Molecular Templates, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Leases

Leases

12 Months Ended

Dec. 31, 2019

NOTE 9 – LEASES

In January 2019, the Company entered into a lease agreement for an additional 57,000 square feet of administrative office and R&D space in Austin, Texas. The lease commenced March 2019 and expires August 2028 and does not contain an option to renew. The tables below include the impact of this lease. Upon the commencement of the lease, the Company recorded an operating lease ROU asset and a lease liability of $7.2 million. The Company subsequently adjusted the lease liability to $7.4 million due to changes in cash receipts related to a tenant improvement allowance. In connection with entering into the lease and in lieu of a cash deposit, the Company obtained a letter of credit of $3.0 million. Additionally, the Company has recorded an asset retirement obligation as a result of this lease which has a balance of $0.4 million at December 31, 2019.

Changes in the carrying amounts of the Company’s AROs for the years ended December 31, 2019 and 2018 are shown below (in thousands):

	2019		2018
Balance at beginning of year	$	344	$	261
Liabilities incurred in the current period		949		44
Accretion expense		72		39
Balance at end of year	$	1,365	$	344

At December 31, 2019, the Company did not have any operating and finance leases that have not yet commenced.

The components of lease expense for the year ended December 31, 2019 were as follows (in thousands):

Operating leases
Operating lease expense	$	2,175
Variable lease expense		456
Total operating lease expense	$	2,631

Finance leases
Amortization of right-of-use asset	$	8
Interest on lease liabilities		2
Total finance lease expense	$	10

Sublease rental income	$	138

Sublease rental income is recorded in Interest and other income, net, on the Company’s Condensed Consolidated Statement of Operations.

The following table summarizes the balance sheet classification of leases at December 31, 2019 (in thousands):

Operating leases
Operating lease right-of-use assets, non-current	$	9,959

Operating lease liabilities, current¹	$	1,683
Operating lease liabilities, non-current		11,682
Total operating lease liabilities	$	13,365

Finance leases
Property and equipment, at cost	$	77
Accumulated depreciation		41
Property and equipment, net	$	36

Finance lease liabilities, current¹	$	18
Finance lease liabilities, non-current²		1
Total finance lease liabilities	$	19

Included in other current liabilities.

Included other liabilities.

The following table presents other information on leases as of December 31, 2019:

Weighted Average

Remaining Lease

Term

Weighted Average

Discount Rate

Operating leases

7.2

6.72

Finance leases

0.8

6.88

Future minimum payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2019 (in thousands):

	Operating Leases			Finance Leases
2020	$	2,517		$	20
2021		2,589			—
2022		2,650			—
2023		1,961			—
2024		1,474
Thereafter		5,762			—
Total lease payments		16,953			20
Less:
Imputed interest		(3,588	)		(1	)
Total lease liabilities	$	13,365		$	19

Supplemental cash flow information related to the Company’s leases were as follows for the year ended December 31, 2019 (in thousands):


Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,278
Operating cash flows from finance leases	$	3
Financing cash flows from finance leases	$	31

Right-of-use asset obtained in exchange for lease obligations:
Operating leases	$	7,501