Leases

9 Months Ended

Sep. 30, 2020

Leases

Leases

6.            Leases

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Rent expense is recognized on a straight-line basis over the lease term.

Operating lease liabilities (see below) are included in accrued liabilities and other liabilities (noncurrent) in the unaudited condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019.

All of the Company’s existing leases as of September 30, 2020 are classified as operating leases. As of September 30, 2020, the Company had seven material operating leases for land, facilities and office equipment with remaining terms expiring from 2021 through 2069 and a weighted average remaining lease term of36.36  years. The Company has fair value renewal options for five of the Company’s existing leases, none of which are considered reasonably certain of being exercised or included in the minimum lease term. Weighted average discount rates used in the calculation of the lease liability is 4.2%. The discount rates reflect the estimated incremental borrowing rate, which includes an assessment of the credit rating to determine the rate that the Company would have to pay to borrow, on a collateralized basis for a similar term, an amount equal to the lease payments in a similar economic environment.

In November 2019, CASI Wuxi entered into a fifty-year lease agreement for the right to use state-owned land in China for the construction of a manufacturing facility. The land parcel is 74,028.40 square meters. The Company classifies this lease as an operating lease. The Company prepaid all of the lease payments for the land use right in 2019 in the amount of RMB 45 million (equivalent to US$6.6 million). In April 2020, CASI Wuxi received RMB 15.9 million (equivalent to approximately US$2.2 million) from the Jiangsu Province Wuxi Huishan Economic Development Zone as government grant for this development project which was recorded as deferred income in April 2020 (See Note 9). On August 27, 2020, CASI Wuxi entered into the Construction Project Contract for RMB 74,588,000 (equivalent to approximately $10,923,000) to complete the phase 1 project of CASI Wuxi's research and development production base (see Note 19). The estimated completion date is October 2023.

In the third quarter of 2020, the Company entered into two 3-year lease agreements for office space in China each of which continue through August 2023 and September 2023, respectively. The Company recorded right-of-use assets of $1.1 million and related lease liabilities of $1.0 million at lease commencement date.  The Company classifies these leases as operating leases.

Rent expense for the nine months ended September 30, 2020 and 2019 was approximately $1,153,000 and $957,000, respectively. There were no variable lease costs or sublease income for leased assets for the nine months ended September 30, 2020.

Right of use assets and liabilities as of September 30, 2020 and December 31, 2019 in the condensed consolidated balance sheets were as follows:

(In thousands)	September 30, 2020		December 31, 2019
Right of use assets	$	9,015	$	8,708
Accrued liabilities	$	1,292	$	1,182
Other liabilities		1,071		1,019
Total lease liabilities	$	2,363	$	2,201

Supplemental cash flow information related to leases was as follows:

	Year ended
(In thousands)	September 30, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows	$	1,064
Right of use assets obtained in exchange for lease obligations:	$	1,030

A maturity analysis of our operating leases as of September 30, 2020 follows:

Future undiscounted cash flows:

(In thousands)
2020 (remaining three months)	$	386
2021		1,360
2022		592
Thereafter		246
Total		2,584
Discount factor		(221)
Lease liability		2,363
Amounts due within 12 months		1,292
Non-current lease liability	$	1,071