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Leases
9 Months Ended
Sep. 30, 2023
Leases  
Leases

16. Leases

 

Lessee Accounting

 

We determine if an agreement is a lease at inception. We lease office space, data center colocation space, other assets, and office equipment under operating leases. We lease data center equipment, including maintenance contracts and vehicles under finance leases.

Operating leases are recorded as “ROU” assets and lease liabilities on the balance sheet, excluding leases that are less than 12 months. ROU assets represent our right to use the leased asset for the lease term and lease liabilities represent our obligation to make lease payments. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our estimated incremental borrowing rate at the commencement date to determine the present value of lease payments. The operating lease ROU assets also include any lease payments made and exclude lease incentives. The Company’s lease agreements do not contain any variable lease payments, material residual value guarantees or any restrictive covenants. Our lease terms may include options, at our sole discretion, to extend or terminate the lease. Lease expense is recognized on a straight-line basis over the lease term.

 

We currently lease office space in Tempe, Arizona under a non-cancelable operating lease agreement that expires in 2025. On August 9, 2023, in connection with the sale of our corporate office building and land, we entered into a lease agreement to leaseback the property. The operating lease agreement has an initial term of eighteen full calendar months, with an option to terminate the lease on the last day of the twelfth full calendar month with a sixty-day notice. The operating lease agreement includes fixed fees for property tax, insurance, and common area maintenance (CAM). We account for the lease components and non-lease components such as fixed fee property tax and insurance charges as a single lease component. The CAM charges are considered a separate non-lease component of the lease agreement and are excluded from the measurement of the lease liability. We utilized our incremental borrowing rate of 6.58% to determine the present value of lease payments to determine our lease liability. Rental expense for the three months ended September 30, 2023 and 2022 was approximately $40 and $0, respectively and for the nine months ended September 30, 2023 and 2022 was $40 and $0, respectively.

 

We currently lease office space in Reston, Virginia under a non-cancelable operating lease agreement that expires in 2025. The operating lease contains customary escalation clauses. Rental expense for the three months ended September 30, 2023 and 2022 was approximately $13 and for the nine months ended September 30, 2023 and 2022 was $26 and $37, respectively.

 

We leased office space in La Jolla, California under a non-cancelable operating lease agreement that expired on December 31, 2022.  The operating lease contained customary escalation clauses. Rental expense for the three months ended September 30, 2023 and 2022 was approximately $0 and $90, respectively and for the nine months ended September 30, 2023 and 2022 was $0 and $269, respectively.

 

We currently lease office space in San Diego, California under a non-cancelable operating lease agreement that expires in 2023. Rental expense for the three months ended September 30, 2023 and 2022 was approximately $21 and $0, respectively and for the nine months ended September 30, 2023 and 2022 was $63 and $0, respectively.

 

We currently lease office space in Overland Park, Kansas under a non-cancelable operating lease agreement that expires in 2027. The operating lease contains customary escalation clauses. Rental expense for the three months ended September 30, 2023 and 2022 was approximately $55 and $0, respectively and for the nine months ended September 30, 2023 and 2022 was $144 and $0, respectively.

 

We currently lease other assets under multiple operating leases. The leases expire on various dates through 2027 and the interest rates range from 3% to 15.74%. The expense is included in cost of product expenses and totaled approximately $23 and $21 for the three months ended September 30, 2023 and 2022, respectively and for the nine months ended September 30, 2023 and 2022 was $64 and $58, respectively.

 

We currently lease data center colocation space in Grand Rapids, Michigan, Las Vegas, Nevada, Dallas, Texas and Lenexa, Kansas, under non-cancelable operating lease agreements that expire in 2024. Rental expense for the three months ended September 30, 2023 and 2022 was approximately $83 and $36, respectively and for the nine months ended September 30, 2023 and 2022 was $257 and $107, respectively.

 

We have lease agreements with lease and non-lease components, and we account for the lease and non-lease components as a single lease component. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.  The Company leases equipment and support under finance lease agreements which extends through 2026. The Company also leases two vehicles under financing agreements that ended in 2022. The outstanding balance for finance leases was $117 and $193 as of September 30, 2023 and December 31, 2022, respectively. The Company recorded assets classified as property and equipment under finance lease obligations of $486 as of September 30, 2023 and December 31, 2022. Related accumulated depreciation totaled $319 and $190 as of September 30, 2023 and December 31, 2022, respectively. The $40 in support contracts were classified as a prepaid expense and are being amortized over the service period of three years. One support contract expired in January 2021 and the other expires in June 2024. Amortization expense is included in general and administrative expenses and totaled $1 for the three months ended September 30, 2023 and 2022, and for the nine months ended September 30, 2023 and 2022 was $4. The interest rates on the finance lease obligations range from 1.37% and 15.74% and interest expense was $1 and $2 for the three months ended September 30, 2023 and 2022, respectively and for the nine months ended September 30, 2023 and 2022 was $3 and $6, respectively.

The maturity of operating leases and finance lease liabilities as of September 30, 2023, are as follows:

 

Year ending December 31,

 

Operating Leases

 

 

Finance Leases

 

2023 remaining

 

$201

 

 

$19

 

2024

 

 

601

 

 

 

77

 

2025

 

 

205

 

 

 

21

 

2026

 

 

179

 

 

 

3

 

2027

 

 

134

 

 

 

-

 

Total minimum lease payments

 

 

1,320

 

 

 

120

 

Less: amount representing interest

 

 

(78)

 

 

(3)

Present value of minimum lease payments

 

$1,242

 

 

$117

 

 

Lease term and discount rate

 

September 30,

2023

 

Weighted-average remaining lease term (years)

 

 

 

Operating leases

 

 

2.7

 

Finance leases

 

 

1.6

 

Weighted-average discount rate

 

 

 

 

Operating leases

 

 

4.8%

Finance leases

 

 

2.3%

 

 

 

Nine Months Ended

September 30,

2023

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

Operating cash flows from operating leases

 

$470

 

Operating cash flows from finance leases

 

 

5

 

Financing cash flows from finance leases

 

 

(2,143)