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LEASES

12 Months Ended

Dec. 31, 2021

(11) LEASES

The Company categorize leases at their inception as either operating or financing leases. Leases include various office and warehouse facilities which have been categorized as operating leases while certain equipment is leased under financing leases.

The Company entered into a sublease agreement on April 9, 2021 with Cognizant Trizetto Software Group, Inc. for up to approximately 110,754 square feet of office space as its new corporate headquarters. The term of the sublease began on May 1, 2021 and will run through April 29, 2028. The Company is entitled to rent credits equal to twenty-one months of base rent at the initial rate. During the first thirty-three months of the sublease, the rent per square foot is $26.50. The price per square foot increases by an additional $0.50 during each subsequent twelve-month period of the sublease. Upon lease commencement, the Company recorded an operating lease liability and a corresponding right-of-use asset for $13.4 million each. The remaining lease term was 5.38 years at December 31, 2021.

The Company’s operating leases do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring the lease liability. The incremental borrowing rate represents an estimate of the interest rate the Company would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of a lease. The Company’s weighted average borrowing rate was determined to be 4.11% for its operating lease liabilities. The Company’s equipment lease agreements have a weighted average rate of 9.37% which was used to measure its finance lease liability.

The table below reconciles the undiscounted future minimum lease payments under the Company’s operating and finance leases to the total operating and capital lease liabilities recognized on the consolidated balance sheets as of December 31, 2021 (in thousands):


	Operating Lease Liability		Finance Lease Liability
2022		3,569		154
2023		2,982		152
2024		3,496		116
2025		3,567		76
2026		3,362		15
Thereafter		4,214		—
Total undiscounted future minimum lease payments	$	21,190	$	513
Less: difference between undiscounted lease payments and discounted lease liabilities:		(2,475)		(78)
Total lease liabilities	$	18,715	$	435

Operating and finance lease costs were $3.7 million and $1.8 million for years ended December 31, 2021 and 2020, which were included in the consolidated statement of operations under the following headings (in thousands):


	For the years ended December 31,
Operating Lease expense	2021		2020
Costs of revenue - devices and supplies	$	399	$	208
Sales and marketing expense		1,186		564
General and administrative		1,964		909
Total operating lease expense	$	3,549	$	1,681

Finance Lease expense
Amortization of right-of-use asset:
Costs of revenue - devices and supplies	$	12	$	8
Sales and marketing expense		35		20
General and administrative		58		33
Total amortization of right-of-use asset		105		61
Interest expense and other		41		20
Total finance lease expense	$	146	$	81

The Company’s 10-K filing for the year ended December 31, 2020, included an error which disclosed $6.51 million of operating lease expense. The corrected operating lease expense of $1.68 million for the year ended December 31, 2020, is included in the table above.