its business. The requirements relating to the conduct of clinical
trials, product licensing, pricing and reimbursement also vary widely from
country to country.

   The process of obtaining approvals from the FDA and other regulatory
authorities can be costly, time consuming, and subject to unanticipated delays.
There can be no assurance that approvals of the Company's products will be
granted or that the Company will have the necessary funds to develop certain of
such products. Any failure to obtain, or delay in obtaining, such approvals
could adversely affect the ability of the Company to market its products.

      Uncertainty Regarding Success of Clinical Trials. Several of the Company's
products, including INCERT and HA oligosaccharides, as well as the products of
the Company's collaborative partners, including OSSIGEL, will require clinical
trials to determine their safety and efficacy in humans for various conditions.
There can be no assurance that the Company or its collaborative partners will
not encounter problems that will cause it to delay or suspend clinical trials of
any of these products. In addition, there can be no assurance that such clinical
trials, if completed, will ultimately demonstrate these products to be safe and
efficacious.

      Dependence Upon Marketing Partners. The Company does not plan to directly
market and sell its current products to customers. Therefore, the Company's
success will be dependent upon the efforts of its marketing partners and the
terms and conditions of the Company's relationships with such marketing
partners. The Company currently manufactures AMVISC and AMVISC Plus for Bausch &
Lomb Surgical under a non-exclusive fixed price, five-year supply agreement
which contains stated minimum annual purchase obligations and terminates on
December 31, 2001. Since January 1, 1997, Chiron Vision has purchased AMVISC and
AMVISC Plus in amounts substantially in excess of the minimum purchase
obligations set forth in the AMVISC supply contract. There can be no assurance
that the acquisitions will be consummated or if consummated, that Bausch & Lomb,
Inc. will continue to purchase AMVISC and AMVISC Plus at levels beyond the
stated minimum annual purchase obligations. Any such decrease in orders under
the AMVISC supply contract could have a material adverse effect on the Company's
business, financial condition and results of operations. For the years ended
December 31, 1997 and 1996, AMVISC and AMVISC Plus sales through Chiron Vision
accounted for 65% and 92% of net sales, respectively.


<PAGE>

   On November 7, 1997, the Company entered into a distribution agreement with
Zimmer for the exclusive marketing and distribution of ORTHOVISC in the United
States, Canada and selected countries in the Asia-Pacific region. While the
agreement provides for future payments to the Company of up to $20.5 million
(which includes the right upon attaining certain milestones, at Zimmer's
election, to make an equity investment in the Company equal to the greater of
$2.5 million or 9.9% of the then outstanding Common Stock (but not to exceed
19.9% of the then outstanding Common Stock) at a premium to the then current
market price), such payments are contingent upon the achievement of certain
enumerated regulatory approval and sales milestones. There can be no assurance
that such milestones will be met on a timely basis or at all and, accordingly,
that any such payments will be received by the Company. In addition, Zimmer has
the right to terminate the agreement on August 1, 1998 if certain specified
events occur prior to that date and upon payment to Anika of $1.0 million in
cash. These circumstances include (i) the failure of Zimmer to sell a stated
minimum number of units of ORTHOVISC during the second quarter of 1998 or the
failure of a competitor of the Company to report enumerated sales minimums
during the first two quarters of 1998, (ii) an FDA requirement of additional
clinical trials for ORTHOVISC or the FDA's acceptance for filing by a party
other than Anika or its primary competitors of a PMA for an injectable HA
product for the treatment of OA in humans without requiring submission of an IDE
clinical study to support the application, (iii) both Synvisc and Hyalgan are
either voluntarily or involuntarily withdrawn from the U.S. market, or (iv) if
Zimmer undergoes a company-wide restructuring prior to June 30, 1998 which
results in Zimmer's determination that the knee implant product line is not a
core product. There can be no assurance that any of these events will not occur
or, if any such event does occur, that Zimmer will not elect to terminate the
agreement. Any such termination would have a material adverse effect on the
Company's ability to market ORTHOVISC, which may have a material adverse effect
on the Company's future operating results.

   The Company will need to obtain the assistance of additional marketing
partners for new products which are brought to market and existing products
brought to new markets. There can be no assurance that such additional partners
will be available or that such partners will agree to market the Company's
products on acceptable terms. The failure to establish strategic partnerships
for the marketing and distribution of the Company's products on acceptable terms
would have a material adverse effect on the Company's business, financial
condition and results of operations.

      Uncertainty of Market Acceptance of New Products. The Company's success
will depend in part upon the acceptance of the Company's new products by the
medical community, hospitals and physicians and other health care providers, and
third-party payors. Such acceptance may depend upon the extent to which the
medical community perceives the Company's products as safer, more effective or
cost-competitive than other similar products. Ultimately, for the Company's new
products to gain general market acceptance, it will also be necessary for the
Company to develop marketing partners for the distribution of its


<PAGE>

products. There can be no assurance that the Company's new products will achieve
significant market acceptance on a timely basis, or at all. Failure of some or
all of the Company's new products to achieve significant market acceptance could
have a material adverse effect on the Company's business, financial condition
and results of operations.

   Dependence on Patents and Proprietary Technology. The Company's success will
depend, in part, on its ability to obtain and enforce patents, protect trade
secrets, obtain licenses to technology owned by third parties when necessary,
and conduct its business without infringing the proprietary rights of others.
The patent positions of pharmaceutical, medical products and biotechnology
firms, including the Company, can be uncertain and involve complex legal and
factual questions. There can be no assurance that any patent applications will
result in the issuance of patents or, if any patents are issued, whether they
will provide significant proprietary protection or commercial advantage, or will
not be circumvented by others. In the event a third party has also filed one or
more patent applications for any of its inventions, the Company may have to
participate in interference proceedings declared by the U.S. Patent and
Trademark Office ("PTO") to determine priority of invention (see below), which
could result in failure to obtain or the loss of patent protection for the
inventions and the loss of any right to use the inventions. Even if the eventual
outcome is favorable to the Company, such interference proceedings could result
in substantial cost to the Company. Filing and prosecution of patent
applications, litigation to establish the validity and scope of patents,
assertion of patent infringement claims against others and the defense of patent
infringement claims by others can be expensive and time consuming. There can be
no assurance that in the event that any claims with respect to any of the
Company's patents, if issued, are challenged by one or more third parties, that
any court or patent authority ruling on such challenge will determine that such
patent claims are valid and enforceable. An adverse outcome in such litigation
could cause the Company to lose exclusivity covered by the disputed rights. If a
third party is found to have rights covering products or processes used by the
Company, the Company could be forced to cease using the technologies or
marketing the products covered by such rights, could be subject to significant
liabilities to such third party, and could be required to license technologies
from such third party. Furthermore, even if the Company's patents are determined
to be valid, enforceable, and broad in scope, there can be no assurance that
competitors will not be able to design around such patents and compete with the
Company using the resulting alternative technology.

   The Company has a policy of seeking patent protection for patentable aspects
of its proprietary technology. The Company co-owns certain United States patents
and a patent application which claim certain adhesion prevention uses and
certain drug delivery uses of HA, and solely owns patents directed to certain
manufacturing processes. The Company also holds an exclusive license from Tufts
University to use technologies claimed in a United States patent application
which has been granted a Notice of Allowance from the U.S. Patent Office for the
anti-metastasis applications of HA oligosaccharides. The Company's issued
patents expire between 2007 and 2015 and the license expires upon


<PAGE>

expiration of all related patents. The Company intends to seek patent protection
with respect to products and processes developed in the course of its activities
when it believes such protection is in its best interest and when the cost of
seeking such protection is not inordinate. However, no assurance can be given
that any patent application will be filed, that any filed applications will
result in issued patents or that any issued patents will provide the Company
with a competitive advantage or will not be successfully challenged by third
parties. The protections afforded by patents will depend upon their scope and
validity, and others may be able to design around the Company's patents. The
Company's issued patents and any patents which arise from the Company's licensed
application would provide competitive protection, if at all, only in the United
States. The Company has not, to date, pursued foreign patents equivalent to
those issued or applied for in the United States.

