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RIGHT OF USE ASSETS AND LEASES

3 Months Ended

Mar. 31, 2025

NOTE 4 – RIGHT OF USE ASSETS AND LEASES

The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use assets (“ROU”), operating lease liabilities, and operating lease liabilities, non-current. Finance leases are included in right-of-use assets, finance lease liabilities, and finance lease liabilities, non-current. Lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As substantially all of the leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at lease commencement date in determining the present value of future payments. Incremental borrowing rate is estimated to approximate the interest rate on a collateralized basis with similar terms and payments, and in economic environments where the leased asset is located. The ROU assets also include any prepaid lease payments made and initial direct costs incurred and excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease, which is recognized when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

Operating leases:

ARC’s principal offices are located at 12115 Visionary Way, Fishers, Indiana 46038. We pay $8,954 per month in rent for the office space and the lease expires in June 2034. The rent is subject to escalation payments on an annual basis.

ReElement leases office space at 1716 E Pleasant Street, Noblesville, Indiana 46060 with a current monthly rent payment of $5,224. The lease agreement expires in November 2028 and is subject to escalation payments on an annual basis.

As of March 31, 2025, $3,929 has been accrued and is included in accounts payable – related party.

Operating leases – related party:

KCC, a subsidiary of AIC, rents office space from LRR at 11000 Highway 7 South, Kite, Kentucky 41828 with monthly rent of $1,702 and a lease expiration of December 31, 2029.

Electrified Materials Corporation leases office space at 1845 Highway 15 South, Hazard, Kentucky 41701 from LRR with a current monthly rent payment of $263. The lease agreement expires in December 2028.

Electrified Materials Corporation leases outdoor storage space from LRR in Noblesville, Indiana at a monthly rent rate of $20,000. The lease expires in December 2028.

Electrified Materials Corporation leases commercial production, office and outdoor storage space at 3 from LRR at 611 South Adams Street, Marion, Indiana at a current monthly rate of $20,559. The lease expires in December 2028 and is subject to escalating payments on an annual basis.

The Company has not made any payments on the related party operating leases as of March 31, 2025, and has a balance of $491,251 due for deferred rent payments.

Finance lease – related party

ReElement leases approximately 316,000 square feet of commercial space from LRR, a related party, for its processing facility at 3301 South Adams Street, Marion, Indiana. The current monthly rent payment is $118,617. The lease expires in May of 2063 and is subject to escalation payments on an annual basis.

The Company has not made any payments on the related party finance lease as of March 31, 2025, and has a balance of $355,852 due for deferred rent payments.

The components of lease expense included on the Company’s statements of operations, inclusive of the related party component were as follows:

		For the Three Months Ended
		March 31,
	Expense Classification	2025		2024
Operating lease expense:
Total Operating lease expense	General and administrative	$	224,717	$	68,855

Finance lease expense:
Amortization of ROU asset	General and administrative	$	126,296	$	-
Interest on lease liabilities	Interest expense		452,346		-
Total finance lease expense		$	578,642	$	-

Other information related to leases is as follows:

	As of March 31,			As of December31,
Operating leases:	2025			2024
Weighted-average remaining lease term:
Operating leases (in years)		4.47			4.61
Weighted-average discount rate:
Operating leases		10	%		10	%
Finance lease:
Finance lease (in years)		38.15			38.39
Weighted-average discount rate:
Finance lease		9	%		9	%

The future minimum lease payments required under leases as of March 31, 2025 were as follows:

	Operating			Finance
Fiscal Year	Leases			Leases			Total
2025	$	512,057		$	1,446,731		$	1,958,788
2026		693,104			1,482,300			2,175,404
2027		704,330			1,518,757			2,223,087
2028		709,921			1,556,126			2,266,047
2029		140,766			1,594,429			1,735,195
Thereafter		244,569			82,289,140			82,533,709
Discounted cash flows		3,004,747			89,887,483			92,892,230
Less imputed interest		(595,209	)		(69,715,102	)		(70,310,311	)
Present value of lease liabilities	$	2,409,538		$	20,172,381		$	22,581,919