Comstock Inc.LODE
Comstock Inc. Leases Disclosure
LEASES
The Company has the following lease balances recorded on the consolidated balance sheets as follows:
| Lease Assets and Liabilities | Classification | December 31, 2023 | December 31, 2022 | ||||||||
| Finance lease right-of-use asset | Asset, held for sale | $ | — | $ | 15,709,039 | ||||||
| Finance lease right-of-use asset | 2,923,766 | 2,911,458 | |||||||||
| Operating lease right-of-use asset | 237,617 | 42,061 | |||||||||
| Total right of use assets | $ | 3,161,383 | $ | 18,662,558 | |||||||
| Operating lease liability - current | $ | 37,401 | $ | 5,211 | |||||||
| Operating lease liability - long-term | 205,154 | 40,193 | |||||||||
| Finance lease liability | Lease liability - held for sale | — | 12,021,566 | ||||||||
| Finance lease liability, current portion | Finance lease - Right of use lease liability | 838,676 | 409,143 | ||||||||
| Finance lease liability | Finance lease - Right of use lease liability, long term portion | — | 406,968 | ||||||||
| Total lease liabilities | $ | 1,081,231 | $ | 12,883,081 | |||||||
The Company has the following lease costs recorded in the consolidated statements of operations as follows:
| Year Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Finance lease cost: | ||||||||
| Amortization of right-of-use assets | $ | 44,193 | $ | 539,115 | ||||
| Interest on lease liabilities | 246,038 | 829,924 | ||||||
| Operating lease cost | 34,945 | 10,099 | ||||||
| Total lease cost | $ | 325,176 | $ | 1,379,138 | ||||
| Other information | ||||||||
| Operating cash flows from operating leases | $ | 33,350 | $ | 9,650 | ||||
| Financing cash flows from finance leases | $ | 301,540 | $ | 3,062,360 | ||||
| Non-cash finance lease modification | $ | 56,501 | $ | 1,147,669 | ||||
| Right-of-use asset and lease acquired | $ | 213,925 | $ | 839,439 | ||||
| Right-of-use acquired with shares of common stock (Haywood) | $ | — | $ | 2,100,000 | ||||
The Company has the following weighted average remaining lease terms and discount rates for our finance and operating leases:
| 2023 | 2022 | |||||||
| Weighted-average remaining lease term in years - finance leases | 0.33 | 1.33 | ||||||
| Weighted-average remaining lease term in years - operating leases | 4.62 | 5.75 | ||||||
| Weighted-average discount rate - finance leases | 8 | % | 8 | % | ||||
| Weighted-average discount rate - operating leases | 13 | % | 11 | % | ||||
Finance Lease
AQMS Lease
Since 2021, LINICO, a majority-owned subsidiary of the Company, had a finance lease (the “AQMS Lease”), as lessee, with Aqua Metals Reno Inc., a subsidiary of Aqua Metals Inc. (“AQMS”), for land, buildings and related improvements (the “Manufacturing Facility”). AQMS was the non-controlling interest holder for LINICO. The lease agreement provided for the Company to purchase the Manufacturing Facility for a total purchase price of $15.25 million ($3.25 million of which was previously paid by LINICO) if LINICO elected not to or was unable to purchase the Manufacturing Facility. LINICO did not exercise the purchase option on October 1, 2022, and paid an additional $2,000,000 on October 25, 2022, effectively extending the option until March 31, 2023, increasing the lease term from 16 to 19 months and a $1,147,669 increase to the lease liability and right of use asset. On March 30, 2023, the Company delivered AQMS a notice of its irrevocable intent to exercise the option and purchase the membership interest of the entity that owned the Manufacturing Facility for $12,000,000, as provided by the agreement. On April 26, 2023, the Company closed on the purchase of the membership interest of Aqua Metals Transfer LLC (“AQMT”) from AQMS and paid the remaining $12.0 million due, taking full ownership of the membership interest of AQMT and terminating the AQMS Lease (see Note 9, Sale of Manufacturing Facility).
AST Asset Purchase Agreement
On April 16, 2021, the Company entered into an asset purchase agreement (the “AST Asset Purchase Agreement”) with AST. The 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, 2024. 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. The Company also entered into three license agreements with AST in connection with the AST Asset Purchase Agreement (see Note 6, Intangible Assets and Goodwill).
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.
The AST Asset Purchase Agreement was accounted for as a finance lease with a purchase option which we are reasonably certain will be exercised. The consideration in the contract was allocated to the separate lease and non-lease components of the contract based on their relative standalone estimated fair values. The total of the lease payments was first allocated to the building, which has an observable price, and the remainder was allocated to the machinery and equipment.
The initial measurement of the right-of-use asset and lease liability was $839,439 using the allocated consideration in the contract of $935,759 for the building discounted using the Company’s incremental borrowing rate at lease commencement of 7.87% because there is no rate implicit in the lease contract. The incremental borrowing rate was determined based on debt acquired by the Company at the end of 2021, adjusted for increases in the risk-free rate. The building is being depreciated over a 20-year useful life and the lease liability has a remaining life at December 31, 2023 of 0.33 years. Of the amounts paid under this agreement, a portion is associated with the acquired machinery and equipment and recognized as research and development expense in the consolidated statements of operation. For the years ended December 31, 2023 and 2022, the Company recognized $319,740 and $213,160, respectively, of research and development expense.