   Other entities have filed patent applications for or have been issued patents
concerning various aspects of HA-related products or processes. There can be no
assurance that the products or processes developed by the Company will not
infringe the patent rights of others in the future. Any such infringement may
have a material adverse effect on the Company's business, financial condition
and results of operations. In particular, the Company has received notice from
the PTO that a third party is attempting to provoke a patent interference with
respect to one of the Company's co-owned patents covering the use of INCERT for
post- surgical adhesion prevention. Although the Company believes that an
interference will be declared by the PTO, it is too early to determine the
merits of the interference or the effect, if any, the interference will have on
the Company's marketing of INCERT for this use. The existence of the
interference proceeding may have a negative impact on the marketing of the
INCERT product, and no assurance can be given that the Company would be
successful in any such interference proceeding. If the third-party interference
were to be decided adversely to the Company, involved claims of the Company's
patent would be cancelled, the Company's marketing of the INCERT product may be
materially and adversely affected and the third party may enforce patent rights
against the Company which could prohibit the sale and use of the INCERT
products, which could have a material adverse effect on the Company's future
operating results.

   The Company also relies upon trade secrets and proprietary know-how for
certain unpatented aspects of its technology. To protect such information, the
Company requires all employees, consultants and licensees to enter into
confidentiality agreements limiting the disclosure and use of such information.
There can be no assurance that these agreements provide meaningful protection or
that they will not be breached, that the Company would have adequate remedies
for any such breach, or that the Company's trade secrets, proprietary know-how,
and technological advances will not otherwise become known to others. In
addition, there can be no assurance that, despite precautions taken by the
Company, others have not and will not obtain access to the Company's proprietary
technology. Further, there can be no assurance that third parties will not
independently develop substantially equivalent or better technology.


<PAGE>

   Pursuant to the AMVISC supply contract the Company has agreed to grant Bausch
& Lomb Surgical a royalty-free, worldwide, exclusive license to the Company's
manufacturing and product inventions which relate to AMVISC products, effective
on December 31, 2001, the termination date of the AMVISC supply contract which
became effective on January 1, 1997. Upon expiration of the AMVISC supply
contract, there can be no assurance that Bausch & Lomb Surgical will continue to
use the Company to manufacture AMVISC and AMVISC Plus. If Bausch & Lomb Surgical
discontinues the use of the Company as a manufacturer after such time, the
Company's business, financial condition and results of operations could be
materially and adversely affected.

      Risks Associated with Manufacturing. The Company's results of operations
are dependent upon the continued operation of its manufacturing facility in
Woburn, Massachusetts. The operation of biomedical manufacturing plants involves
many risks, including the breakdown, failure or substandard performance of
equipment, natural and other disasters, and the need to comply with the
requirements of directives of government agencies, including the FDA. In
addition, the Company relies on a single supplier for syringes and a small
number of suppliers for a number of other materials required for the
manufacturing and delivery of its HA products. Furthermore, manufacturing
processes and research and development efforts of the Company involve animals
and products derived from animals. The utilization of animals in research and
development and product commercialization is subject to increasing focus by
animal rights activists. The activities of animal rights groups and other
organizations that have protested animal based research and development programs
or boycotted the products resulting from such programs could cause an
interruption in the Company's manufacturing processes and research and
development efforts. The occurrence of material operational problems, including
but not limited to the events described above, could have a material adverse
effect on the Company's business, financial condition and results of operations
during the period of such operational difficulties.

   No Assurance of Ability to Manage Growth. The Company's future success
depends on substantial growth in product sales. There can be no assurance that
such growth can be achieved or, if achieved, can be sustained. There can be no
assurance that if substantial growth in product sales and the demand for the
Company's products is achieved, the Company will be able to (i) develop the
necessary manufacturing capabilities, (ii) obtain the assistance of additional
marketing partners, (iii) attract, retain and integrate the required key
personnel, or (iv) implement the financial, accounting and management systems
needed to manage growing demand for its products, should it occur. Failure of
the Company to successfully manage future growth could have a material adverse
effect on the Company's business, financial condition and results of operations.

   Third Party Reimbursement and Health Care Cost Containment Initiatives. In
the U.S. and other markets, health care providers, such as hospitals and
physicians, that purchase health care products, such as the Company's products,
generally rely on third party payors, including Medicare, Medicaid and other
health insurance and managed care plans, to


<PAGE>

reimburse all or part of the cost of the health care product. Reimbursement by a
third party payor may depend on a number of factors, including the payor's
determination that the use of the Company's products are clinically useful and
cost-effective, medically necessary and not experimental or investigational.
Since reimbursement approval is required from each payor individually, seeking
such approvals can be a time consuming and costly process which, in the future,
could require the Company or its marketing partners to provide supporting
scientific, clinical and cost-effectiveness data for the use of the Company's
products to each payor separately. Significant uncertainty exists as to the
reimbursement status of newly approved health care products, and third party
payors are increasingly attempting to contain the costs of health care products
and services by limiting both coverage and the level of reimbursement for new
therapeutic products and by refusing in some cases to provide coverage for uses
of approved products for disease indications for which the FDA has not granted
marketing approval. In addition, Congress and certain state legislatures have
considered reforms that may affect current reimbursement practices, including
controls on health care spending through limitations on the growth of Medicare
and Medicaid spending. There can be no assurance that third party reimbursement
coverage will be available or adequate for any products or services developed by
the Company. Outside the U.S., the success of the Company's products is also
dependent in part upon the availability of reimbursement and health care payment
systems. Lack of adequate coverage and reimbursement provided by governments and
other third party payors for the Company's products and services could have a
material adverse effect on the Company's business, financial condition and
results of operations.

      Need for Additional Funds; Liquidity. The Company anticipates that its
cash and cash equivalents of $22.7 million on December 31, 1997 will be adequate
to fund its operations for 24 months from December 31, 1997. The Company's
future capital requirements and the adequacy of available funds will depend,
however, on numerous factors, including market acceptance of its existing and
future products, the successful commercialization of products in development,
progress in its product development efforts, the magnitude and scope of such
efforts, progress with preclinical studies, clinical trials and product
clearances by the FDA and other agencies, the cost and timing of its efforts to
expand its manufacturing capabilities, the cost of filing, prosecuting,
defending and enforcing patent claims and other intellectual property rights,
competing technological and market developments, and the development of
strategic alliances for the marketing of certain of its products. To the extent
that funds generated from the Company's operations, together with the Company's
existing capital resources and are insufficient to meet future requirements, the
Company will be required to obtain additional funds through equity or debt
financings, strategic alliances with corporate partners and others, or through
other sources. The terms of any future equity financings may be dilutive to the
Company's stockholders and the terms of any debt financings may contain
restrictive covenants which limit the Company's ability to pursue certain
courses of action. The ability of the Company to obtain financing is dependent
on the status of the Company's future business prospects as well as conditions
prevailing in the relevant capital


<PAGE>

markets. No assurance can be given that any additional financing will be made
available to the Company or will be available on acceptable terms should such a
need arise.

      Exposure to Product Liability Claims. The testing, marketing and sale of
human health care products entail an inherent risk of allegations of product
liability, and there can be no assurance that substantial product liability
claims will not be asserted against the Company. Although the Company has not
received any material product liability claims to date and has a $1 million
insurance policy to cover such claims should they arise, there can be no
assurance that material claims will not arise in the future or that the
Company's insurance will be adequate to cover all situations. Moreover, there
can be no assurance that such insurance, or additional insurance, if required,
will be available in the future or, if available, will be available on
commercially reasonable terms. Any product liability claim, if successful, could
have a material adverse effect on the Company's business, financial condition
and results of operations.

      Dependence Upon Key Personnel. The Company is highly dependent on the
members of its management and scientific staff, the loss of one or more of whom
could have a material adverse effect on the Company. In addition, the Company
believes that its future success will depend in large part upon its ability to
attract and retain highly skilled, scientific, managerial and manufacturing
personnel. The Company faces significant competition for such personnel from
other companies, research and academic institutions, government entities and
other organizations. There can be no assurance that the Company will be
successful in hiring or retaining the personnel it requires. The failure to hire
and retain such personnel could have a material adverse effect on the Company's
business, financial condition and results of operations.

   Environmental Regulation. The Company is subject to a variety of local, state
and federal government regulations relating to the storage, discharge, handling,
emission, generation, manufacture and disposal of toxic, or other hazardous
substances used in the manufacture of the Company's products. Any failure by the
Company to control the use, disposal, removal or storage of hazardous chemicals
or toxic substances could subject the Company to significant liabilities, which
could have a material adverse effect on the Company's business, financial
condition and results of operations.

