Related Party Transactions
|12 Months Ended|
Dec. 31, 2020
|Related Party Lease|
|Related Party Transactions||
10. Related Party Transactions
On February 28, 2018, Legacy Canoo, via a wholly owned subsidiary, entered into a lease for an office facility in Torrance, California with an entity controlled by certain investors of Legacy Canoo, which was assigned to another entity controlled by certain investors of Legacy Canoo, on April 30, 2018. The original lease term is 15 years and commenced on April 30, 2018. The lease contains a 3% per annum escalation clause. Legacy Canoo is also required to pay the property taxes on the facility. Related party lease expense related to this operating lease was $1.7 million and $1.7 million for the years ended December 31, 2020 and 2019, respectively. During 2020 and 2019, Legacy Canoo made rent payments related to this operating lease in the amount of $1.5 million and $1.4 million, respectively.
The lease contains the option to extend the term of the lease for two additional 60-month periods commencing when the prior term expires. At lease inception, Legacy Canoo was not reasonably certain it would exercise any of the options to extend the term of the lease. There have been no changes to that assessment as of December 31, 2020.
The Company has determined that the lease does not effectively transfer control of the underlying facility to the Company based on the lease terms and, accordingly, the Company has classified the lease as an operating lease. As such, the rent and property taxes are expensed on a straight-line basis in the consolidated statements of operations.
The Company used judgment in determining an appropriate incremental borrowing rate to calculate the operating lease right-of-use asset and operating lease liability for the lease. Upon commencement of the lease, the Company recorded an operating lease ROU asset and operating lease liability of approximately $14.5 million and $14.5 million, respectively, on the Company’s consolidated balance sheet. The incremental borrowing rate used to determine the lease liability was 7.9%. As of December 31, 2020, the remaining operating lease ROU asset and operating lease liability were approximately $12.9 million and $13.7 million, respectively. As of December 31, 2019, the remaining operating lease ROU asset and operating lease liability were approximately $13.5 million and $14.1 million, respectively. As of December 31, 2020 and 2019, $0.4 million and $0.4 million, respectively, of the lease liability was determined to be short term and was included in accrued expenses within the consolidated balance sheet.
The weighted average remaining lease term at December 31, 2020 and 2019 was 12.3 years and 13.3 years, respectively.
Maturities of the Company’s operating lease liabilities at December 31, 2020 were as follows (in thousands):
On November 25, 2020, Legacy Canoo entered into an agreement with Tony Aquila, Executive Chairman to reimburse Mr. Aquila for certain air travel expenses based on certain agreed upon criteria (“aircraft reimbursement”). The total aircraft reimbursement to Mr. Aquila for the use of an aircraft owned by Aquila Family Ventures, LLC (“AFV”), an entity controlled by Mr. Aquila, for the purposes related to the business of the Company for year ended December 31, 2020 was $541,000.
The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef