Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Lease Receivable

Note 4 - Lease Receivable
3 Months Ended
Mar. 31, 2023
Notes to Financial Statements  
Lessor, Sales-type Leases [Text Block]

4. Lease receivable


The Company has entered into an Industrial Lease Agreement with LINICO Corporation, a Nevada corporation, or ("LINICO"), dated February 15, 2021 pursuant to which the Company has leased to LINICO its 136,750 square foot recycling facility at TRIC. The lease commenced  April 1, 2021 and expired on March 31, 2023. During the lease term, LINICO (or it's parent, Comstock Inc.) had the option to purchase the land and facilities at a purchase price of $14.25 million if the option is exercised and the sale is completed by October 1, 2022 or $15.25 million if the option is exercised prior to March 31, 2023. The purchase option is subject to LINICO’s payment of a nonrefundable deposit of $1.25 million, which was paid on October 15, 2021, and a second nonrefundable deposit of $2.0 million, which was paid on October 25, 2022. Both deposits will be applied towards the purchase price. The lease agreement is a triple-net lease pursuant to which LINICO is responsible for all fixed costs, including maintenance, utilities, insurance, and property taxes. The lease agreement provides for LINICO’s monthly lease payments starting at $68,000 per month and increasing to $100,640 in the last six months of the lease. On March 31, 2023, Aqua Metals, Inc. received a notice of Comstock Inc.’s exercise of the option to purchase to the land and building located at 2500 Peru Dr., McCarran, Nevada. Per the Industrial Lease dated February 15, 2021, Comstock has the right to exercise the purchase option in lieu of LINICO, and the transaction will follow the same terms of the original agreement. Per the agreement, Comstock Inc. has no more than 30 days, or until April 30, 2023, to close on the purchase of the land and building.


The Company accounted for the Industrial Lease and Option to Purchase Agreement as a sales-type lease. As a component of the accounting for the agreement, the Company recognized the estimated fair market value of the land and plant of $17.0 million as a lease receivable, which is reflected on the Company's condensed consolidated balance sheets. The implied interest rate of 0.5% was utilized for the amortization of the scheduled building lease/purchase payments outlined in the agreement. The Company applies the monthly payments received as a reduction to lease receivable and interest income. The interest income recognized from the agreement is included in "Interest and other income" on the Company's condensed consolidated statements of operations. For the three months ended March 31, 2023, the Company recognized a reduction in the lease receivable balance of approximately $283,000 and recorded $18,000 of interest income related to this agreement.


On April 26, 2023, the Company sold the land and building located at 2500 Peru Dr., McCarran, Nevada to Comstock Inc. and after paying the note payable as noted in Note 14, the Company received the net proceeds of approximately $5.7 million.