      Risks Relating to International Operations. Approximately 14.5% of the
Company's product sales during 1997 were generated in international markets
through marketing partners. The Company's representatives, agents and
distributors which sell products in international markets are subject to the
laws and regulations of the foreign jurisdictions in which they operate and in
which the Company's products are sold. A number of risks are inherent in
international sales and operations. For example, the volume of international
sales may be limited by the imposition of government controls, export license
requirements, political instability, trade restrictions, changes in tariffs,
difficulties in managing international operations, import restrictions


<PAGE>

and fluctuations in foreign currency exchange rates. Such changes in the volume
of sales may have an adverse effect on the Company's business, financial
condition and results of operations.

      Potential Volatility of Stock Price; No Control Over Market Making. The
market price of shares of the Company's Common Stock may be highly volatile.
Factors such as announcements of new commercial products or technological
innovations by the Company or its competitors, disclosure of results of clinical
testing or regulatory proceedings, governmental regulation and approvals,
developments in patent or other proprietary rights, public concern as to the
safety of products developed by the Company and general market conditions may
have a significant effect on the market price of the Company's Common Stock. The
trading price of the Company's Common Stock could be subject to wide
fluctuations in response to quarter-to-quarter variations in the Company's
operating results, material announcements by the Company or its competitors,
governmental regulatory action, conditions in the health care industry generally
or in the medical products industry specifically, or other events or factors,
many of which are beyond the Company's control. In addition, the stock market
has experienced extreme price and volume fluctuations which have particularly
affected the market prices of many medical products companies and which often
have been unrelated to the operating performance of such companies. The
Company's operating results in future quarters may be below the expectations of
equity research analysts and investors. In such event, the price of the Common
Stock would likely decline, perhaps substantially.

   No person is under any obligation to make a market in the Common Stock or
publish research reports on the Company, and any person making a market in the
Common Stock or publishing research reports on the Company may discontinue
market making or publishing such reports at any time without notice. There can
be no assurance that an active public market in the Common Stock will develop
or, if developed, will be sustained.

      Lack of Payment of Dividends on Common Stock. The Company has never paid
cash dividends on its Common Stock and does not anticipate paying such dividends
in the foreseeable future. The Company currently intends to retain any future
earnings for use in the Company's business.

      Control by Principal Stockholders, Directors and Officers. The present
directors, executive officers and principal stockholders of the Company and
their affiliates beneficially own approximately 24.8% of the outstanding shares
of Common Stock. As a result, these stockholders may be able to exercise
significant influence over matters requiring shareholder approval, including the
election of directors and approval of significant corporate transactions. Such
concentration of ownership may have the effect of delaying or preventing a
change in control of the Company.

   Possible Adverse Effect of Certain Anti-Takeover Provisions. Certain
provisions of the Company's Restated Articles of Organization and Amended and
Restated By-laws could have the effect of discouraging a third party from
pursuing a non-negotiated takeover of the Company and


<PAGE>

preventing certain changes in control. These provisions include a classified
Board of Directors, advance notice to the Board of Directors of stockholder
proposals, limitations on the ability of stockholders to remove directors and to
call stockholder meetings, the provision that vacancies on the Board of
Directors be filled by a majority of the remaining directors, the ability of the
Board of Directors to issue, without further stockholder approval and the
ability of the Board of Directors to adopt a shareholder rights plan without
seeking stockholder approval. The Company also is subject to Chapter 110F of the
Massachusetts General Laws which, subject to certain exceptions, prohibits a
Massachusetts corporation from engaging in any of a broad range of business
combinations with any "interested stockholder" for a period of three years
following the date that such stockholder became an interested stockholder. These
provisions could discourage a third party from pursuing a takeover of the
Company at a price considered attractive by many stockholders, since such
provisions could have the effect of preventing or delaying a potential acquiror
from acquiring control of the Company and its Board of Directors.


<PAGE>

ITEM 7. FINANCIAL STATEMENTS

                                            BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                          As of,
                                                                                -------------------------
                                                                                December 31,     December 31,
                                                                                ------------     ------------
                                                                                1997             1996
                                                                                ----             ----

ASSETS
------

Current assets:

<S>                                                                             <C>             <C>
    Cash and cash equivalents................................................   $ 22,679,820    $2,704,665
    Accounts receivable......................................................      1,918,293       539,004
    Inventories..............................................................      2,541,552     2,481,646
    Prepaid expenses.........................................................        610,364       306,537
                                                                                ------------    ----------
      Total current assets...................................................     27,750,029     6,031,852

Property and equipment.......................................................      4,138,365     3,865,330
Less accumulated depreciation................................................      3,325,321     3,046,286
                                                                                ------------    ----------
        Net property and equipment...........................................        813,044       819,044
                                                                                ------------    ----------

Loan receivable from officer.................................................         75,000            --
Long term deposits...........................................................        111,265        68,765
                                                                                ------------    ----------
        Total Assets.........................................................   $ 28,749,338    $6,919,661
                                                                                ============    ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable.........................................................   $    967,986    $  550,314
    Accrued expenses.........................................................      1,253,154     1,055,234
    Deferred revenue.........................................................        200,000       200,000
                                                                                ------------    ----------
        Total current liabilities............................................      2,421,140     1,805,548
                                                                                ------------    ----------

Advance rent payment.........................................................        103,912       142,775

Redeemable convertible preferred stock; $.01 par value: authorized 750,000
   shares; issued and outstanding zero shares and 126,259 shares,
   respectively; at cost of $20.00 per share plus accrued dividends..........             --     2,602,527

Stockholders' equity:
   Undesignated preferred stock; $.01 par value: authorized 1,250,000 shares;
     no shares issued and outstanding........................................             --            --

   Common stock; $.01 par value: authorized 15,000,000 shares; issued and
     outstanding 9,691,091 shares and 4,930,719 shares, respectively.                 96,911        49,307
     Additional paid-in capital..............................................     32,156,504    11,693,070
     Accumulated deficit.....................................................     (6,029,129)   (9,373,566)
                                                                                ------------    ----------
         Total stockholders' equity..........................................     26,224,286     2,368,811
                                                                                ------------    ----------
         Total Liabilities and Stockholders' Equity..........................   $ 28,749,338    $6,919,661
                                                                                ============    ==========
</TABLE>

See accompanying notes to financial statements.


<PAGE>

ANIKA THERAPEUTICS, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                           Four
                                                                           month
                                                            Year           transitional  Year
                                                            ended          year ended    ended
                                                            December 31,   December      August 31,
                                                            1997           31, 1996      1996
                                                            ----           --------      ----
<S>                                                         <C>            <C>           <C>
Product revenue ..........................................  $ 9,255,338    $ 1,212,041   $ 4,612,918
Licensing fees ...........................................    2,700,000             --            --
                                                            -----------    -----------   -----------
              Net sales...................................   11,955,338      1,212,041     4,612,918
    Cost of product revenue...............................    4,744,123      1,308,625     4,472,214
                                                            -----------    -----------   -----------
        Gross profit (loss)...............................    7,211,215        (96,584)      140,704

Operating expenses:
    Research and development..............................    1,957,796      1,310,330     1,634,640
    Selling, general and administrative...................    2,092,467      1,308,583     1,469,257
                                                            -----------    -----------   -----------
         Total operating expenses.........................    4,050,263      2,618,913     3,103,897
                                                            -----------    -----------   -----------
    Income (loss) from operations ........................    3,160,952     (2,715,497)   (2,963,193)
    Interest income, net..................................     (262,162)       (57,898)     (114,314)
                                                            -----------    -----------   -----------
Income (loss) before income taxes.........................    3,423,114     (2,657,599)   (2,848,879)
                                                            -----------    -----------   -----------
Income taxes..............................................       78,677             --            --
                                                            -----------    -----------   -----------
         Net income (loss)................................  $ 3,344,437    $(2,657,599)  $(2,848,879)
                                                            ========================================

Basic earnings (loss) per share ..........................  $      0.60    $     (0.56)  $     (0.76)
                                                            ===========    ===========  ============
Shares used for computing basic earnings per share........    5,436,474      4,905,381     4,052,660

Diluted earnings (loss) per share ........................  $      0.44    $      (.56)  $      (.76)
                                                            ===========    ============  ============

Shares used for computing diluted earnings per share......    7,587,393      4,905,381     4,052,660
</TABLE>

See accompanying notes to financial statements.


