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, 2020

NOTE 9 – LEASES

In January 2019, the Company entered into a lease agreement for an additional 57,000 square feet of administrative office and research and development 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. 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, 2020.

In June 2020, the Company entered into a lease agreement for office space in New York, New York. The space consists of an initial 9,289 square feet and an additional 3,000 square feet of expansion space. The lease for the initial space commenced on August 1, 2020 and the possession of the expansion space commenced in December 2020. The term for both spaces will expire on October 30, 2025 and does not contain an option to renew. In connection with entering into the lease and in lieu of a cash deposit, the Company obtained a letter of credit in the amount of $0.2 million.

Changes in the carrying amounts of the Company’s AROs for the years ended December 31, 2020 and 2019 are shown below (in thousands):

	2020		2019
Balance at beginning of year	$	1,365	$	344
Liabilities incurred in the current period		—		949
Accretion expense		125		72
Balance at end of year	$	1,490	$	1,365

At December 31, 2020, the Company did not have any operating and finance leases that have not yet commenced.

The components of lease expense for the years ended December 31, 2020 and December 31, 2019 were as follows (in thousands):

	2020		2019
Operating leases
Operating lease expense	$	2,520	$	2,175
Variable lease expense		491		456
Total operating lease expense	$	3,011	$	2,631

Finance leases
Amortization of right-of-use asset	$	8	$	8
Interest on lease liabilities		1		2
Total finance lease expense	$	9	$	10

The following table summarizes the balance sheet classification of leases at December 31, 2020 (in thousands):

Operating leases
Operating lease right-of-use assets	$	11,104

Operating lease liabilities, current¹	$	2,210
Operating lease liabilities, non-current		12,213
Total operating lease liabilities	$	14,423

Finance leases
Property and equipment, at cost	$	77
Less, Accumulated depreciation		49
Property and equipment, net	$	28

Finance lease liabilities, current¹	$	1

Included in other current liabilities.

The following table presents other information on leases as of December 31, 2020 and December 31, 2019 (in thousands):

	2020			2019
Weighted average remaining lease term, operating leases	6.1 years			7.2 years
Weighted average remaining lease term, finance leases	0.1 years			0.8 years
Weighted average discount rate, operating leases		7.04	%		6.72	%
Weighted average discount rate, finance leases		0.00	%		6.88	%
Right of use assets obtained in exchange for operating lease liabilities	$	2,735		$	7,501

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, 2020 (in thousands):

	Operating Leases			Finance Leases

2021	$	3,142		$	1
2022		3,361			—
2023		2,689			—
2024		2,218			—
2025		2,147			—
Thereafter		4,244			—
Total lease payments		17,801			1
Less:
Imputed interest		(3,378	)		—
Total lease liabilities	$	14,423		$	1

Supplemental cash flow information related to the Company’s leases were as follows for the years ended December 31, 2020 and December 31, 2019 (in thousands):

	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows operating leases	$	2,453	$	1,278
Operating cash flows finance leases		1		3
Financing cash flows finance leases	$	18	$	31