Note 13 - Leases

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Leases of Lessee Disclosure [Text Block]

13. Leases

On

October 9, 2015,

our Italian subsidiary, Anika Therapeutics S.r.l. (“Anika S.r.l.”) entered into a build-to-suit lease agreement with Consorzio Zona Industriale E Porto Fluviale di Padova (“ZIP”), as landlord, pursuant to which Anika S.r.l. leases a new European headquarters facility, consisting of approximately

33,000

square feet of general office, research and development, training, and warehousing space located in Padova, Italy. The lease has an initial term of

fifteen

years, which commenced on

March 1, 2017.

The lease will automatically renew for up to

three

additional

six

-year terms, subject to certain terms and conditions. The Company has the ability to withdraw from this lease subject to certain financial penalties after

six

years and with

no

penalties after the

ninth

year. Beginning on the commencement date, the lease provides for an initial yearly rent of approximately

$0.3

million.

Construction of the new facility commenced during the

first

quarter of

2016.

During the period of construction, the Company was the deemed owner of the facility. Accordingly, the landlord's costs of constructing the facility were capitalized, as a non-cash transaction, offset by a corresponding facility lease obligation in the Company’s consolidated balance sheet. When the construction concluded on

March 1, 2017,

the Company removed the construction-in-process asset of

$3.1

million and related liability from its condensed consolidated balance sheet. The Company commissioned ZIP for additional tenant improvements of

$0.8

million, which are recorded within Other long-term assets on the condensed consolidated balance sheet and which will be amortized over the life of the lease. The lease is accounted for as an operating lease based on the Company’s assessment of the applicable accounting principles.