NOTE 7                  LEASES                  

The Company has the following lease balances recorded on the condensed consolidated balance sheets as follows:

Finance Lease

Facility Lease

During the six-months ended June 30, 2023, the Company received $29.1 million (cash proceeds of $21.25 million and restricted ABTC shares of $7.9 million), toward the sale of a leased facility and all the related equipment, of which the facility portion of the sale ultimately closed in August 2023 at which time the Company recognized a gain of $7.3 million. In connection with a portion of the $6.0 million received associated with the equipment, the Company recognized a gain of $178,193 on the sale of that equipment during the three-month period ended March 31, 2023. On April 26, 2023, the Company closed on the purchase of the membership interest of Aqua Metals Transfer LLC from Aqua Metals Inc. and paid the remaining $12.0 million due, taking full ownership of the membership interest of Aqua Metals Transfer LLC and terminating the lease. 

AST Asset Purchase Agreement

On April 16, 2021, the Company entered into an asset purchase agreement (the “AST Asset Purchase Agreement”) with AST. Concurrently and in connection with the entry into the AST Asset Purchase Agreement, the Company and AST entered into the AST License Agreements (see Note 5, Intangible Assets). The AST License Agreements provided for full use of the facility and all machinery and equipment located therein until April 30, 2022. Under the AST Asset Purchase Agreement, the Company agreed to acquire substantially all of AST’s assets in exchange for $3,500,000 due on April 30, 2024 in addition to $35,000 per month from May 1, 2022 to April 30, 2025. Beginning May 1, 2022, the AST Asset Purchase Agreement provides for full access and use of the AST assets until all payments are made and title transfers to the Company. 

All of the assets purchased under the agreement are being used for research and development activities. The machinery and equipment acquired was built for a specific purpose and is being used in testing for development of the technology required to process woody biomass into intermediate materials that can be converted into paper products and fuels. These assets have no alternative future use. The facility purchased is an industrial property located in Wausau, Wisconsin with an alternative use.  Since its inception, payments under this contract were allocated to the separate lease and non-lease components of the contract based on their relative standalone estimated fair values.   

On April 2, 2024, the Company and AST amended the AST License Agreements and the AST Asset Purchase Agreement (the “License Agreement Amendments”) to amend the consideration paid pursuant to the AST License Agreements and the AST Asset Purchase Agreement, such that some or potentially all of the future obligation would be paid in the Company’s common stock. The consideration paid pursuant to the AST Asset Purchase Agreement was replaced with the following:

Haywood Quarry Acquisition and Lease Agreement

On April 7, 2022 and amended on November 7, 2022, the Company entered into a purchase agreement (the “Haywood Purchase Agreement”) with Decommissioning Services LLC (“Decommissioning Services”) to purchase Haywood quarry and industrial property (the “Haywood Property”) for $2.1 million, payable in $50,000 of cash and 1,500,000 common shares of the Company with a total value of $2,295,000. The Haywood Property represents approximately 190 industrial acres in Lyon County, Nevada, and part of one of the larger industrial parks in Lyon County. The property has power, water and direct highway access. The Company plans to employ a portion of the property for the storage of end-of-life electrification products. 

The closing of the Haywood Purchase Agreement is contingent on liquidation of the shares and receipt of the full purchase price by Decommissioning Services. The Company agreed to make up any shortfall if the proceeds from the sale of the shares plus the deposit are less than $2.2 million, and Decommissioning Services agreed to refund any excess proceeds. This contractual stock consideration has been recorded as a derivative on the consolidated balance sheets (see Note 11, Fair Value Measurements). 

On April 2, 2024, the Company and Decommissioning Services amended the Haywood Purchase Agreement to extend the latest date of the closing to June 30, 2025, and to increase the purchase price to $2.2 million. Pursuant to the amendment, the Company will pay $75,000 per month to Decommissioning Services, with $60,000 of each payment applied to the $2.2 million purchase price, until the sum of such applied cash amounts plus previous cash payments plus the net proceeds from the sale of the Company common shares equals $2.2 million. On April 11, 2024, pursuant to the amendment, the Company issued 1,500,000 shares of common stock of the Company to Decommissioning Services with a fair value of $509,850. The payment was applied against the make-whole derivative liability associated with the common stock. The increase in purchase price from $2.1 million to $2.2 million increased the right-of-use finance lease asset and the make-whole derivative liability by $100,000 (see Note 11, Fair Value Measurements).

During the period between execution of the Haywood Purchase Agreement and closing, Decommissioning Services leases the Haywood Property to Comstock Exploration for no additional consideration, providing exclusive rights to access, use or sublease portions of the Haywood Property, to obtain permits and prepare the property for its intended purpose, including improvements. If the conditions for closing are not satisfied by June 30, 2025, the Haywood Purchase Agreement will terminate and Decommissioning Services will retain a total of $400,000 in rental fees for use of the Haywood Property. During this lease period, Comstock Exploration will pay Decommissioning Services a 2% royalty of the sales price of any gravel, aggregate, or rock products produced and sold from the Haywood Property, excluding the removal of materials that have been pledged to a third-party for improvements made.

Operating Leases

For the three and six-months ended June 30, 2024, short-term operating lease expense was $24,800 and $45,500, respectively. For the three and six-months ended June 30, 2023, short-term operating lease expense was $15,189 and $30,578, respectively.

On August 15, 2023, the Company, as lessee, signed a Real Estate and Building Lease Agreement (the “SCP Building Lease”) with Sierra Clean Processing LLC (“SCP”) to lease real property and improvements located in Silver Springs, Nevada. The SCP Building Lease is under a five-year term commencing on August 1, 2023, subject to automatically renew for an additional five-year term. Under the SCP Building Lease, rental expense is $4,680 per month with an annual rent increase of 3% and all lease payments were recognized as rental expense. At lease inception, the SCP Building Lease was classified as an operating lease with a lease term of five years. At August 15, 2023, the Company recorded a right-of-use asset and lease liability of $213,925 and $213,925, respectively, at a discount rate of 13.57%. For the three and six-months ended June 30, 2024, the fixed operating lease expense was $14,908 and $29,816, respectively. For the three and six-months ended June 30, 2023, no fixed operating lease expense was expensed on the SCP Building Lease. The Company's chief executive officer is an executive and director of SCP.

Minimum lease payments to be paid by the Company by fiscal year for the Company's operating and finance leases are as follows:

Operating Lease Income

For the three-months ended June 30, 2024 and 2023, revenues from operating leases on our land and building leased to others totaled $36,600 and $35,325, respectively. For the six-months ended June 30, 2024 and 2023, revenues from operating leases on our land and building leased to others totaled $71,925 and $66,075, respectively.

Minimum lease payments for operating leases to be received from others are as follows: