Fortress Biotech, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

Commitments and Contingencies

3 Months Ended

Mar. 31, 2020

15. Commitments and Contingencies

Most of the Company's lease liabilities result from the lease of its New York City, NY office, which expires in 2031, and Mustang's Worcester, MA cell processing facility lease, which expires in 2026. Such leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Certain of the Company's leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and right of use assets as the Company is not reasonably certain to exercise the options. The Company does not act as a lessor or have any leases classified as financing leases. On March 31, 2020, the Company had operating lease liabilities of $23.7 million and right of use assets of $21.1 million, which were included in the condensed consolidated balance sheet.

During the three months ended March 31, 2020 and 2019, the Company recorded the following as lease expense.


	As of		As of
($in thousands)	March 31, 2020		March 31, 2019
Lease cost
Operating lease cost	$	809	$	796
Shared lease costs		(470)		(477)
Variable lease cost		264		26
Total lease cost	$	603	$	345

The following tables summarize quantitative information about the Company's operating leases, under the adoption of Topic 842:


	Three Months Ended			Three Months Ended
($in thousands)	March 31, 2020			March 31, 2019
Operating cash flows from operating leases	$	(451)		$	(767)
Right-of-use assets exchanged for new operating lease liabilities	$	21,076		$	22,618
Weighted-average remaining lease term – operating leases (years)		6.1			6.7
Weighted-average discount rate – operating leases		6.2	%		6.2	%


	Future Lease
($in thousands)	Liability
Nine months ended December 31, 2020	$	2,515
Year ended December 31, 2021		3,114
Year ended December 31, 2022		3,084
Year ended December 31, 2023		3,137
Year ended December 31, 2024		3,190
Other		20,273
Total operating lease liabilities		35,313
Less: present value discount		(9,872)
Net operating lease liabilities, short-term and long-term	$	25,441

Indemnification

In accordance with its certificate of incorporation, bylaws and indemnification agreements, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. There have been no claims to date, and the Company has director and officer insurance to address such claims. Pursuant to agreements with clinical trial sites, the Company provides indemnification to such sites in certain conditions.

Legal Proceedings

Fortress Biotech, Inc.

In the ordinary course of business, the Company and its subsidiaries may be subject to both insured and uninsured litigation. Suits and claims may be brought against the Company by customers, suppliers, partners and/or third parties (including tort claims for personal injury arising from clinical trials of the Company’s product candidates and property damage) alleging deficiencies in performance, breach of contract, etc., and seeking resulting alleged damages.