Leases

12 Months Ended

Dec. 31, 2021

The Company currently leases its software and R&D center in San Francisco (“Source Code”) and advanced design center in Los Angeles (“Limitless”) under single leases classified as an operating lease expiring in March 2024 (“Source Code”) and in April 2026 (“Limitless”). The Source Code lease is a sublease arrangement that does not contain an option to renew, contains fixed rent increases each year and the Company is responsible for a fixed portion of the landlord’s operating expenses. The Limitless lease contains an option to renew for one year and sixty days at 95% of the fair market value for rent of comparable properties at the end of the initial lease term. The Company can terminate the Limitless lease contract at the end of the original lease term without penalty and thus did not include the renewal option in the lease term. The Limitless lease also includes variable lease payments for real estate taxes and insurance costs for which the lessor has provided an estimate that the Company treats as an in-substance fixed payment included in lease cost within operating lease expense. When actual real estate taxes and insurance costs are determined, the Company will recognize and disclose the variable lease expense. The leases do not impose any financial restrictions and do not contain residual value guarantees. The Company has three leased vehicle classified as operating leases.

In February 2021, the Company entered into a First Amendment to Lease Agreement (the “Amendment”) with Continental 830 Nash LLC and Continental Rosecrans Aviation L.P., as tenants in common (together, “Continental”). Continental is the lessor of the Company’s corporate headquarters in Manhattan Beach, California (Inception). The Amendment provides for, among other things, (a) an increase in the rentable square feet from approximately 72,000 square feet to approximately 78,500 square feet, (b) a modification to the term of the lease to be 69 months from February 1, 2021, with no option to extend, and (c) an adjustment to the base rental amounts payable by the Company to Continental during the term of the lease. The Company substantially completed its construction of improvements to the property that are owned by Continental in May 2021 at which time the lease commenced. The Company recorded a non-cash transaction to recognize a lease liability of $17.9 million and right-of-use asset of $18.3 million.

In the fourth quarter of 2021, the Company entered into contracts for experience centers in Los Angeles and Munich. The leases will commence in 2022 after the Company has access to the leased space and it is ready for its intended use, which is expected in the first half of 2022. The Company accessed the leased assets in January 2022 and will construct significant improvements before it occupies the leased space. The lease term for the experience center in Los Angeles ends in January 2027. The lease term for the Munich experience center ends in January 2029 and the Company has an irrevocable right to extend the lease term for five years. The lease contracts for both experience centers will be classified as an operating lease and the minimum rental payments will approximate $30 million over the respective combined lease terms. The Company will recognize the right of use asset and corresponding lease liability in 2022.

The Company does not act as a lessor or have any leases classified as financing leases.

During 2021 and 2020, the Company recorded non-cash operating lease right-of-use assets of $18.3 million and $2.5 million and non-cash operating lease liabilities of $17.8 million and $2.6 million, respectively, on its consolidated balance sheet.

The tables below present information regarding the Company’s lease assets and liabilities (in thousands):


	As of December 31,	As of December 31,
	2021	2020
Assets:
Operating lease right-of-use assets	18,285	2,548
Liabilities:
Operating Lease—Current	4,552	655
Operating Lease—Long term	14,933	1,912

The components of lease related expense are as follows (in thousands):


	Year Ended December 31,		Year Ended December 31,
	2021		2020
Lease costs:
Operating lease expense	$	3,318	$	274
Short-term lease expense	74		29
Total lease costs	$	3,392	$	303

The components of supplemental cash flow information related to leases are as follows (in thousands):


	Year Ended December 31,			Year Ended December 31,
	2021			2020
Cash flow information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used by operating leases	$	957		$	175
Non-cash activity:
ROU asset obtained in exchange for operating lease obligations	$	18,313		$	2,636
Other Information
Weighted average remaining lease term (in years)	3.6			3.10
Weighted average discount rate	5.27		%	5.35		%

As of December 31, 2021, future minimum payments during the next five years and thereafter are as follows (in thousands):


	Operating Leases
Year Ending December 31, 2022	$	4,552
Year Ending December 31, 2023	4,680
Year Ending December 31, 2024	4,519
Year Ending December 31, 2025	4,555
Year Ending December 31, 2026	3,800
Thereafter	—
Total	22,105
Less present value discount	(2,620)
Operating lease liabilities	$	19,485

The Company’s lease agreements do not provide an implicit rate, so the Company used an estimated incremental borrowing rate, which was derived from third-party information available at lease inception, in determining the present value of lease payments. The rate used is for a secured borrowing of a similar term as the lease.