Haywood Quarry Acquisition and Lease Agreement
On April 7, 2022 and amended on November 7, 2022, the Company contracted to purchase Haywood quarry and industrial property (the “Haywood Property”) from Decommissioning Services LLC (“Decommissioning Services”) for $2.1 million, payable in $50,000 of cash and 1,500,000 common shares of Comstock with a total value of $2,295,000. The Haywood Property represents approximately 190 industrial acres in Lyon County, Nevada, and is 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 and purchase of the asset is contingent on liquidation of the shares and receipt of the full purchase price by the seller. The Company agreed to make up any shortfall if the proceeds from the sale of the shares plus the deposit are less than $2.1 million, and the seller agreed to refund any excess proceeds. This contractual stock consideration has been recorded as a derivative on the consolidated balance sheets. The first amendment to the lease agreement signed by the parties on November 7, 2022 extended the closing date to April 7, 2024. For the years ended December 31, 2023 and 2022, the Company paid Decommissioning Services $200,000 and $150,000, respectively, which resulted in a decrease in contractual stock consideration (see Note 14, Fair Value Measurements).
During the period between execution of the agreement and closing, the property is leased to us for no additional consideration, providing exclusive rights to access, use or sublease portions of the property, to obtain permits and prepare the property for its intended purpose, including improvements. If the conditions for closing are not satisfied by April 7, 2024, the agreement will terminate, and Decommissioning Services will retain a total of $400,000 in rental fees for use of the property. We agreed to 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.
Daney Ranch
In September 2020, the Company, as lessor, leased real property and improvements located at 25 Daney Canyon Road, Dayton, Nevada (“Daney Ranch”) under a 36-month lease agreement commencing September 1, 2020, subject to early termination upon exercise of a purchase option. The option allowed the lessee to purchase the property for $2,700,000 less all rental payments made in the first 24 months if exercised within the first two years of the agreement. At lease inception, it was not reasonably certain the lessee would exercise the purchase option and the lease was classified as an operating lease. All lease payments were recognized as rental income and the property was classified as assets held for use in property, plant and equipment during the term of the lease. In August 2022, the lessee exercised the option and completed the purchase of the Daney Ranch property, which resulted in lease termination and derecognition of the underlying assets (see Note 3, Notes Receivable and Advances, net).
Operating Leases
On August 15, 2023, the Company, as lessee, signed a Real Estate and Building Lease Agreement (the “Building Lease”) with Sierra Clean Processing LLC to lease real property and improvements located at 600 Lake Avenue, Silver Springs, Nevada. The Building Lease is under a five year term commencing on August 1, 2023, subject to automatically renew for an additional five year terms. Under the agreement, 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 lease was classified as an operating lease and the Company determined the lease term to be five years. At August 15, 2023, we 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 year ended December 31, 2023, the fixed operating lease expense was $24,847. The Company's chief executive officer is an executive and director of Sierra Clean Processing LLC.
The Company has an operating lease, as lessee, with Sutro as lessor, for a property located adjacent to the Gold Hill Hotel, which is primarily used as a room rental. The lease runs from 2018 until 2028. The monthly rent is $5,850 with automatic annual increases of $25 per month every November, beginning in 2020. The operating lease is sub-leased to Crown Point Management LLC, the operators of the Gold Hill Hotel, and not separately valued within the Gold Hill Hotel lease. For the years ended December 31, 2023 and 2022, the fixed operating lease expense was $10,099 and $10,099, respectively.
For the years ended December 31, 2023 and 2022, short-term operating lease expense was $100,030 and $52,115, respectively.
Minimum lease payments to be paid by the Company by fiscal year for the Company's operating and finance leases are as follows:
| Operating Leases | Finance Leases | ||||||||||
| 2024 | $ | 67,112 | $ | 860,564 | |||||||
| 2025 | 69,118 | — | |||||||||
| 2026 | 71,175 | — | |||||||||
| 2027 | 73,285 | — | |||||||||
| 2028 | 46,372 | — | |||||||||
| Thereafter | — | — | |||||||||
| Total lease payments | 327,062 | 860,564 | |||||||||
| Less: imputed interest | (84,507) | (21,888) | |||||||||
| Present value of lease liabilities | $ | 242,555 | $ | 838,676 | |||||||
Operating Lease Income
Revenues from operating leases on our land and building leased to others totaled $368,198 and $169,100 for the years ended December 31, 2023 and 2022, respectively.
Minimum lease payments for operating leases to be received from others are as follows:
| 2024 | $ | 94,725 | |||
| 2025 | 96,000 | ||||
| 2026 | 96,000 | ||||
| 2027 | 96,000 | ||||
| 2028 | 96,000 | ||||
| Thereafter | 96,000 | ||||
| Total Minimum Lease Income | $ | 574,725 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Feb 27, 2024 | Showing above |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 28, 2022 | |
| 2020 | Mar 10, 2021 | |
| 2019 | Mar 30, 2020 | |
| 2016 | Mar 9, 2017 | |
| 2015 | Jan 28, 2016 | |
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.