5.        Right of Use Assets and Liabilities

Right of Use - Operating

The Company has a month-to-month lease for its office, ramp and hanger space in Carlsbad, California. The Company entered into a lease amendment on February 14, 2023, increasing the monthly rent to $7,108. The Company entered into another lease amendment on February 1, 2024 which increased the monthly rent to $9,438. Effective September 1, 2024, the Company entered into a revised lease agreement for a period of 60 months expiring on August 31, 2029. Under the terms of the agreement, the Company’s initial monthly payment is $28,371 increasing by a minimum of 3% per annum each subsequent year. There are no lease renewals. On September 1, 2024, the Company recorded a right of use asset and liability – operating of $1,317,020. The Company used an incremental borrowing rate of 12.9% based upon historical borrowing rates on similar collateralized loans.

As discussed in Note 6, in May 2024, the Company and Demeter signed an Aircraft Asset Rights Transfer Agreement which included leases on four aircraft. At the time of assignment, the Company recorded right of use assets and liabilities – operating of $4,558,913 and $4,558,193, and right of use assets and liabilities – financing of $12,433,818 and $10,520,064, respectively. The Company accounted for the assets and liabilities assumed at their carrying value due to both entities being under common control. The operating leases are payable in monthly payments ranging from $25,000 to approximately $32,000 through December 2029 and contained an initial imputed interest rates ranging from 7.75% to 12.9% and are secured by the equipment being leased.

For the years ended December 31, 2025 and 2024, the Company recorded total operating lease expense of $893,322 and $731,485, respectively. As of December 31, 2025, the weighted average remaining lease term and the weighted average discount rate for the operating leases was 4.0 years and 10.33%, respectively.

Maturities of the Company’s right of use liabilities – operating is as follows:

Right of Use - Financing

The financing leases are payable in monthly payments ranging from $14,698 to $53,077 through dates ranging from November 2026 to October 2028 and contain original imputed interest rates ranging from 3.85% to 7.75% and are secured by the equipment being leased. Additionally, the leases have balloon payments due at the end of the leases totaling $8,894,298.

For the years ended December 31, 2025 and 2024, amortization expense of right of use assets – financing was $103,692 and $54,067, respectively. For the years ended December 31, 2025 and 2024, interest expense associated with the right of use liabilities – financing was approximately $716,712 and $492,869, respectively. As of December 31, 2025, the weighted average remaining lease term and the weighted average discount rate for the financing leases was 2.25 years and 6.5%, respectively.

As of December 31, 2025, future annual minimum lease payments under right of use liabilities – financing are as follows: