NOTE 7                  LEASES                  

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

The Company has the following weighted average remaining lease terms and discount rates for our finance and operating leases:

Finance Lease

AST Asset Purchase Agreement

On March 20, 2025, the Company and American Science and Technology Corporation (“AST”) amended the License Agreement Amendments (the “Second License Agreement Amendments”) to supplement the Purchase Consideration and License Consideration such that additional consideration was delivered in the form of the Company’s common stock. The Second License Agreement Amendments requires the Company to:

On March 20, 2025, pursuant to the Second License Agreement Amendments, the Company issued 985,000 shares of its common stock to AST with a fair value of $2,482,200 determined by the closing price per share of our common stock. The fair value of $2,482,200 for the 985,000 issued shares of common stock was allocated as a reduction to the remaining lease liability of $466,423, recognition of research and development expense of $1,487,476 and recognition of a derivative asset of $480,540. This contractual stock consideration has been recognized as a derivative on the condensed consolidated balance sheets (see Note 11). 

As of  March 31, 2025, AST holds 1,167,166 shares of the Company's stock which includes the 985,000 shares issued under the Second license Agreement Amendments, 497,500 shares issued in 2024 under a separate amendment, reduced by 315,334 shares sold by AST through March 31, 2025.

For the three-months ended March 31, 2025, the Company recognized interest expense of $85,509 in connection with the 12% stated interest rate pursuant to the terms of the True Up Payment.

All of the assets purchased under the initial lease 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 pulp, paper and fuels. These assets have no alternative future use. The facility is an industrial property located in Wausau, Wisconsin with alternative uses. Since its inception, payments under this contract were allocated to the separate lease and non-lease components of the contract based on their standalone estimated fair values. During the three-months ended  March 31, 2025 and 2024, the Company recognized $1,562,901 and $79,935, respectively, of research and development expense associated with payments under this agreement. The expense for three-months ended March 31, 2025, includes $1,487,476 from the stock consideration from the Second License Agreement Amendments discussed above.

Haywood Quarry Acquisition and Lease Agreement

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 by $100,000 to $2.2 million. Pursuant to the amendment, the Company will pay $75,000 per month to Decommissioning Services, with $15,000 of each payment applied to rent expense and $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 shares of Company common stock equals $2.2 million. On April 11, 2024, pursuant to the amendment, the Company issued an additional 150,000 shares of the Company's common stock 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). 

For the three-months ended  March 31, 2025 and 2024, the Company paid Decommissioning Services $120,000 and $0, respectively, which resulted in a decrease in contractual stock consideration (see Note 11). As of  March 31, 2025, Decommissioning Services sold 49,552 shares of the Company's stock for net proceeds of $153,999 and holds 250,448 shares of the Company's stock.

Operating Leases

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. For the three-months ended  March 31, 2025 and 2024, the fixed operating lease expense was $14,908.

On July 1, 2024, the Company, as lessee, signed a Real Estate and Building Lease Agreement (the “SCP Real Estate and Building Lease”) with SCP to lease real property and improvements located in Silver Springs, Nevada. For the three-months ended  March 31, 2025 and 2024, the fixed operating lease expense was $217,875 and $0, respectively.

The Company's chief executive officer is an executive and director of SCP. 

On January 22, 2025, the Company, as lessee, signed a Building Lease Agreement (the “Oklahoma Office Lease”) with Gaillardia Parkway LLC to lease real property and improvements located in Oklahoma City, OK. The Oklahoma Office Lease is under a three-year term which commenced on February 1, 2025, with no extension provision. Under the lease, rental expense is $5,244 per month for the first twelve rent payments, $5,403 per month for the next twelve months and $5,566 per month for the last twelve months of the lease term. At lease inception, the Oklahoma Office Lease was classified as an operating lease with a lease term of three years. At February 1, 2025, the Company recorded a right-of-use asset and lease liability of $160,102, at a discount rate of 12.95%. For the three-months ended March 31, 2025, the fixed operating lease expense was $10,489.

On February 27, 2025, the Company, as lessee, signed a Commercial Lease Agreement (the “Madison Commercial Lease”) with McAllen Properties Dane LLC to lease commercial property and improvements located in Madison, WI (see Note 9). The Madison Commercial Lease is under an initial seven-year term which commenced on March 1, 2025 with an optional renewal term of five years. The Company expects to exercise the optional five-year renewal term. Under the lease, rental expense starts at $43,657 per month and escalates at fixed rates annually through the twelve-year term. At lease inception, the Madison Commercial Lease was classified as an operating lease with a lease term of twelve years. At February 27, 2025, the Company recorded a right-of-use asset and lease liability of $3,388,455, at a discount rate of 14.24%, commensurate to a twelve-year lease term, inclusive of the five-year renewal term. For the three-months ended March 31, 2025, the fixed operating lease expense was $43,657.

For the three-months ended  March 31, 2025 and 2024, short-term operating lease expense was $29,594 and $20,700, 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 Lease Income

For the three-months ended March 31, 2025 and 2024, revenues from operating leases on our land and building leased to others totaled $37,050 and $35,325, respectively. 

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