LEASES

6 Months Ended

Jun. 30, 2024

LEASES

LEASES

6. LEASES

The Company accounts for leases in accordance with ASC 842 – Leases. This accounting standard requires all lessees to record the impact of leasing contracts on the balance sheet as a right to use asset and corresponding liability. This is measured by taking the present value of the remaining lease payments over the lease term and recording a right to use asset and corresponding lease obligation for lease payments. Rent expense is realized on a straight-line basis and the lease obligation is amortized based on the effective interest method. The amounts recognized reflect the present value of the remaining lease payments for all leases that have a lease term greater than 12 months. The discount rate used is an estimate of the Company’s incremental borrowing rate based on information available at lease commencement in determining the present value of lease payments.

In considering the lease asset value, the Company considers fixed or variable payment terms, prepayments, and options to extend, terminate or purchase. Renewal, termination, or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised.

Effective September 21, 2021, the Company entered into a lease agreement for real property, including land and buildings in Upton, Wyoming for the Demonstration Plant (the “Property Lease”). The Property Lease is a 12-month lease with annual renewal terms. In June 2024, the Property Lease was renewed, extending the termination date to September 30, 2025. The Property Lease, which is

classified as an operating lease, generally provides for base rent, and requires the Company to pay all insurance, personal property taxes on any structure or improvements made by the Company and other maintenance costs. The Property Lease provides for an annual cost of living adjustment, but contains no residual value guarantees or restrictive covenants. Pursuant to the Property Lease, the Company is obligated to remove certain Company completed property improvements; however, those items requiring removal, if any, will be confirmed with the lessor prior to the termination of the Property Lease.

On May 14, 2024, the Company entered into a second lease agreement for modular office units for use at its Demonstration Plant site in Upton, Wyoming (the “Office Lease”). The Office Lease is for an initial 12-month term and provides for monthly extension options thereafter. During the initial 12-month term, the Company, at its option, can terminate the Office Lease for convenience upon ninety (90) days’ prior written notice and the payment of an early termination fee. The Office Lease, which is classified as an operating lease, generally provides for base rent, and requires the Company to pay all insurance, property taxes and other applicable costs, including the transportation charges to return the units to their original point of origin in an amount not to exceed $7.

For purposes of the following table, payments under the Property Lease and Office Lease are assumed to run through September 30, 2026 and September 30, 2025, respectively.  If the completion of the Demonstration Plant operations dictates further extensions beyond these dates, the Company may seek to extend the term of one or both lease agreements accordingly.  

Total future lease payments under the Company’s leases as of June 30, 2024 are as follows:

2024	$	96
2025		177
2026		96
Total lease payments		369
Less interest		(39)
Present value of lease payments	$	330

For the six months ended June 30, 2024, $58 was included in operating cash flows for amounts paid for operating leases.

As of June 30, 2024 the weighted average lease term for the Company’s operating leases was 1.75 years (including expected renewal options) and the weighted average discount rate was estimated at 12%.