<PAGE>

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                       Additional      Unearned                        Total
                                            Common stock               paid-in         stock           Accumulated     stockholders'
                                            $.01 par value             capital         option          deficit         equity
                                                                       -------         compensation    -----------     ------
                                                                                       -------------
                                              Shares        Amount
                                            ----------------------

<S>                                         <C>         <C>            <C>             <C>             <C>             <C>
Balance, September  1, 1995 ..........      3,291,475   $     32,915   $  7,378,514    $         --    $ (3,867,088)   $  3,544,341
Exercise of common  stock
   options ...........................         74,804            748        158,752              --              --         159,500
Issuance of common stock to
   401(k) plan .......................         19,447            194         79,176              --              --          79,370
Dividend on redeemable convertible
   preferred stock ...................             --             --       (224,605)             --              --        (224,605)
Issuance of common stock, net ........      1,455,000         14,550      3,527,035              --              --       3,541,585
Unearned stock option
   compensation ......................             --             --        632,813        (468,750)             --         164,063
Net loss .............................             --             --             --              --      (2,848,879)     (2,848,879)
                                         ------------   ------------   ------------    ------------    ------------    ------------
Balance, August 31, 1996 .............      4,840,726         48,407     11,551,685        (468,750)     (6,715,967)      4,415,375
                                         ------------   ------------   ------------    ------------    ------------    ------------
 Exercise of common  stock
   options ...........................         83,733            837        193,049              --              --         193,886
Issuance of common stock to
   401(k) plan .......................          6,260             63         27,381              --              --          27,444
Dividend on redeemable convertible
   preferred stock ...................             --             --        (79,045)             --              --         (79,045)
Unearned stock option
   compensation ......................             --             --             --         468,750              --         468,750
Net loss .............................             --             --             --              --      (2,657,599)     (2,657,599)
                                         ------------   ------------   ------------    ------------    ------------    ------------
Balance, December 31, 1996 ...........      4,930,719         49,307     11,693,070              --      (9,373,566)      2,368,811
                                         ------------   ------------   ------------    ------------    ------------    ------------
Exercise of common stock
   options ...........................        228,047          2,281        583,394              --              --         585,675
Issuance of common stock, net ........      2,725,000         27,250     17,004,231              --              --      17,031,481
Issuance of common stock to 401(k)
   plan ..............................         25,795            258        133,147              --              --         133,405
Issuance of common stock to Board of
Directors ............................          8,000             80         43,670              --              --          43,750
Conversion of redeemable convertible
   preferred stock ...................      1,773,530         17,735      2,802,027              --              --       2,819,762
Dividend on redeemable convertible
   preferred stock ...................             --             --       (103,035)             --              --        (103,035)
Net income ...........................             --             --             --              --       3,344,437       3,344,437
                                         ------------   ------------   ------------    ------------    ------------    ------------
Balance, December 31, 1997 ...........      9,691,091   $     96,911   $ 32,156,504    $         --    $ (6,029,129)   $ 26,224,286
                                         ============   ============   ============    ============    ============    ============
</TABLE>

See accompanying notes to financial statements.


<PAGE>

<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
                                                                                                    Four month
                                                                                 Year               transitional       Year
                                                                                 ended,             year ended,        ended,
                                                                                 Dec. 31,           Dec. 31,           Aug. 31,
                                                                                 1997               1996               1996
                                                                                 -------            ------------       -----------
<S>                                                                              <C>                <C>                <C>
Cash flows from operating activities:
   Net income (loss) ......................................................      $  3,344,437       $ (2,657,599)      $ (2,848,879)
   Adjustments to reconcile net income (loss) to net cash provided
     by (used for) operating activities:
     Depreciation and amortization ........................................           279,035            129,827            352,209
     Impairment of leasehold improvements .................................                --            375,924            200,000
     Amortization of unearned stock compensation ..........................                --            468,750            164,063
     Common stock issued to 401(k) plan and Board of
        Directors .........................................................           177,155             27,444             79,370
     Other long-term liabilities ..........................................           (38,863)           (57,225)          (520,757)
     Changes in operating assets and liabilities:
        Accounts receivable ...............................................        (1,379,289)            92,912           (440,940)
        Inventories .......................................................           (59,906)            32,634            778,136
        Prepaid expenses ..................................................          (303,827)           195,672           (183,247)
        Accounts payable and accrued expenses .............................           615,592            364,230            786,365
                                                                                 ------------       ------------       ------------
          Net cash provided by (used for) operating activities ............         2,634,334         (1,027,431)        (1,633,680)
                                                                                 ------------       ------------       ------------

Cash flows used for investing activities:
   Long term deposits .....................................................           (42,500)           (68,765)                --
   Additions to property and equipment ....................................          (273,035)           (44,048)          (413,752)
    Loan receivable from officer ..........................................           (75,000)                --                 --
                                                                                 ------------       ------------       ------------
          Net cash used for investing activities ..........................          (390,535)          (112,813)          (413,752)
                                                                                 ------------       ------------       ------------

Cash flows provided by financing activities:
   Proceeds from issuance of common stock, net ............................        17,031,481                 --          3,541,585
   Expenses from issuance of preferred stock ..............................                --                 --            (27,293)
   Proceeds  from exercise of preferred  stock  warrants ..................           114,200                 --                 --
   Proceeds from exercise of stock options ................................           585,675            193,886            159,500
   Payments on long-term debt .............................................                --                 --           (800,000)
                                                                                 ------------       ------------       ------------
          Net cash provided by financing activities .......................        17,731,356            193,886          2,873,792
                                                                                 ------------       ------------       ------------
          Increase (decrease) in cash and cash equivalents ................        19,975,155           (946,358)           826,360
Cash and cash equivalents at beginning of period ..........................         2,704,665          3,651,023          2,824,663
                                                                                 ------------       ------------       ------------
Cash and cash equivalents at end of period ................................      $ 22,679,820       $  2,704,665       $  3,651,023
                                                                                 ============       ============       ============

Supplemental disclosure of cash flow information:
   Cash paid for interest .................................................      $      2,771                 --       $     42,222
                                                                                 ============       ============       ============

Supplemental disclosure of non cash items:

   Repayment of debt through future deferred sublease
     payments .............................................................      $         --       $         --       $    200,000
                                                                                 ============       ============       ============
   Conversion of redeemable convertible
     preferred stock ......................................................      $  2,819,762                 --                 --
                                                                                 ============       ============       ============
   Dividend on redeemable convertible
     preferred stock ......................................................      $    103,035       $     79,045       $    224,605
                                                                                 ============       ============       ============
</TABLE>

See accompanying notes to financial statements.


<PAGE>

                          NOTES TO FINANCIAL STATEMENTS

1. NATURE OF BUSINESS

      Anika Therapeutics, Inc. (the Company) develops, manufactures and
commercializes therapeutic products and devices intended to promote the
protection and healing of bone, cartilage and soft tissue.

      These products are based on hyaluronic acid (HA), a naturally-occurring,
biocompatible polymer found throughout the body. Due to its unique biophysical
and biochemical properties, HA plays an important role in a number of
physiological functions such as the protection and lubrication of soft tissues
and joints, the maintenance of the structural integrity of tissues, and the
transport of molecules to and within cells. The Company has been developing HA
and HA based products since 1983.

      The Company's currently marketed products consist of ORTHOVISC(R), which
is an HA product used in the treatment of some forms of osteoarthritis in humans
and HYVISC(R), which is an HA product used in the treatment of equine
osteoarthritis. ORTHOVISC is currently approved for marketing in Canada and
Europe; in the U.S. ORTHOVISC is currently limited to investigational use only.
The Company manufactures AMVISC(R) and AMVISC Plus(R), which are HA products
used as viscoelastic supplements in ophthalmic surgery, for Bausch and Lomb
Surgical, a subsidiary of Bausch and Lomb. The Company is currently developing
INCERT(R), which is an HA based product designed for use in the prevention of
post-surgical adhesions. In addition, the Company is collaborating with Orquest,
Inc. to develop OSSIGELTM, an injectable formulation of basic fibroblast growth
factor combined with HA designed to accelerate the healing of bone fractures.

      Commencing on December 31, 1996, the Company changed its fiscal year end
from August 31 to December 31.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   Basis of Presentation

      Anika became an independent company in May 1993 when MedChem Products,
Inc. ("MedChem"), distributed 3,154,812 shares of outstanding Anika common stock
to MedChem stockholders as a dividend.

