NOTE 5 – 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. 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 $9,178 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.

Operating leases – related party:

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.

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.

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

Other information related to leases is as follows:

The future minimum lease payments required under leases as of December 31, 2025 are as follows: