LEASES

6 Months Ended

Jun. 30, 2023

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 $1.8 million under the Office Agreement. We began to occupy this space in April 2016, with rental payments beginning in the third quarter of 2016. Also in connection with this Office Agreement, we have pledged $1.3 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 condensed consolidated balance sheets.

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. We incurred rental expense of $0.1 million for the six months ended June 30, 2023.

In October 2021, we finalized a five-year lease for office space in North Carolina (the NC Lease). We approximate an average annual rental obligation of $0.2 million under the NC Lease. We took possession of this space in February 2022, with rental payments beginning in April 2022. We incurred rental expense of $0.1 million for the six months ended June 30, 2023.

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 $11.3 million and $8.5 million, respectively, as of June 30, 2023. Our leases have remaining lease terms of 2 years to 9 years. One lease has a renewal option to extend the lease for an additional term of two years. The following components of lease expense are included in the Company’s condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022:

	Three months ended				Six months ended
	June 30,		June 30,		June 30,
(in thousands)	2023		2022		2023		2022
Operating lease cost	$	552	$	524	$	1,096	$	1,038
Net lease cost	$	552	$	524	$	1,096	$	1,038

As of June 30, 2023, the weighted-average remaining operating lease term was 6.1 years and the weighted-average discount rate for operating leases was 9.98%. Cash paid for amounts included in the measurement of operating lease liabilities during the six months ended June 30, 2023 was $1.2 million. The balance sheet classification of lease liabilities was as follows:

	June 30,		December 31,
(in thousands)	2023		2022
Liabilities
Lease liability current portion	$	1,512	$	1,581
Lease liability non-current		9,805		10,344
Total lease liability	$	11,317	$	11,925

As of June 30, 2023, the maturities of lease liabilities were as follows:

	Operating
(in thousands)		leases
Remainder of 2023	$	1,188
2024		2,388
2025		2,100
2026		2,080
2027		1,913
After 2028		6,543
Total lease payments		16,212
Less: interest		(4,895)
Present value of lease liabilities(*)	$	11,317

(*) 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 through December 31, 2021. We used an incremental borrowing rate of 5.65% for the NC lease.