•

An equipment financing arrangement that is considered a financing-type lease. This arrangement has a term of four years for each draw. The Company was required to deposit cash into a restricted account in an amount equal to the future rent payments required by the lease. As of September 30, 2022, restricted cash totaled $0.2 million. The Company has the option to request the return of excess collateral annually in December, and the amount the Company expects to receive is reflected as a current asset.

•

A small number of short-term and immaterial leases for office equipment.

The Company’s adoption of the Standard required it to remove its existing land, buildings, and equipment associated with its headquarters lease as well as the associated liability. The Company assessed the elements of its lease agreement and upon adoption, recorded an operating lease associated with the sale leaseback of land underlying the headquarter facility, and a second operating lease associated with the building. The cumulative effect of the adoption of the Standard was recorded to stockholders’ equity. The impact of adoption on the Company’s December 31, 2021, consolidated balance sheet was as follows:


	As Reported December 31, 2021			Adoption of Lease Standard			As Adjusted December 31, 2021
Assets

Land, buildings, and equipment	$	21,731		$	(16,543	)	$	5,188
Operating lease right-of-use assets		—			14,090			14,090

	$	21,731		$	(2,453)		$	19,278

Liabilities and stockholders’ equity
Current portion of financing lease obligations	$	370		$	(4)		$	366
Other current liabilities		191			276			467
Financing lease obligations		17,506			(17,371)			135
Operating lease obligations		—			13,814			13,814
Accumulated deficit		(196,092	)		832			(195,260	)

	$	(178,025	)	$	(2,453	)	$	(180,478	)

The Company records its operating lease liabilities at the present value of the future lease payments over the lease term. If the lease term includes options to extend or terminate the lease, those elements are included in the determination of lease term when it is reasonably certain that the option will be exercised. The rate used to determine the present value of future lease payments is the rate stated in the lease agreement, or if not stated, the Company’s incremental borrowing rate is used, up to an effective rate that enables the lease liability to amortize to zero over the lease term. Rent expense for operating leases is recorded in selling, general, and administrative (SG&A) expense in the consolidated statements of operations and in operating cash flows in the consolidated statements of cash flows. The Company also records operating lease right-of-use assets at an initial amount equal to the operating lease liability. Those right-of-use assets are amortized to lease expense within SG&A over the lease term using the effective interest method to ensure the right-of-use asset amortizes to zero concurrent with the associated liability, and the right-of-use asset amortization expense is also reported in operating cash flows in the consolidated statements of cash flows.

The Company records its financing lease liabilities at the present value of the future lease payments over the lease term. If the lease term includes options to extend or terminate the lease, those elements are included in the determination of lease term when it is reasonably certain that the option will be exercised. The rate used to determine the present value of future lease payments is the rate stated in the lease agreement, or if not stated, the Company’s incremental borrowing rate is used, up to an effective rate that enables the lease liability to amortize to zero over the lease term. Expense associated with financing leases is recorded in interest, net in the consolidated statements of operations and in operating cash flows in the consolidated statements of cash flows.

The Company is obligated under non-cancellable operating leases, primarily for office space and certain equipment, as follows:


	As of September 30, 2022
	Remaining		Right-of-Use
In Thousands	Term (years)		Asset
Roseville, MN lease		15.6	$	13,734
Total			$	13,734

The Roseville, MN lease includes four options to each extend the lease for 5 years. These options to extend the lease are not recognized as part of the right-of-use assets and operating lease liabilities as it is not reasonably certain that the Company will exercise those options. The Company’s agreement does not include options to terminate the lease.

The components of lease expense were as follows:


In Thousands	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Finance lease costs	$	57	$	73
Operating lease costs		381		1,174
Variable lease costs		260		717

Total	$	698	$	1,964

Operating lease cost for short-term leases was not material for the nine months ended September 30, 2022.

Other information related to leases was as follows:


In Thousands except for lease term and discount rate	As of and for Nine Months Ended September 30, 2022
	Operating			Financing
Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows	$	205		$	—
Financing cash flows	$	—		$	353
Weighted average remaining lease term (years)		15.6			0.6
Weighted average discount rate		7.9	%		8.1	%

As of September 30, 2022, future minimum payments under operating and finance leases were as follows:


In Thousands	Operating			Financing			Total
Remainder of 2022	$	345		$	25		$	370
2023		1,446			100			1,546
2024		1,480			—			1,480
2025		1,479			—			1,479
2026		1,479			—			1,479
2027		1,479			—			1,479
Thereafter		16,991			—			16,991

		24,699			125			24,824
Less: imputed interest		(10,814	)		(5	)		(10,819	)

Total	$	13,885		$	120		$	14,005

Litigation and Claims

The Company is not currently a party to any material pending legal proceeding except as disclosed in Note 10.