   Use of Estimates

      The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.


<PAGE>

   Cash and Cash Equivalents

      Cash and cash equivalents consists of cash and investments with original
maturities of three months or less.

   Financial Instruments

      The carrying amount of cash and cash equivalents, accounts receivable,
accounts payable and accrued expenses approximates fair value because of the
short term maturity of these items.

   Inventories

      Inventories are stated at the lower of cost or market, with cost being
determined using the first-in, first-out (FIFO) method.

   Revenue Recognition

      The Company recognizes revenue on product sales when the products are
shipped and the customer takes ownership. The Company records advance payments
for products as deferred revenue and records the revenue when the product is
shipped.

      Revenue related to licensing payments is recognized when the earnings
process is deemed to be complete and collection of revenue is assured.

   Property and Equipment

      Property and equipment is stated at cost and depreciated using the
straight-line method over the estimated useful lives of the respective assets,
as follows:

<TABLE>
<S>                                                      <C>
       Machine and equipment ............................ 5-10 years
       Furniture and fixtures ............................. 5 years
       Leasehold improvements .......................... 4-10 years
</TABLE>

      Amortization on leasehold improvements is calculated using the
straight-line method over the shorter of the lease term or estimated life of the
asset.

   Impairment of Long-Lived Assets and Assets to Be Disposed Of

      The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" (SFAS 121), on September 1, 1996.
This statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be recoverable.

      During the four-month transitional year ended December 31, 1996 and the
fiscal year ended August 31, 1996 the Company recorded losses on impairment for
certain leasehold improvements of approximately $376,000


<PAGE>

and $200,000, respectively. The losses resulted from relocating the corporate
offices and the Company's unsuccessful attempts to obtain sublease income
sufficient enough to recover the amortization of the improvements.

   Research and Development

      Research and Development costs are expensed as incurred.

   Earnings (Loss) Per Share

   The Company has adopted SFAS No. 128, "Earnings per Share", which establishes
standards for computing and presenting earnings (loss) per share, simplifying
previous standards and making them comparable to international earnings per
share standards.

   Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period. Diluted earnings
per share is computed by dividing net income (loss) by the weighted average
number of common shares and dilutive potential common shares outstanding during
the period. Under the treasury stock method, the unexercised options are assumed
to be exercised at the beginning of the period or at issuance, if later. The
assumed proceeds are then used to purchase common shares at the average market
price during the period.

   Potential common shares for which inclusion would have the effect of
increasing diluted earnings per share (i.e. antidilutive) are excluded from the
computation. Antidilutive potential common shares outstanding at December 31,
1996 and August 31, 1996 were approximately 2,203,871 and 2,086,467,
respectively.

   For the four month transitional year ended December 31, 1996 and the fiscal
to year ended August 31, 1996, the numerator and denominator used to
compute both basic and diluted earning per share were the same due to the fact
that the Company incurred a net loss in both periods.

   The following illustrates a reconciliation of the numerator and
denominator for the December 31, 1997 basic and diluted earnings per
share computations.

<TABLE>
<CAPTION>
                                           For the year ended December 31, 1997
                                       -----------------------------------------
                                       Income          Shares          Per-Share
                                       (Numerator)     (Denominator)   Amount
                                       -----------     -------------   ------
<S>                                    <C>             <C>             <C>
     Net income                        3,344,437

     Less: Redeemable convertible
       preferred stock dividend         (103,035)
                                       ---------
     Basic EPS
     Income available to
       common stockholders             3,241,401       5,436,474       $.60
                                       =========       =========       ====

     Effect of Dilutive Securities
       Warrants and options                              952,482
       Redeemable convertible
          preferred stock                103,035       1,198,437
                                       ---------

     Diluted EPS
       Income available to
       common stockholders             3,344,437       7,587,393       $.44
                                       =========       =========       ====
</TABLE>

<PAGE>

     Income Taxes

      Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted rates in effect for the year in which those temporary differences are
expected to be recovered or settled.

   Stock Based Compensation

      Prior to August 31, 1996, the Company accounted for its stock option plan
in accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25. "Accounting for Stock Issued to Employees," and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise price. On
September 1, 1996, the Company adopted the provisions of SFAS No. 123,
"Accounting for Stock- Based Compensation", which permits entities to recognize
as expense over the vesting period the fair value of all stock-based awards on
the date of grant. Alternatively, SFAS 123 also allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide pro forma net earnings
(loss) disclosures for employee stock option grants made in fiscal 1996 and
future years as if the fair-value-based method defined in SFAS 123 had been
applied. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide the pro forma disclosure of SFAS 123 (see note 8).

   Significant Customers

      Sales of AMVISC to Chiron Vision, who was acquired by Bausch & Lomb
Surgical, accounted for 84%, 94% and 89% of total product revenue for the year
ended December 31, 1997, the four-month transitional year ended December 31,
1996 and the fiscal year ended August 31, 1996, respectively. In addition,
ORTHOVISC(R) sales to another customer accounted for 14.5% of total product
revenue for the year ended December 31, 1997.

   Concentration of Credit Risks

      The Company invests its excess cash in deposits with major U.S. financial
institutions and money market funds. The Company has established guidelines
relative to diversification and maturities that maintain safety and liquidity.
To date, the Company has not experienced any losses on its cash equivalents and
money market funds.


<PAGE>

3. INVENTORIES

      Inventories consist of the following:

<TABLE>
<CAPTION>
                                              December 31,
                                         1997              1996
                                      ----------        ----------
<S>                                   <C>               <C>
      Raw materials ...............   $  442,364        $  691,826
      Work in process .............    2,098,736         1,780,964
      Finished goods ..............          452             8,856
                                      ----------        ----------
              Total................   $2,541,552        $2,481,646
                                      ==========        ==========
</TABLE>

4. PROPERTY & EQUIPMENT

      Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                             December 31,
                                        1997              1996
                                     ----------------------------
<S>                                  <C>               <C>
      Machinery and equipment .....  $2,353,761        $2,188,463
      Leasehold improvements.......   1,495,923         1,397,907
      Furniture and fixtures ......     288,681           278,960
                                     ----------        ----------
              Total................  $4,138,365        $3,865,330
                                     ==========        ==========
</TABLE>

5. LOAN RECEIVABLE FROM OFFICER

      Loan receivable from an officer consists of a loan made to an officer of
the Company on March 17, 1997. The entire balance is due at the earlier of the
end of five years or at the termination of the officer's employment. Interest
accrues at an annual rate of 6% and is payable monthly over the term of the
loan.

6. ACCRUED EXPENSES

      Accrued expenses consists of the following:

<TABLE>
<CAPTION>
                                           December 31,
                                        1997           1996
                                      -----------  ----------
<S>                                   <C>          <C>
       Accrued compensation .......   $   612,176  $  308,496
       Other accrued expenses .....       640,978     746,738
                                      -----------  ----------
               Total ..............   $ 1,253,154  $1,055,234
                                      ===========  ==========
</TABLE>

7. LEASE OBLIGATIONS

      The Company leases two facilities with one lease expiring in February 2001
and the other in October 2001. As of December 31, 1997 one facility is being
partially sublet. These leases are accounted for as operating leases in the
accompanying statements of operations. Net rental payments in connection with
the leases, totaled $352,922 for the year ended December 31, 1997, $115,074 for
the four-month transitional year ended December 31, 1996 and $369,928 for the
fiscal year ended August 31, 1996. Future minimum lease payments under the
operating leases and sublease income for the years ending December 31 are as
follows:


<PAGE>

<TABLE>
<CAPTION>
                             Lease            Sublease             Net
                           Payments            Income           Payments
                           --------          ---------         ---------
<S>                       <C>                <C>               <C>
       1998 ...........   $  453,712         $  43,458         $  410,254
       1999 ...........      477,338            44,024            433,314
       2000 ...........      502,145            44,625            457,520
       2001 ...........      132,814            14,946            117,868
       2002 ...........           --                --                 --
                          ----------         ---------         ----------
               Total      $1,566,009         $ 147,053         $1,418,956
                          ==========         =========         ==========
</TABLE>

8. STOCK OPTION PLAN

      In 1993, the Company adopted the Anika Therapeutics, Inc. Stock Option
Plan (the "Plan") and reserved 1,000,000 shares of the Company's common stock
for the grant of stock options to employees, officers, directors, consultants
and advisors of the Company. In addition, the Company also established the
Directors Stock Option Plan (the "Directors Plan") and reserved 40,000 shares of
the Company's common stock for the Board of Directors. On March 21, 1995 the
Company's Board of Directors approved an increase in the number of shares
reserved for grant under the Plan to 2,000,000 shares and the Company's
stockholders approved such an increase at the Annual Meeting of Stockholders
held on January 10, 1996.

