In July 2019, we entered into a sublease for office space located at 2100 Powell Street, Emeryville, California (the “Powell Street Sublease”). Under the terms of the Powell Street Sublease, we are leasing 23,976 square feet at the rate of $3.90 per square foot, paid on a monthly basis. Rent is subject to scheduled annual increases and we are responsible for certain operating expenses and taxes throughout the life of the Powell Street Sublease. The Powell Street Sublease will continue until June 30, 2022. There is no option to extend the sublease term.

In September 2018, we entered into a lease (“Horton Street Master Lease”) for office and laboratory space located at 5959 Horton Street, Emeryville, California (“Horton Street Premises”). Under the terms of the Horton Street Master Lease, we are leasing 75,662 square feet at the rate of $4.75 per square foot, paid on a monthly basis, starting on April 1, 2019 (“Commencement Date”). Rent is subject to scheduled annual increases, and we are also responsible for certain operating expenses and taxes throughout the life of Horton Street Master Lease. In connection with the Horton Street Master Lease, we have received tenant improvement allowance totaling $8.1 million through December 31, 2021. The Horton Street Master Lease has an initial term of 12 years, following the Commencement Date with an option to extend the lease for two successive five-year terms. The optional periods were not included in the lease term used in determining the right-of-use asset or the lease liability as we did not consider it reasonably certain that we would exercise the options. The operating lease right-of-use assets and liabilities on our December 31, 2021 and 2020 consolidated balance sheets primarily relate to the Horton Street Master Lease. Lease expense related to the Horton Street Master Lease is included in operating expense in our consolidated statements of operations.

In connection with the organizational restructuring in May 2019, we did not occupy the Horton Street Premises and in July 2019, we entered into an agreement to sublease the Horton Street Premises to a third party (“Horton Street Sublease”). Under the terms of the Horton Street Sublease, we are subleasing the entire 75,662 rentable square feet at the rate of $5.50 per square foot, paid on a monthly basis. Rent is subject to scheduled annual increases and the subtenant (“Subtenant”) is responsible for certain operating expenses and taxes throughout the life of the Horton Street Sublease. The Horton Street Sublease term is until March 31, 2031, unless earlier terminated, concurrent with the term of our Horton Street Master Lease. The Subtenant has no option to extend the sublease term. For the years ended December 31, 2021, 2020 and 2019, we recognized $7.7 million, $7.7 million and $2.6 million, respectively of sublease income included in other income (expense) in our consolidated statements of operations.

Under the terms of the Horton Street Master Lease, rent received from the Subtenant in excess of rent paid to the landlord is shared by paying the landlord 50% of the excess rent. The excess rent is considered a variable lease payment and the total estimated payments are being recognized as additional rent expense on a straight-line basis.

In September 2021, we entered into a commercial lease agreement in Düsseldorf, Germany (the "New Düsseldorf Lease"). The New Düsseldorf Lease is for the same space that we currently lease in Düsseldorf, Germany and with the same landlord. Our existing lease will continue until December 31, 2021, at which point the New Düsseldorf Lease will be in effect. We have determined that the New Düsseldorf Lease qualifies as a modification not accounted for as a separate contract. The New Düsseldorf Lease has an initial term of 10 years, beginning on January 1, 2022, with an option to extend the lease for two successive five-year terms. The optional periods were not included in the lease term used in determining the right-of-use assets and liabilities as we did not consider it reasonably certain that we would exercise the options. Beginning on January 1, 2024, the base rent is subject to an annual increase at the same percentage of Consumer Price Index of Germany. We are also responsible for certain operating expenses and taxes throughout the life of the New Düsseldorf Lease. We used our estimated incremental borrowing rate of 10.1% to recognize the initial right-of-use asset for the New Düsseldorf Lease.

Our lease expense comprises of the following (in thousands):


	Year Ended December 31,
	2021		2020		2019
Operating lease expense	$	6,265	$	6,267	$	6,886

Cash paid for amounts included in the measurement of lease liabilities for the years ended December 31, 2021 and 2020 was $7.0 million and $6.9 million, respectively and were included in change in lease liabilities in our consolidated statement of cash flows.

