Leases

6 Months Ended

Jun. 30, 2022

Leases

Leases

(17) Leases

On January 1, 2022, the Company adopted ASU No. 2016-02, Leases (Topic 842), (ASC 842), using the modified retrospective method. The Company chose to apply the transition provisions as of the period of adoption. Results for reporting periods beginning on or after January 1, 2022 are presented under ASC 842 while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under ASC 840.

Adoption of the new standard resulted in the recording of $10,409 of operating lease right of use assets, $673 of financing lease right of use assets, $2,741 of short-term operating lease liabilities, $272 of short-term financing operating lease liabilities, $7,968 of long-term operating lease liabilities, and $197 of long-term financing lease liabilities. The difference between the operating lease liabilities and operating right of use assets is associated with existing deferred rent under ASC 840. The following table summarizes the amount by which each financial statement line item was affected in the current reporting period due to the adoption of ASC 842 as compared with the guidance that was in effect before the change.

	December 31, 2021		ASC 842 Adjustment		January 1, 2022
Assets
Operating lease right of use assets, net	$	—	$	10,409	$	10,409
Financing lease right of use assets, net		—		673		673
Property and equipment, net		673		(673)		—
Total assets	$	190,907	$	10,409	$	201,316
Liabilities and stockholders' equity
Deferred rent	$	300	$	(300)	$	—
Current portion of capital lease liabilities		272		(272)		—
Current portion of operating lease liabilities		—		2,741		2,741
Current portion of financing lease liabilities		—		272		272
Total current liabilities		27,682		2,441		30,123
Capital lease liabilities, net of current portion		197		(197)		—
Operating lease liabilities, net of current portion		—		7,968		7,968
Financing lease liabilities, net of current portion		—		197		197
Total liabilities		69,556		10,409		79,965
Stockholders' equity
Total stockholders' equity		121,351		—		121,351
Total liabilities and stockholders' equity	$	190,907	$	10,409	$	201,316

The Company considers a lease to be a contract, or part of a contract, that conveys the right to control the use of identified property or equipment (an identified asset) for a period of time in exchange for consideration. The Company leases office, lab, and warehouse spaces as follows:

In July 2019, the Company entered into a seven-year office lease agreement for office and laboratory space in Marlborough, MA. In connection with this agreement, the Company paid a security deposit totaling $450 in the form of a letter of credit. On June 18, 2021, the Company entered into an amendment to reduce its letter of credit to $300. The Company’s letter of credit is recorded as restricted cash in the consolidated balance sheet.

In July 2019, the Company signed a seven-year lease agreement for office and laboratory space in Menlo Park, CA. In connection with this agreement, the Company paid a security deposit totaling $181, which is recorded as a component

of long-term assets in the consolidated balance sheet; the lease commencement date was May 2020. In July of 2021, the Company signed a 70-month amendment to its lease in Menlo Park, CA to expand its existing space. In connection with this agreement, the Company paid a security deposit totaling $92, in addition to the existing security deposit, which is recorded as a component of long-term assets in the consolidated balance sheet; the lease commencement date was August 2021.

In August 2021, the Company signed a 30-month lease with MTP Equity Partners, LLC for office space in Marlborough, MA. In connection with this agreement, the Company paid a security deposit totaling $43, which is recorded as a component of long-term assets in the consolidated balance sheet; The lease commencement date was August 2021.

In March 2022, the Company signed a 96-month lease with Atlantic-Fulcrum Realty LLC for warehouse space in Marlborough, MA. The leased premises ranges from approximately 16,068 rentable square feet to 32,125 rentable square feet during the lease term. The lease commencement date was April 2022.

The Company holds various auto leases which have an initial term of 48 months.

For the six months ended June 30, 2022, the Company entered into three financing leases for staining equipment. The Company also holds financing leases for computer equipment, staining equipment, and furniture which the Company was accounting for as capital leases prior to its adoption of ASC 842.

Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these leases on a straight-line basis over the lease term. For these lease agreements, the Company has elected the practical expedient to not separate non-lease and lease components and instead to account for them as a single lease component.

Under Topic 842, lease payments include: fixed payments, including in-substance fixed payments, less any lease incentives paid or payable to the lessee; variable lease payments that depend on an index or a rate; exercise price of a purchase option reasonably certain to be exercised; penalties for terminating a lease; and amounts where it is probable that the Company will owe under a residual value guarantee. Refundable deposits are not considered to be a fixed payment. Variable lease costs that are not based on an index or a rate are recorded to expenses in the period incurred. Lease term is determined at lease commencement. The initial determination of a lease liability is calculated as the net present value of the lease payments not yet paid.

Some leases include an option to renew, with renewal terms that can extend the lease term by five years. The exercise of lease renewal options is at the Company’s sole discretion. None of these options to renew are recognized as part of the Company’s right-to-use asset or lease liability as of June 30, 2022, as renewal was determined to not be reasonably assured. The depreciable life of assets and leasehold improvements are limited by the expected lease term. The Company recognizes lease expense for operating leases on a straight-line basis over the lease term. The Company recognizes amortization expense for finance leases over the lease term based on the terms of the lease agreement.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As most of the Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at the adoption or commencement date, in determining the present value of lease payments.

The table below summarizes the Company’s lease costs for the three and six months ended June 30, 2022:

		Three Months Ended		Six Months Ended
		June 30,		June 30,
Lease Costs	Classification	2022		2022
Finance lease cost:
Amortization of right-of-use assets	Cost of service and other revenue	$	18	$	34
Amortization of right-of-use assets	Depreciation and amortization		127		266
Interest on lease liabilities	Interest expense, net		14		20
Operating lease cost	Selling, general and administrative		806		1,516
Total lease cost		$	965	$	1,836

As of June 30, 2022, future minimum commitments under ASC 842 under the Company’s operating leases were as follows:

Maturity of operating lease liabilities	As of June 30, 2022
Remainder 2022	$	1,605
2023		3,071
2024		2,661
2025		2,709
2026		2,548
2027 and thereafter		2,103
Total lease payments	$	14,697
Less: discount to lease payments		(2,616)
Total operating lease liabilities	$	12,081

As of June 30, 2022, future minimum commitments under ASC 842 under the Company’s financing leases were as follows:

Maturity of financing lease liabilities	As of June 30, 2022
Remainder 2022	$	326
2023		573
2024		445
2025		113
2026		—
2027 and thereafter		—
Total lease payments	$	1,457
Less: discount to lease payments		(158)
Total financing lease liabilities	$	1,299

The table below summarizes the weighted-average remaining lease term (in years), the weighted-average incremental borrowing rate (in percentages), as well as supplemental cash flow information related to leases for the three and six months ended June 30, 2022:

	Six Months Ended
Lease Term, Discount Rates, and Other	June 30, 2022
Weighted average remaining lease term
Operating leases		5.0	years
Financing leases		2.5	years
Weighted average incremental borrowing rate
Operating leases		7.85	%
Financing leases		6.24	%
Cash payments of amounts included in lease liabilities
Operating cash flows from operating leases	$	1,405
Operating cash flows from finance leases		20
Financing cash flows from finance leases		316