LEASES

3 Months Ended

Mar. 31, 2019

Leases [Abstract]

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, which is now our corporate headquarters. 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 $1.1 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. During the three months ended March 31, 2019, we recognized a lease liability of $9.4 million, with a corresponding Right of Use (ROU) asset of $7.9 million 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. Our leases have remaining lease terms of 1 year to 12 years. One lease has a renewal option to extend the lease for an additional term of 2 years.

After an initial commitment period of the 45% rate for a period of three (3) years, we and FBIO will 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. 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.

The following components of lease expense are included in the Company's consolidated statements of operations for the three months ended March 31, 2019:

(in thousands)	March 31, 2019
Operating lease cost	$	418
Net lease cost	$	418

As of March 31, 2019, the weighted-average remaining operating lease term was 9.75 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 in the first quarter of fiscal 2019 was $0.3 million.

The balance sheet classification of lease liabilities was as follows:

(in thousands)	March 31, 2019
Liabilities
Lease liability – current portion	$	1,261
Lease liability – non-current		8,182
Total lease liability	$	9,443

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

(in thousands)	Operating leases
Remainder of 2019	$	1,023
2020		1,348
2021		1,353
2022		1,376
2023		1,367
After 2023		10,281
Total lease payments		16,748
Less: Interest		(7,305	)
Present value of lease liabilities(*)	$	9,443

(*) 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.