Note 11. Commitments

Leases

The Company’s adoption of ASU No. 2016-02 resulted in an increase in the Company’s assets and liabilities of $7.9 million at July 1, 2019. In the first quarter of Fiscal 2020, the Company recorded a ROU lease asset totaling $1.2 million related to an existing lease at Cody Labs upon adoption of ASU No. 2016-02. The Company subsequently recorded a full impairment of the asset as a result of the decision to cease operations at Cody Labs. At June 30, 2020, the Company has a ROU lease asset of $9.3 million and a ROU liability of $10.9 million, of which $1.1 million and $9.8 million represent the current and non-current balance, respectively.

In November 2019, the Company signed an eight year lease for its new headquarters in Trevose, Pennsylvania. The Company is currently providing lease improvements and met the lease commencement date criteria under ASC Topic 842 Leases as of March 31, 2020. Accordingly, the Company recorded a ROU lease asset and liability totaling $4.3 million, respectively, in the third quarter of Fiscal 2020.

Components of lease costs are as follows:


	Fiscal Year Ended
(In thousands)	June 30, 2020
Operating lease cost	$	2,246
Variable lease cost		153
Short-term lease cost (a)		579
Total	$	2,978

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(a) Not recorded on the Consolidated Balance Sheet

Supplemental cash flow information and non-cash activity related to our operating leases are as follows:


	Fiscal Year Ended
(In thousands)	June 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,086
Non-cash activity:
ROU assets obtained in exchange for new operating lease liabilities	$	4,317

Weighted average remaining lease term and discount rate for our operating leases are as follows:


	Fiscal Year Ended
	June 30, 2020
Weighted-average remaining lease term	9	years
Weighted-average discount rate	7.91	%

Maturities of lease liabilities by fiscal year for our operating leases are as follows:


(In thousands)	Amounts Due
2021	$	1,101
2022		2,125
2023		2,144
2024		2,164
2025		2,183
Thereafter		5,749
Total lease payments		15,466
Less: Imputed interest		4,525
Present value of lease liabilities	$	10,941

As of June 30, 2019, future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) for the twelve-month periods ending June 30 thereafter are as follows:


(In thousands)	Amounts Due
2021	$	1,450
2022		1,123
2023		1,123
2024		1,123
2025		—
Thereafter		3,839
Total	$	8,658

Other Commitments

During Fiscal 2017, the Company signed an agreement with a company operating in the pharmaceutical business, under which the Company agreed to provide up to $15.0 million in revolving loans, which expires in seven years from the loan origination date and bears interest at 2.0%, for the purpose of expansion and other business needs. The decision to provide any portion of the revolving loan is at the Company’s sole discretion.

In Fiscal 2019, the Company sold 50% of the outstanding loan to a third party for $5.6 million, in addition to assigning 50% of all rights, title and interest in the loan and loan documents. As of June 30, 2020, $6.5 million was outstanding under the revolving loan and is included in other assets. Based on the guidance set forth in ASC 810-10 Consolidation, the Company has concluded that it has a variable interest in the entity. However, the Company is not the primary beneficiary to the entity and as such, is not required to consolidate the entity’s results of operations.

In Fiscal 2020, the Company executed a License and Collaboration Agreement with North South Brother Pharmacy Investment Co., Ltd. and HEC Group PTY, Ltd. (collectively, “HEC”) to develop an insulin glargine product that would be biosimilar to Lantus Solostar. Under the terms of the deal, among other things, the Company shall fund up to the initial $32 million of the development costs and split 50/50 any development costs in excess thereof. Lannett shall receive an exclusive license to distribute and market the product in the United States upon FDA approval under the 50/50 profit split for the first ten years following commercialization, followed by a 60/40 split in favor of HEC for the following five years. To date, the COVID-19 pandemic has not had a material impact on the development of the insulin glargine product. The longer countries around the world remain on lockdown, the more likely the timing of the product development and approval will be delayed.