In July 2019, we entered into a sublease for office space located at 2100 Powell Street, Suite 900, Emeryville, California (the “Powell Street Sublease”) for our corporate headquarters. Under the terms of the Powell Street Sublease, we leased 23,976 square feet at the rate of $3.90 per square foot, paid on a monthly basis. We were also responsible for certain operating expenses and taxes throughout the life of the Powell Street Sublease. The Powell Street Sublease expired on June 30, 2022. There was no option to extend the sublease term.

In March 2022, we entered into a lease agreement (“Powell Street Lease”) for office space located at 2100 Powell Street, Suite 720, Emeryville, California to replace the Powell Street Sublease which expired on June 30, 2022. The Powell Street Lease commenced on June 1, 2022 ("Powell Street Commencement Date"). Under the Powell Street Lease, we are leasing 8,053 square feet at the rate of $4.65 per square foot, paid on a monthly basis. The first two monthly rent payments following the Powell Street Commencement Date will be abated. Rent is subject to scheduled annual increases, and we are responsible for certain operating expenses and taxes throughout the life of the Powell Street Lease. The Powell Street Lease will continue until July 31, 2025. There is no option to extend the lease 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 (“Horton Street 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 June 30, 2022. The Horton Street Master Lease has an initial term of 12 years, following the Horton Street 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 June 30, 2022 condensed 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 condensed 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 (“Horton Street 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 Horton Street Subtenant has no option to extend the sublease term. Sublease income for the three and six months ended June 30, 2022 were $2.0 million and $3.6 million, respectively. For the three and six months ended June 30, 2021, we recognized sublease income of $1.7 million and $3.7 million, respectively. Sublease income is included in other income (expense) in our condensed consolidated statements of operations.

Under the terms of the Horton Street Master Lease, rent received from the Horton Street Subtenant in excess of rent paid to the landlord shall be 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") for the same space that we were previously leasing in Düsseldorf, Germany with the same landlord. The New Düsseldorf Lease became effective on January 1, 2022. 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.

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Operating lease expense	$	1,867	$	1,570	$	3,474	$	3,130

Cash paid for amounts included in the measurement of lease liabilities for the six months ended June 30, 2022 and 2021 was $3.5 million and $3.4 million, respectively, and was included in change in lease liabilities in our condensed consolidated statements of cash flows.

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


	June 30, 2022		December 31, 2021
Operating lease liabilities:
Current portion of lease liabilities (included in other current liabilities)	$	3,039	$	2,577
Long-term portion of lease liabilities		33,677		34,316
Total operating lease liabilities	$	36,716	$	36,893

As of June 30, 2022, 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 (remaining)	$	2,709	$	3,195
2023		5,518		6,512
2024		5,684		6,646
2025		5,854		6,123
2026		6,030		5,861
Thereafter		27,712		27,161
Total	$	53,507		55,498
Less:
Present value adjustment				(18,782	)
Total			$	36,716

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


	June 30, 2022			December 31, 2021
Weighted average remaining lease term	8.25 years			9.1 years
Weighted average discount rate		10.1	%		10.1	%

As of June 30, 2022, our material non-cancelable purchase and other commitments, for the supply of HEPLISAV-B and CpG 1018, totaled $115.7 million.

As of June 30, 2022, the aggregate principal amount of our Convertible Notes was $225.5 million, excluding debt discount of $4.5 million (see Note 7). The Convertible Notes mature on May 15, 2026, unless converted, redeemed or repurchased 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 June 30, 2022 and is collateralized by a certificate of deposit for €0.2 million, which has been included in restricted cash in the condensed consolidated balance sheets as of June 30, 2022.

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 our immune-oncology compound, SD-101. In July 2020, we sold assets related to SD-101 to Surefire Medical, Inc. d/b/a TriSalus Life Sciences (“TriSalus”). We paid $2.5 million to Holdings in August 2020. In each of September 2021 and May 2022, we received $1.0 million from TriSalus because it met a pre-commercialization milestone. We recorded the proceeds as gain on sale of assets in our condensed consolidated statements of operations in the third quarter of 2021 and second quarter of 2022. We paid Holdings $0.5 million in each of September 2021 and May 2022. We included the payments in selling, general and administrative expenses in our condensed consolidated statements of operations in the third quarter of 2021 and second quarter of 2022. No liability has been recorded under this agreement as of June 30, 2022.

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, results of operations, or cash flows in a particular period.