      On October 28, 1997, the Company amended the Plan to reserve an additional
1,000,000 shares of common stock. In addition, the Board of Directors granted to
certain executive officers and employees of the Company options to acquire
269,000 shares of common stock at an exercise price of $7.625 per share, vesting
over a four-year period. Such grants are subject to stockholder approval of the
amendment to the Plan. If the amendment is approved, the Company will be
required to record compensation expense with respect to the 269,000 options
granted equal to the difference, if any, between the exercise price and the
market value of the common stock at the time of such approval. Such compensation
expense, if any, will be recognized on a straight line basis over the option's
four year vesting period.

      Combined option activity for both plans is summarized as follows:

<TABLE>
<CAPTION>
                                                   Weighted Avg Exercise
                                       Shares      Price per Share
                                       ------      ---------------
<S>                                    <C>         <C>
       Balance at September 1, 1995    1,346,072         $2.55
               Granted                   302,750          1.69
               Canceled                 (146,391)         2.83
               Exercised                 (74,804)         2.13
                                       ---------         -----
       Balance at August 31, 1996      1,427,627          2.36
               Granted                   435,500          4.91
               Canceled                       --            --
               Exercised                 (83,732)         2.35
                                       ---------         -----
       Balance at December 31, 1996    1,779,395          2.99
               Granted                   309,500          7.40
               Canceled                  (14,333)         2.42
               Exercised                (228,047)         2.54
                                       ---------         -----
       Balance at December 31, 1997    1,846,515         $3.77
                                       =========         =====
</TABLE>

<PAGE>

      Generally, options vest in varying installments up to four years after the
date of grant and have an expiration date no later than ten years after the date
of grant. The price range of options exercisable as of December 31, 1997,
December 31, 1996 and August 31, 1996 was from $1.383 to $5.25, $1.067 to $2.625
and $1.383 to $4.781, respectively. Options for 1,148,680 shares were
exercisable at December 31, 1997.


      The following table summarizes significant ranges of outstanding
options under the Plan and the Directors Plan at December 31, 1997:

            Options Outstanding                     Options Exercisable
------------------------------------------------  ----------------------
                           Weighted
                            Average     Weighted                Weighted
Ranges of                  Remaining     Average                 Average
 Exercise       Number    Contractual   Exercise     Number     Exercise
   Price     Outstanding      Life        Price    Exercisable    Price
-----------  -----------  -----------  ----------  -----------  --------
$0.50-$2.00    264,178        7.50        $0.96      239,178     $1.01
$2.01-$4.50    906,895        6.71        $2.84      792,894     $2.76
$4.51-$6.77    401,442        8.58        $5.11      116,608     $5.00
$6.77-$8.13    274,000        9.82        $7.62         -           -

      During 1996, options for 302,750 shares of its $.01 par value common stock
were granted by the Company. The Company recorded deferred compensation of
$632,813 on options for 168,750 shares to account for the difference between the
market value of the stock at the time of grant and exercise price of the
options.

      The Company applies APB Opinion No. 25 and related interpretations in
accounting for the Plan. Accordingly, no compensation cost has been recognized
in the accompanying financial statements for its fixed stock option plan. Had
compensation cost for the Company's stock option plan been determined based on
the fair value at the grant dates for grants under this plan consistent with the
methodology of SFAS 123, the Company's net income (loss) for the year ended
December 31, 1997, the four-month transitional year ended December 31, 1996, and
the fiscal year ended August 31, 1996 would have changed to the pro forma
amounts as follows:

<TABLE>
<CAPTION>
                                                 Four month
                                 Year            transitional   Fiscal year
                                 ended           year ended     ended
                                 December 31,    December 31,   August 31,
                                 1997            1996           1996
                                 ----            ----           ----
<S>                              <C>             <C>            <C>
Net income (loss) reported       $3,344,437      $(2,657,599)   $(2,848,879)

Pro forma net income (loss)....  $2,644,895      $(2,765,290)   $(3,162,717)
                                 ==========      ===========    ===========
</TABLE>

      The per share weighted-average fair value of stock options granted during
the year ended December 31, 1997, the four-month transitional year ended
December 31, 1996, and the fiscal year ended August 31, 1996 was $7.40, $4.91,
and $1.69, respectively, estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions for grants:
no dividend yield for all three years; expected volatility of 54.8%, 57.8% and
57.9%, respectively; risk-free interest rates of 6.0% for all periods; and
expected lives of six years.

      Pro forma net income (loss) reflects only options granted in the year
ended December 31, 1997, the four month transitional year ended December 31,
1996, and the fiscal year ending August 31, 1996. Therefore, the full impact of
compensation cost for stock options under SFAS 123 is not reflected in the pro
forma net income (loss) amounts presented above because compensation cost is
reflected over the options' vesting period of up to four years, and
compensation cost for options granted prior to September 1, 1995 is not
considered.

<PAGE>

9. REDEEMABLE CONVERTIBLE PREFERRED STOCK

      On May 17, 1995, the Company issued 120,970 shares of Series A
Redeemable Convertible Preferred Stock ("Series A stock") at a selling price
of $20.00 per share for a total consideration of $2,235,642, net of offering
costs. On December 1, 1997, the Company completed a secondary offering of
2,725,000 shares of common stock. In connection with the completion of the
offering the Company converted the entire amount of Series A stock, including
accrued dividends, (130,576 shares) to 1,305,760 shares of common stock. In
addition the Company also converted all warrants (46,777) issued in
connection with the Series A stock to 467,770 shares of common stock.

      Each share of the Series A stock was entitled to receive an
annual dividend on May 1 of each year, at a rate of $1.80 per share, payable in
additional shares of Series A stock, with the number of dividend shares
determined by the price of the Company's underlying common stock. The Company
had the right to elect to pay the dividend in cash if certain financial
covenants were met. During each consecutive ninety day period in which the
average quarterly price of the Company's common stock remained above $6.00
per share, no dividend accrued. As of June 5, 1997, the Company ceased
accruing dividends. For the period May 1, 1996 to April 30, 1997 the Company
issued 3,952 additional shares of Series A stock to preferred Shareholders as
a dividend payment. For the period May 17, 1995 through April 30, 1996, Anika
issued 5,289 additional shares of Series A stock to the preferred
shareholders as dividend payments. The total recorded values of the
dividend payment were $227,266 and $208,227, respectively. For the year ended
December 31, 1997, the four month transitional year ended December 31, 1996
and the fiscal year ended August 31, 1996, accrued dividends payable were $0,
$158,737 and $79,693, respectively.

      The holders of the Series A stock were entitled to liquidation preference
over the common shareholders at $20.00 per share plus accrued dividends. Each
share of the Series A stock had voting rights equal to the number of common
shares into which each share of Series A stock was convertible at the time of
such vote. In addition, the holders of the Series A stock were entitled to
certain representation on the Company's Board of Directors based upon the number
of shares outstanding.


<PAGE>

10. COMMON STOCK

      On December 1, 1997 the Company completed a secondary offering of common
stock. In connection with the offering the Company issued 2,725,000 shares of
common stock and received total gross proceeds of $19,075,000, and net proceeds
of $17,031,481. The Company intends to use the net proceeds of this offering for
expansion of its manufacturing facilities, to fund the Company's product
research and development efforts, including clinical trials, and for working
capital and other general corporate purposes. The Company may also use a portion
of the net proceeds of this offering to acquire or invest in new products or
technologies or to acquire other businesses.

      In March, 1996 the Company completed a financing involving the private
placement of 1,455,000 shares of newly issued common stock to institutional and
accredited investors. Total gross proceeds were $3,986,700 and net proceeds
to the Company after fees and expenses were $3,541,585. In addition,
the Company granted certain registration rights and filed a registration
statement with the Securities and Exchange Commission that was declared
effective by the Securities and Exchange Commission on May 23, 1996. The
proceeds from the private placement were used to repay a $1,000,000 debt
obligation and for general working capital purposes.

