Quarterly report pursuant to Section 13 or 15(d)

LEASES

v3.19.1
LEASES
3 Months Ended
Mar. 31, 2019
LEASES [Text Block]

NOTE 8 – LEASES

            As of January 1, 2019, the Company adopted ASU No. 2016-02, “Leases (Topic 842),” which requires leases with durations greater than twelve months to be recognized on the balance sheet. The Company adopted the standard using the modified retrospective approach with an effective date as of the beginning of our fiscal year, January 1, 2019. The total impact of the adoption of this standard at January 1, 2019 was an increase of assets and liabilities in the amount of $3,226 thousand.  Prior year financial statements were not recast under the new standard and, therefore, those amounts are not presented below. The Company elected the package of transition provisions available for expired or existing contracts, which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs.

            The Company leases research and development facilities, equipment, offices and cars under finance and operating leases. For leases with terms greater than 12 months, the Company record the related asset and obligation at the present value of lease payments over the term. Many of the leases include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate.

            The Company leases do not provide a readily determinable implicit rate. Therefore, the Company estimated the incremental borrowing rate to discount the lease payments based on information available at lease commencement.

Research and Development facilities

            The Company leases space for its CDMO facilities and research and development facilities in Belgium, Israel, South Korea and the United States of America under five lease agreements of operating leases. The leasing contracts are for a period of 3 - 16 years.

Equipment

            The Company leases laboratory equipment in Belgium under several agreements of finance leases. The equipment is the basic material for our new production center (as Incubator, laminar flow and bio-reactor). Each leasing contract is concluded for a period of 5 years.

Offices

            The Company leases space for offices in Belgium, Korea, Israel and the United States of America under operating leases. The leasing contract are for a period of 1.5 - 16 years. These contracts are considered as operational leasing and under operating lease right-of-use assets.

Cars

            The Company leases cars. Each leasing contract is concluded for a period of 4 years. These contracts are considered as operational leasing and operating lease right-of-use assets.

Lease Position

            The table below presents the lease-related assets and liabilities recorded on the balance sheet.

    March 31,  
    2019  
  Assets      
  Operating Leases      
 Operating lease right-of-use assets $ 14,354  
       
  Finance Leases      
 Property and equipment, gross $ 1,056  
 Accumulated depreciation   (88 )
  Property and equipment, net   968  
       
       
  Liabilities      
  Current liabilities      
 Current maturities of operating leases   1,291  
 Current maturities of long-term finance   232  
       
  Long-term liabilities      
 Non-current operating leases   11,816  
 Long-term finance leases   641  
       
  Weighted Average Remaining Lease      
  Term      
 Operating leases   12 years  
 Finance leases   3.5 years  
       
  Weighted Average Discount Rate      
 Operating leases   7%  
 Finance leases   4.71%  

Lease Costs

            The table below present certain information related to lease costs and finance and operating leases during the three months ended March 31, 2019.

    Three-Months  
    Ended  
    March 31,  
    2019  
       
Operating lease cost: $ 324  
Finance lease cost:      
Amortization of leased assets   57  
Interest on lease liabilities   14  
Total finance lease cost $ 71  

            The table below presents supplemental cash flow information related to leases during the three months ended March 31, 2019:

    Three Months  
    Ended  
    March 31,  
    2019  
    (in Thousands)  
Cash paid for amounts included in the measurement of leases liabilities:      
Operating cash flows from operating leases $ 1,595  
Operating cash flows from finance leases   76  
       
Right-of-use assets obtained in exchange for lease obligations:      
Operating leases   11,332  
Finance leases   -  

Undiscounted Cash Flows

            The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the balance sheet.

    Operating     Finance  
    Leases     Leases  
  Year ended December 31,            
   Remaining months 2019 $ 1,203   $ 295  
  2020   1,995     393  
  2021   1,418     209  
  2022   1,506     174  
  2023   1,551     108  
   Thereafter   14,661     -  
Total minimum lease payments   22,334     1,179  
Less: amount of lease payments representing interest            
    (9,227 )   (306 )
Present value of future minimum lease payments            
    13,107     873  
Less: Current leases obligations   (1,291 )   (232 )
Long-term leases obligations $ 11,816   $ 641  

Future minimum lease payments as of November 30, 2018

            Future minimum lease commitments under non-cancelable operating lease agreements are as follows:

2019 $ 783  
2020   626  
2021 and thereafter   3,504  
Total $ 4,913  

Future minimum lease payments as of December 31, 2018

            No material change in the month ended December 31, 2018

Lease facilities in the USA

            During January 2019, Masthercell U.S., LLC executed a lease agreement for production facilities in the United States. Under the terms of the agreement, Masthercell U.S., LLC leased approximately 32,011 square feet for 180 months. Masthercell U.S., LLC advanced $1.6 million on account of a security deposit, tenant improvement allowance and prepaid base rent.