The Company enters into capital lease arrangements to obtain hard drives and related equipment for its data center operations. The terms of these agreements primarily range from three to four years and certain of these arrangements have optional renewals. Contingent rental payments are generally not included in the Company’s lease agreements. The leases are generally secured by the underlying leased equipment.


Year Ending December 31,
2022	$	16,765
2023	14,123
2024	6,707
2025	617
2026	—
Thereafter	—
Total future minimum lease and financing commitments	38,212
Less imputed interest	(4,964)
Total liability	$	33,248

For the Company’s assets acquired through capital lease agreements, depreciation expense was $11.5 million and $9.2 million for the years ended December 31, 2021 and 2020, respectively, which is included in cost of revenue in its statements of operations.

During the year ended December 31, 2021, the Company entered into four sale-leaseback arrangements with vendors to provide approximately $4.3 million in cash proceeds for previously purchased hard drives and related equipment. The Company concluded the related lease arrangements would be classified as lease financing obligations as it has the option to repurchase the assets at their fair value at a future date. Therefore, the transaction was deemed a failed sale-leaseback and was accounted for as a financing arrangement. The assets continue to be depreciated over their useful lives, and payments are allocated between interest expense and repayment of the financing liability. As of December 31, 2021, the future minimum payments related to the financing agreements consisted of the following (in thousands):

The Company leases its facilities for data centers and office space under non-cancelable operating leases with various expiration dates. Certain lease agreements include options to renew or terminate the lease, which are not reasonably certain to be exercised and therefore are not factored into the determination of lease payments. Contingent rental payments are generally not included in the Company’s lease agreements.

The future minimum commitments for these operating leases as of December 31, 2021 were as follows (in thousands), which also include minimum payments for services under our operating lease agreements:

Rental expense related to the Company’s operating leases was approximately $7.1 million for the year ended December 31, 2021, of which $6.3 million and $0.8 million is included in cost of revenue and general and administrative expenses in its statement of operations, respectively. Rental expense related to the Company’s operating leases was approximately $5.2 million for the year ended December 31, 2020, of which $4.6 million and $0.6 million is included in cost of revenue and general and administrative expenses in its statement of operations, respectively.

In December 2020, the Company ceased use of an existing operating lease agreement for office space and recognized a one-time charge of $0.6 million for the remaining payments under the agreement. The one-time loss was recorded as general and administrative expense in the Company’s statement of operations. The current portion of the remaining obligation from the operating lease agreement is recorded in accrued expenses and other current liabilities and the non-current portion is recorded in other long-term liabilities on the Company’s balance sheet.

Other non-cancellable commitments relate mainly to infrastructure agreements used to facilitate the Company’s operations. As of December 31, 2021, the Company had future minimum payments under the Company’s non-cancelable purchase commitments of $1.8 million and $1.5 million payable during the years ending December 31, 2022 and 2023, respectively.

The Company sponsors a 401(k) defined contribution plan covering all eligible U.S. employees. Contributions to the 401(k) plan are discretionary. The Company contributed $1.1 million and $0.7 million to the 401(k) plan for the years ended December 31, 2021 and 2020, respectively.

The Company is involved from time to time in various claims and legal actions arising in the ordinary course of business. While it is not feasible to predict or determine the ultimate outcome of these matters, the Company believes that none of its current legal proceedings will have a material adverse effect on its financial position, results of operations or cash flows. However, the results of legal proceedings are inherently unpredictable and if an unfavorable ruling were to occur in any of the current legal proceedings there exists the possibility of a material adverse effect on the Company’s financial position, results of operations and cash flows.

The Company undertook an analysis of its sales tax exposure based on the South Dakota vs. Wayfair case whereby the U.S. Supreme Court determined that physical presence was not required to determine the potential exposure a company has for sales tax purposes. Based on the Company’s initial analysis, its total accrual for sales tax payable was $1.2 million and $0.6 million as of December 2021 and 2020, respectively, which includes estimated amounts for penalties and interest.

The Company has calculated a liability for uncollected and unpaid VAT, which is generally assessed by various taxing authorities on services the Company provides to its customers. The Company accrues an amount that it considers probable to be collected and can be reasonably estimated. Based on the Company’s analysis, its total accrual for VAT tax payable was $2.5 million and $1.5 million as of December 31,2021 and 2020, respectively, which includes estimated amounts for penalties and interest.

The Company enters into indemnification provisions under agreements with other parties from time to time in the ordinary course of business. The Company has agreed in certain circumstances to indemnify and defend the indemnified party for claims and related losses suffered or incurred by the indemnified party from third-party claims due to the Company’s activities or non-compliance with certain representations and warranties made by the Company. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. No losses have been recorded in the statements of operations in connection with the indemnification provisions.