COMMITMENTS AND CONTINGENCIES
Non-cancelable Purchase Obligations
In the normal course of business, we enter into non-cancelable purchase commitments with various parties to purchase primarily software-based services. As of December 31, 2024, we had outstanding non-cancelable purchase obligations with a term of less than 12 months of $1.6 million and non-cancelable purchase obligations with a term 12 months or longer of $1.4 million.
During the year ended December 31, 2024 the Company incurred $10.0 million in termination expenses in relief of $116.0 million of prior purchase commitments with suppliers.
Contingencies
The Company is party to various legal proceedings from time to time arising in the ordinary course of its business. A liability is accrued when a loss is both probable and can be reasonably estimated. Management believes that the probability of a material loss with respect to any currently pending legal proceeding is remote. However, litigation is inherently uncertain and it is not possible to definitively predict the ultimate disposition of any of these proceedings. The Company does not believe that there are any pending legal proceedings or other loss contingencies that will, either individually or in the aggregate, have a material adverse effect on the Company’s consolidated financial statements.
Commitments
In June 2024, the Company recognized a $2.5 million operating lease liability and a corresponding operating lease right-of-use (“ROU”) asset, which are included in the consolidated balance sheets as of December 31, 2024. The operating lease liability and operating lease ROU asset correspond to 6,508 square feet of leased office in San Francisco, California. As of the commencement date of the lease, the remaining lease term was 65 months. The lease agreement contemplates options to extend the non-cancelable lease term, which have been determined to be not reasonably certain to be exercised. Base rent is approximately $54,200 per month with escalating payments. Upon entering into this new lease, the Company subleased an existing office space which led to a right-of-use asset impairment of $2.1 million in June 2024.
In September 2024, the Company recognized a $1.7 million operating lease liability and a corresponding operating lease right-of use asset, which are included in the consolidated balance sheets as of December 31, 2024, consisting of 24,102 square feet of leased office in Longmont, Colorado. As of the commencement date of the lease, the remaining lease term was 77 months and base rent is approximately $30,100 per month with escalating payments over the lease term.
In November 2024, the Company recognized a $1.3 million operating lease liability and a corresponding operating lease right-of use asset, which are included in the consolidated balance sheets as of December 31, 2024, consisting of 13,608 square feet of leased office in Bloomfield, Colorado. Monthly rent will begin in the third quarter of fiscal year 2025 and begins at approximately $27,200 with escalating payments over the lease term. The lease will terminate in the third quarter of 2030.
Non-Income Related Taxes
During 2023, the Company was selected for sales and use tax examination by the state of California and determined that it was not appropriately charging certain customers sales tax and remitting the applicable amounts to the taxing authority for certain revenue arrangements from 2018 through 2022. The Company determined it was probable that it would be subject to sales tax liabilities plus applicable interest in certain states, principally California, and estimated a probable tax liability of $5.6 million. The California sales and use tax examination is ongoing and the Company is awaiting final ruling on its sales tax administration process and clarity on the required settlement amount. The Company accrued this amount included in general and administrative expense in the consolidated statement of operations. Management considered qualitative and quantitative factors and concluded the out of period adjustment is immaterial to 2023 and each of the applicable periods.