LEASES

12 Months Ended

Dec. 31, 2019

LEASES

LEASES

NOTE 8 - LEASES

In October 2014, we entered into an agreement (the “Office Agreement”) with Fortress Biotech, Inc. (“FBIO”) to occupy approximately 45% of the 24,000 square feet of New York City office space leased by FBIO. The Office Agreement requires us to pay our respective share of the average annual rent and other costs of the 15-year lease. We approximate an average annual rental obligation of $1.4 million under the Office Agreement. We began to occupy this new space in April 2016, with rental payments beginning in the third quarter of 2016. At January 1, 2019, we recognized a lease liability and corresponding Right of Use (“ROU”) asset of $9.5 million and $8.1 million, respectively, based on the present value of the remaining lease payments for all of our leased office spaces, the majority of which is comprised of our New York City office space. The present values of our lease liability and corresponding ROU asset are $11.8 million and $9.4 million, respectively, as of December 31, 2019. Our leases have remaining lease terms of 4 months to 12 years. One lease has a renewal option to extend the lease for an additional term of 2 years.

The initial commitment period of the 45% rate was for a period of three (3) years. We and FBIO currently determine actual office space utilization annually and if our utilization differs from the amount we have been billed, we will either receive credits or be assessed incremental utilization charges. As of December 31, 2019, the allocation rate is 61% and will be evaluated again in August 2020 for the following rent year. Also in connection with this lease, in October 2014 we pledged $0.6 million to secure a line of credit as a security deposit for the Office Agreement, which has been recorded as restricted cash in the accompanying consolidated balance sheets. Additional collateral of $0.6 million was pledged in April 2018 to increase the letter of credit for the office space.

In October 2019, we finalized a five-year lease for office space in New Jersey (the “NJ Lease”). We approximate an average annual rental obligation of $0.3 million under the NJ Lease. We took possession of this space in October 2019, with rental payments beginning in November 2019.

The following components of lease expense are included in the Company’s consolidated statements of operations for the year ended December 31, 2019 and 2018:

	December 31,		December 31,
(in thousands)	2019		2018
Operating lease cost	$	2,651	$	1,440
Net lease cost	$	2,651	$	1,440

As of December 31, 2019, the weighted-average remaining operating lease term was 8.4 years and the weighted-average discount rate for operating leases was 10.25%. Cash paid for amounts included in the measurement of operating lease liabilities during the year ended December 31, 2019 was $1.5 million.

The balance sheet classification of lease liabilities was as follows:

	December 31,
(in thousands)	2019
Liabilities
Lease liability current portion	$	1,616
Lease liability non-current		10,218
Total lease liability	$	11,834

As of December 31, 2019, the maturities of lease liabilities were as follows:

	Operating
(in thousands)		leases
2020	$	1,804
2021		1,874
2022		1,911
2023		1,913
2024		1,796
After 2024		10,615
Total lease payments		19,913
Less: Interest		(8,079)
Present value of lease liabilities(*)	$	11,834

(*) As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date and considering the term of the lease to determine the present value of lease payments. We used the incremental borrowing rate of 10.25% on February 28, 2019, for operating leases that commenced prior to that date.