11. WARRANTS

      In connection with the sale of Series A stock, the Company issued warrants
to the holders of Series A stock to purchase 60,485 shares of Series A stock,
exercisable at $20.00 per share. These warrants were called by the Company on
October 22, 1997 and are no longer outstanding.

      In connection with the private placement of newly issued common stock in
March, 1996, the Company issued warrants to Leerink, Swann, Garrity, Sollami,
Yaffe and Wynn, Inc. ("Leerink Swann & Company"), for 146,664 shares of common
stock exercisable at $3.00 per share and warrants for 57,036 shares of common
stock exercisable at $4.00 per share. On January 8, 1998, the notice for
mandatory exercise of the warrants by the Company was sent in accordance with
the warrant provisions and all warrants were converted into common stock and the
Company received $668,136. L. Eric Swann, an officer, director and shareholder
of Leerink, Swann & Company, is the son of David A. Swann, Chairman of the Board
of Directors of the Company.


<PAGE>

12. EMPLOYEE BENEFIT PLAN

      Full-time employees are eligible to participate in the Company 401(k)
savings plan. Employees may elect to contribute a percentage of their
compensation to the plan, and the Company will make matching contributions up to
a limit of 5% of an employee's compensation. In addition, the Company can make
annual discretionary contributions. For the year ended December 31, 1997, the
four-month transitional year ended December 31, 1996, and the fiscal year ended
August 31, 1996, the Company's matching contributions and any discretionary
contributions to the plan were in the form of the Company's common stock. The
Company's total 401(k) savings plan expense for each respective period listed
above was $133,405, $27,444 and $79,370, respectively.

13. LICENSING AGREEMENTS

      In November 1997, the Company entered into a long-term distribution
agreement with Zimmer, Inc. ("Zimmer"), a subsidiary of Bristol-Myers Squibb
Company (the "Zimmer Distribution Contract"). The Zimmer Distribution Contract
provides Zimmer with exclusive marketing and distribution rights to ORTHOVISC in
the United States, Canada, Australia, Hong Kong, Indonesia, Malaysia, New
Zealand, the Philippines, Singapore, Taiwan and Thailand. Zimmer also has the
option under the agreement to seek regulatory approval for and market ORTHOVISC
in Japan and has the right of first offer in China. Upon signing of this
agreement, the Company received an up-front non-refundable payment of $2.5
million, which has been recorded as revenue as a licensing fee in the
December 31, 1997 statement of operations. Zimmer has also agreed to make
future payments aggregating up to $20.5 million upon the achievement of
certain regulatory approval and enumerated sales milestones. As an
alternative to a $2.5 million milestone payment, Zimmer has the right to
elect to acquire shares of the Company's Common Stock equal to the greater of
$2.5 million or 9.9% of the then outstanding Common Stock (but not to exceed
19.9% of the then outstanding Common Stock) at a premium to the then current
market price. In addition, under the terms of the agreement, Zimmer has the
option to terminate the agreement on August 1, 1998 if certain specified
events occur prior to that date and upon payment to Anika of $1.0 million.

<PAGE>

14. INCOME TAXES

      Deferred tax assets, net of any valuation allowance, and liabilities
arising from temporary differences, income tax credit carryforwards and loss
carryforwards are measured by using tax rates expected to be in effect when they
reverse or are realized. The components of the net deferred tax asset are as
follows:






1997 Four month transitional year ended December 31, 1996

<TABLE>
<CAPTION>
                                                  Four month
                                                  trans-
                                     Year         itional
                                     ended        year         Fiscal year
                                     December     ended        ended
                                     31,          December     August 31,
                                     1997         31,  1996    1996
                                     ----         ----------   ----
<S>                                 <C>          <C>           <C>
 Gross deferred tax assets:

   Depreciation.................    $  358,566   $  636,386    $  461,151

   Accrued expenses & other.....        87,755      186,201       149,368
   Inventory loss reserve.......            --       35,430       158,969
   Non-qualified stock option          217,081      103,822        66,069
      amortization..............
   Uniform capitalization.......        59,743       62,861        50,754
   Net operating loss                2,001,952    3,295,569     2,267,960
     carryforward..............
   Credit carryforward..........       219,194      154,347        18,388
                                    ----------   ----------    ----------
Gross deferred tax assets.......     2,944,291    4,474,616     3,172,659
   Less: valuation allowance....    (2,944,291)  (4,474,616)   (3,172,659)
                                    ----------   ----------    ----------

Net deferred tax asset..........    $       --   $       --    $       --
                                    ==========   ==========    ==========
</TABLE>

      Income tax expense was $78,677 for the year ended December 31, 1997 and $0
for the four month transitional year ended December 31, 1996 and the fiscal year
ended August 31, 1996, respectively, and differs from the amounts computed by
applying the U.S. Federal income tax rate of thirty-four percent to pretax
income as a result of the following:

<TABLE>
<CAPTION>
                                                                        Four month
                                                                        trans-
                                                        Year            itional
                                                        ended           year             Fiscal year
                                                        August          ended            ended
                                                        31,             December         August 31,
                                                        1996            31, 1996         1996
                                                        ----            --------         ----
<S>                                                     <C>             <C>             <C>
Computed expected tax (benefit) expense.                $1,163,859     $ (903,584)      $  (968,619)
State tax (benefit) expense (net of federal                215,329       (166,631)         (178,323)
   benefit)
Nondeductible expenses                                       3,804            517             1,638
Increase in credit carryforward                                  0       (219,361)           (9,200)
Other                                                       (7,660)         5,335               149
Change in valuation allowance related
   to income tax benefit                                (1,296,655)     1,283,724         1,154,355
                                                        ----------     ----------       -----------
Tax expense                                             $   78,677     $       --       $        --
                                                        ==========     ==========       ===========
</TABLE>


<PAGE>

      The valuation allowance for deferred tax assets was $2,944,291 at December
31, 1997, a decrease of $1,530,325 over the balance of $4,474,616 at December
31, 1996. The valuation allowance for deferred tax assets was $4,474,616 at
December 31, 1996 an increase of $1,301,957 over the balance of $3,172,659 at
August 31, 1996. Subsequently recognized tax benefits relating to the valuation
allowance for deferred tax assets will be allocated as follows:

<TABLE>
<CAPTION>
                                         Year ended
                                         December 31, 1997
                                         -----------------
<S>                                      <C>
Income tax benefit                       $3,256,103
Additional paid in capital                 (311,812)
                                         ----------
                                         $2,944,291
                                         ==========
</TABLE>

      The Company has total Federal and State net operating losses of $4,971,325
and $4,808,490 for the years ended December 31, 1997 and 1996, respectively.

      The Federal net operating losses will begin to expire beginning 2008. The
state net operating losses will begin to expire in 1997. However, if changes in
the Company's stock ownership exceed 50% of the value of the Company's common
stock during any three-year period, the utilization of the federal net operating
loss and credit carryforwards may be subject to limitations.


<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Anika Therapeutics, Inc.:

   We have audited the accompanying balance sheets of Anika Therapeutics, Inc.
(the Company) as of December 31, 1997 and 1996, and the related statements of
operations, stockholders' equity and cash flows for the year ended December 31,
1997, the four-month transitional year ended December 31, 1996 and the year
ended August 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

   We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

   In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Anika Therapeutics, Inc. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the year ended December 31, 1997, the four-month transitional year ended
December 31, 1996 and the year ended August 31, 1996, in conformity with
generally accepted accounting principles.

                                        KPMG Peat Marwick LLP

Boston, Massachusetts
February 18, 1998


<PAGE>

PART II

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
        ON ACCOUNTING AND FINANCIAL DISCLOSURE

     None.

PART III

ITEM 9. DIRECTORS,EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
        COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     The information required by item 9 is hereby incorporated by reference to
the Registrant's Proxy Statement (the "Proxy Statement") for the Annual Meeting
of Stockholders to be held on June 3, 1998 under the headings "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance".

ITEM 10. EXECUTIVE COMPENSATION

     The information required by Item 10 is hereby incorporated by reference to
the Proxy Statement under the heading "Election of Directors-Executive
Compensation".

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT

     The information required by Item 11 is hereby incorporated by reference to
the Proxy Statement under the heading "Beneficial Ownership of Voting Stock".

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by Item 12 is hereby incorporated by reference to
the Proxy Statement under the headings "Employment Arrangements with Senior
Executives" and "Certain Relationships".


