Arrive AI Inc. Leases Disclosure
NOTE 7 – LEASES
The Company leases office space and ground robots under noncancelable operating lease agreements.
Office Space – Related Party Lease
The office space is leased from an entity owned by the Company’s Chief Executive Officer and principal shareholder and is therefore considered a related-party lease. The lease is an operating lease with an initial term of five years commencing on October 1, 2025. The lease includes an option to renew upon expiration of the initial term; however, renewal periods were not included in the measurement of the right-of-use asset or lease liability because the Company has determined that exercise of the renewal option is not reasonably certain at this time.
Under this lease, the base rent is $44,481 per month for the first twelve months, increasing 3% for each twelve-month period thereafter. The lease is structured as a triple-net arrangement under which the Company also pays taxes, insurance, and common area maintenance charges directly. These triple-net lease (“NNN”) costs are variable in nature and are not included in the measurement of the right-of-use asset or lease liability; they are expensed as incurred. Based on current estimates, NNN costs are approximately $9,885 per month. Total variable lease costs recognized under this arrangement during the year ended December 31, 2025 were approximately $29,655. The estimated all-in monthly occupancy cost is approximately $54,366. This lease arrangement is also disclosed in NOTE 14.
Ground Robot Leases
The Company also leases ground robots used in delivery operations to transport goods between Arrive Point units. These leases have initial terms of two years commencing on July 31, 2025. Lease payments are approximately $4,200 per month. Total lease costs recognized under this arrangement during the year ended December 31, 2025 were approximately $25,200. The lease includes renewal options; however, renewal periods were not included in the measurement of the right-of-use assets or lease liabilities because the Company has determined that exercise of the renewal options is not reasonably certain at this time.
The ground robot leases and the office space lease have been aggregated in the disclosures below as they share similar remaining terms, discount rates, and lease structures. Management has evaluated the leases and concluded that separate presentation is not necessary to provide a meaningful understanding of the Company’s lease obligations.
Right-of-Use Assets and Lease Liabilities
The following summarizes the right-of-use assets and lease liabilities recorded on the Company’s balance sheet as of December 31, 2025:
ARRIVE AI INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2025 AND 2024
Lease Cost
The following is a summary of the lease cost of operating leases recognized in the Company’s statement of operations:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating lease cost included in general and administrative expense | $ | 159,382 | $ | |||||
Supplemental Cash Flow Information
The following is a summary of the supplemental information related to the Company’s operating leases included in the statements of cash flows:
| Years Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | 158,643 | $ | |||||
| Right-of-use assets obtained in exchange for lease obligations | 2,216,753 | |||||||
Discount Rate and Lease Term
As the Company’s office lease does not provide an implicit interest rate, the Company used its incremental borrowing rate (“IBR”) to discount future lease payments. Because the Company has no directly observable secured borrowing rate, the IBR was estimated using a build-up approach consisting of the applicable U.S. Treasury rate for a borrowing term consistent with the expected lease term as of the lease commencement date, plus a credit risk premium based on prevailing speculative-grade corporate bond spreads, and adjusted to reflect the collateralized nature of the borrowing as contemplated by ASC 842.
The weighted-average remaining lease term and weighted-average discount rate for operating leases at December 31, 2025 were 4.65 years and 10.42%, respectively.
Future Minimum Lease Payments
The future lease payments required under the Company’s leases for the years ending December 31 are as follows:
| Future minimum lease payments | ||||
| 2026 | $ | 588,174 | ||
| 2027 | 579,102 | |||
| 2028 | 570,516 | |||
| 2029 | 587,634 | |||
| 2030 | 300,378 | |||
| Total future lease payments | 2,625,804 | |||
| Less: Amount representing interest | (507,781 | ) | ||
| Present value of lease liabilities | 2,118,023 | |||
| Less: current portion | (392,950 | ) | ||
| Long-term portion | $ | 1,725,073 |
Scheduled amounts represent contractual base rent only and exclude variable NNN costs. Variable lease costs associated with the ground robot leases, if any, were not material for the year ended December 31, 2025. Based on current estimates, NNN costs are approximately $9,885 per month and are expensed as incurred.
ARRIVE AI INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2025 AND 2024
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.