Molecular Templates, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Leases

Leases

6 Months Ended

Jun. 30, 2022

NOTE 9 – LEASES

The Company has operating leases for administrative offices and research and development facilities, and certain finance leases for equipment. The operating leases have remaining terms of less than one year to less than seven years. Leases with an initial term of 12 months or less will not be recorded on the condensed consolidated balance sheets as operating leases or finance leases, and the Company will recognize lease expense for these leases on a straight-line basis over the lease term. Certain leases include options to renew, with renewal terms that can extend the lease term for five years. The exercise of lease renewal options for the Company’s existing leases is at the Company’s sole discretion and not included in the measurement of lease liability and ROU asset as they are not reasonably certain to be exercised. Certain finance leases also include options to purchase the leased equipment. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The leases do not contain any residual value guarantees or material restrictive covenants.

In September 2021, the Company permanently vacated its office space of approximately 10,000 square feet in Jersey City, New Jersey. The space was vacated because employees have transitioned to long-term remote working arrangements or the Company’s office space in New York, New York. The abandonment of leased space is an indicator of impairment and the Company assessed the lease ROU asset for impairment.

The following table summarizes the components of lease expense for the three and six months ended June 30, 2022 (in thousands):

	Three Months Ended June 30,		Six Months Ended June 30,
	2022		2022
Operating leases
Operating lease expense	$	601	$	1,201
Variable lease expense		91		211
Total operating lease expense	$	692	$	1,412

The following table summarizes the balance sheet classification of leases at June 30, 2022 (in thousands):


Operating leases
Operating lease right-of-use assets	$	7,794

Operating lease liabilities, current¹	$	2,459
Operating lease liabilities, non-current		8,444
Total operating lease liabilities	$	10,903

Included in other current liabilities.

The following table presents other information on leases as of June 30, 2022 and December 31, 2021:

	2022	2021
Weighted average remaining lease term, operating leases	5.10 years	5.65 years
Weighted average discount rate, operating leases	7.01%	7.02%

Maturities of lease liabilities were as follows as of June 30, 2022 (in thousands):

	Operating Leases
2022 (remaining)	$	1,648
2023		2,689
2024		2,218
2025		2,147
2026		1,559
Thereafter		2,686
Total lease payments		12,947
Less:
Imputed interest		(2,044	)
Total lease liabilities	$	10,903

Supplemental cash flow information related to the Company’s leases were as follows (in thousands):

	Six Months Ended June 30,
	2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows operating leases	$	1,668