<PAGE>

ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
         AND REPORTS ON FORM 8-K

     (a)   Documents filed as part of Form 10-KSB.

           (1)   Financial Statements

     The financial statements of the Company have been included in Item 7 of
this report.

   Balance Sheets - December 31, 1997 and 1996
   Statements of Operations - Year ended December 31, 1997,
        four month transitional year ended December 31, 1996
        and fiscal year ended Aug 31, 1996
   Statements of Stockholders' Equity - Year ended December 31, 1997,
        four month transitional year ended Dec 31, 1996,
        and fiscal year ended Aug 31, 1996
   Statements of Cash Flows - Years ended December 31, 1997,
        four month transitional year ended Dec 31, 1996,
        and fiscal year ended Aug 31, 1996
   Notes to Financial Statements

         (2) Schedules
         Page #

         Schedules other than those listed above have been omitted since they
         are either not required or the information required is included in the
         financial statements or the notes thereto.

         KPMG Peat Marwick LLP's Reports with respect to the above listed
         financial statements and financial statements schedules are included
         herein on Item 7 and Exhibit 23.1

         (3)Exhibits required to be filed by Item 601 of Regulation S-K
         and by Item 13 (c)

         The list of Exhibits filed as a part of this Annual Report on Form
         10-KSB are set forth on the Exhibit Index immediately preceding such
         Exhibits, and is incorporated herein by reference.

     (b) Reports on Form 8-K

     The Company filed a report on Form 8K on February 25, 1998 notifying the
     SEC of Anika Therapeutics year end results and also that the Company
     received notification from the U.S. Food and Drug Administration's Center
     for Devices and Radiological Health (the "FDA") that the Company's
     application for Pre-Market Approval for its ORTHOVISC therapy for the
     treatment of osteoarthritis of the knee has been accepted for filing, with
     a date of December 31, 1997. In addition, the notification stated that the
     FDA will not refer the PMA to the Orthopedic and Rehabilitation Advisory
     Panel for review and recommendation.


<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.


          Anika Therapeutics, Inc.


          BY: /s/ Sean F. Moran
              -----------------
          Name: Sean F. Moran
          Title: Principal Financial & Accounting Officer
          Date: March 31, 1998


<PAGE>

SIGNATURES

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on
the dates indicated, on March 31, 1998.


SIGNATURE                                                                TITLE
---------                                                            ---------

/s/ David A. Swann
---------------------
David A. Swann                                                      Chairman &
                                                      Chief Scientific Officer

/s/ Joseph L. Bower
---------------------
Joseph L. Bower                                                       Director

/s/ Eugene A. Davidson
---------------------
Eugene A. Davidson                                                    Director

/s/ Jonathan D. Donaldson
---------------------
Jonathan D. Donaldson                                                 Director

/s/ Samuel F. McKay
---------------------
Samuel F. McKay                                                       Director

/s/ Harvey S. Sadow
---------------------
Harvey S. Sadow                                                       Director

/s/ Steven E. Wheeler
---------------------
Steven E. Wheeler                                                     Director

/s/ J. Melville Engle
---------------------                                        President & Chief
J. Melville Engle                                            Executive Officer

/s/ Sean Moran
---------------------
Sean Moran                                             Chief Financial Officer


<PAGE>


Exhibit Index

Exhibit  #      Description
+        3.1    Amended and Restated Articles of Organization of Anika
                Therapeutics, Inc. ("Anika") as amended.
+++      3.2    Certificate of Vote of Directors Establishing a Series of
                Convertible Preferred Stock.
+++++++  3.3    Amendment to Amended and Restated Articles of Organization of
                Anika, as amended.
+++++++  3.4    By-Laws of Anika, as amended.
+*       10.1   Settlement Agreement dated January 11, 1991 among MedChem
                Products, Inc. ("MedChem"), Kabi Pharmacia AB , Pharmcia, Inc.,
                Dr. Endre Balazs and IOLAB Corporation.
+*       10.2   Third Amendment to Distribution Agreement dated as of January
                11, 1991 between Anika and IOLAB Corporation, as amended.
++       10.3   Fourth Amendment to Distribution Agreement dated as of August 1,
                1994 between Anika and IOLAB Corporation.
++*      10.4   Supply Agreement dated as of August 1, 1994 between Anika and
                IOLAB Corporation.
+*       10.5   Sponsored Research Agreement dated as of June 18, 1992
                between Tufts University and Anika, as amended.
+        10.6   Form of TMJ Agreement dated as of April 29, 1993 between Anika
                and MedChem.
+        10.7   Form of Sublease Agreement dated as of April 29, 1993 between
                Anika and MedChem.
+        10.8   Form of Tax Matters Agreement dated as of April 29, 19
                between Anika and MedChem.
+        10.9   Form of Plan and Agreement of Distribution dated as of April
                29, 1993 between MedChem and Anika.
++++++   10.10  1993 Stock Option Plan, as amended.
++++++++ 10.11  1993 Directors Stock Option Plan.
+*       10.12  License Agreement dated as of July 22, 1992 between Tufts
                University and Anika, as amended.
+++      10.13  Series A Preferred Stock Purchase Agreement by and among the
                Purchasers Listed on Schedule 1 thereto and Anika, dated as of
                May 17, 1995.
+++      10.14  Shareholders' Agreement by and among Anika and Stockholders
                listed on Schedule 1 thereto, dated as of May 17, 1995.
++++     10.15  Lease dated March 10, 1995 between Cummings Properties and
                Anika.
+++++    10.16  Amended and Restated Employment Agreement with David A. Swann,
                dated as of February 1, 1996.
+++++    10.17  Non-Disclosure and Non-Competition Agreement with David A.
                Swann, dated as of February 1, 1996.
+++++    10.18  Non-Statutory Stock Option Agreement with David A. Swann, dated
                as of February 1, 1996.
+++++    10.19  Portion of Form of Stock Purchase Agreement dated as of March 1,
                1996 containing undertaking by the Company to register shares of
                Common Stock.
+++++    10.20  (i) Warrant Agreement dated as of April 1, 1996 relating to
                146,664 shares of Common Stock.
                (ii) Warrant Agreement dated as of April 1, 1996 relating to
                57,036 shares of Common Stock.
**       10.21  Letter Agreement dated as of August 27, 1997 between the Company
                and Leerink, Swann & Company relating to registration rights.
++++++   10.22  Employment Agreement dated September 24, 1996 between  Anika
                and J. Melville Engle.


<PAGE>

**       10.23  Promissory note for $75,000 dated as of March 17, 1997 from
                J. Melville Engle to the Company.
***      10.24  Exclusive Distribution Agreement dated as of November 7, 1997
                between Anika and Zimmer, Inc.
         11.1   Statement of Computation of Per Share Earnings.
         23.1   Consent of Independent Auditors
         27.1   Financial Data Schedule.

*        Confidential treatment granted as to certain portions of this Exhibit.
**       Incorporated by reference to Exhibits to Anika's SB-2 as filed on
         October 29, 1997.
***      Incorporated by reference to Exhibits to Anika's SB-2/A as filed on
         November 10, 1997. Confidential treatment was granted as to certain
         portions of this Exhibit.
+        Incorporated by reference to Exhibits to the Registration Statement
         of Form 10 (File No. 0-21326) filed by Anika on March 5, 1993.
++       Incorporated by reference to Exhibits to Anika's Form 10-K for the
         fiscal year ended August 31, 1994 as filed on November 23, 1994.
+++      Incorporated by reference to Exhibits to Anika's Form 10-Q/A for the
         quarterly period ended May 31, 1995 as filed by Anika on July 29, 1995.
++++     Incorporated by reference to Exhibits to Anika's Form 10-K for the
         fiscal year ended August 31, 1995 as filed on November 28, 1995.
+++++    Incorporated by reference to Exhibits to Anika's Form 10-Q for the
         quarterly period ended February 29, 1996 as filed on April 15, 1996.
++++++   Incorporated by reference to Exhibits to Anika's Form 10-KSB for the
         year ended August 31, 1996 as filed on November 27, 1996.
+++++++  Incorporated by reference to Exhibits to Anika's Form 10-QSB for the
         quarterly period ended November 30, 1996 as filed on January 14, 1997.
++++++++ Incorporated by reference to Exhibits to Anika's Form 10/A (File No. 0-
         21326) as filed on April 28, 1993.