The balance sheet classification of our operating lease liabilities was as follows (in thousands):


	December 31, 2021		December 31, 2020
Operating lease liabilities:
Current portion of lease liabilities (included in other current liabilities)	$	2,577	$	3,247
Long-term portion of lease liabilities		34,316		34,789
Total operating lease liabilities	$	36,893	$	38,036

At December 31, 2021, the maturities of our sublease income and operating lease liabilities were as follows (in thousands):


Years ending December 31,	Sublease Income		Operating Lease Liabilities
2022	$	5,357	$	6,174
2023		5,518		5,634
2024		5,684		5,778
2025		5,854		5,927
2026		6,030		6,080
Thereafter		27,712		28,259
Total	$	56,155		57,852
Less:
Present value adjustment				(20,959	)
Total			$	36,893

The weighted average remaining lease term and the weighted average discount rate used to determine the operating lease liability were as follows:


	December 31, 2021			December 31, 2020
Weighted average remaining lease term	9.1 years			9.1 years
Weighted average discount rate		10.1	%		10.1	%

As of December 31, 2021, our purchase commitments include non-cancelable purchase for the supply of HEPLISAV-B and CpG 1018 adjuvant. The following summarizes our material purchase commitments at December 31, 2021 and the effect those obligations are expected to have on our liquidity and cash flows in future periods (in thousands):


Years ending December 31,	(in thousands)
2022	$	55,318
2023		9,312
2024		10,857
2025		11,367
2026		11,872
Thereafter		-
Total		98,726

In addition to the non-cancelable commitments included above, we have entered into contractual arrangements that obligate us to make payments to the contractual counterparties upon the occurrence of future events. In addition, in the normal course of operations, we have entered into license and other agreements and intend to continue to seek additional rights relating to compounds or technologies in connection with our discovery, manufacturing and development programs. Under the terms of the agreements, we may be required to pay future up-front fees, milestones and royalties on net sales of products originating from the licensed technologies, if any, or other payments contingent upon the occurrence of future events that cannot reasonably be estimated.

We also rely on and have entered into agreements with research institutions, contract research organizations and clinical investigators as well as clinical material manufacturers. These agreements are terminable by us upon written notice. Generally, we are liable only for actual effort expended by the organizations at any point in time during the contract through the notice period.

As of December 31, 2021, the aggregate principal amount of our Convertible Notes was $225.5 million, excluding debt discount of $5.0 million (see Note 10). The Convertible Notes mature on May 15, 2026, unless converted, redeemed or repurchased in accordance with their terms prior to such date.

During 2004, we established a letter of credit with Deutsche Bank as security for our Düsseldorf Lease in the amount of €0.2 million (Euros). The letter of credit remained outstanding through December 31, 2021 and is collateralized by a certificate of deposit for €0.2 million, which has been included in restricted cash in the consolidated balance sheets as of December 31, 2021 and 2020.

In July 2020, we sold assets related to our immuno-oncology compound, SD-101, which included intellectual property, clinical and non-clinical data, regulatory filings, clinical supply inventory and certain contracts, to Surefire Medical Inc. d/b/a TriSalus Life Sciences (“TriSalus”). Pursuant to the Asset Purchase Agreement, we received $5 million upon closing of the transaction and $4 million in December 2020 as reimbursement for certain clinical trial expenses. In addition, we could receive up to an additional $250 million upon the achievement of certain development, regulatory, and commercial milestones and low double-digit royalties based on potential future net sales of product containing SD-101 compound. In September 2021, we received payment of $1 million from TriSalus for their meeting a pre-commercialization milestone.

For the year ended December 31, 2021 and 2020, we recognized a gain on sale of SD-101 assets of $1 million and $6.9 million, respectively based on the amount of consideration received, net of any transaction costs.

In conjunction with our agreement with Symphony Dynamo, Inc. and Symphony Dynamo Holdings LLC (“Holdings”) in November 2009, we agreed to make contingent cash payments to Holdings equal to 50% of the first $50 million from any upfront, pre-commercialization milestone or similar payments received by us from any agreement with any third party with respect to the development and/or commercialization of cancer and hepatitis C therapies originally licensed to Symphony Dynamo, Inc., including SD-101. Pursuant to this agreement, we paid Holdings $0.5 million in September 2021 and $2.5 million in August 2020 which were included in selling, general and administrative expense in our consolidated statements of operations for the year ended December 31, 2021 and 2020, respectively.

From time to time, we may be involved in claims, suits, and proceedings arising from the ordinary course of our business, including actions with respect to intellectual property claims, commercial claims, and other matters. Such claims, suits, and proceedings are inherently uncertain and their results cannot be predicted with certainty. Regardless of the outcome, such legal proceedings can have an adverse impact on us because of legal costs, diversion of management resources, and other factors. In addition, it is possible that a resolution of one or more such proceedings could result in substantial damages, fines, penalties or orders requiring a change in our business practices, which could in the future materially and adversely affect our financial position, financial statements, results of operations, or cash flows in a particular period.