NOTE 6 – OPERATING LEASES

We have leased vehicles with terms greater than one year that are classified as operating leases per the guidelines. The lease terms vary between 48 and 60 months. At the end of the term the vehicle becomes the property of the Company.

The capital lease value is calculated following FASB guidelines annually and is presented as a non-current asset on the balance sheet. As of December 31, 2025, the value is calculated to be $2,642,589. The Operating Lease liability is presented as current and long term. The current portion of the Operating Lease liability for December 31, 2025, is $903,648, and the long-term portion is $1,738,941. The non-current operating lease asset is $2,642,589 as of March 31, 2026, and the current portion of the Operating Lease Liability is $903,648, with long-term Operating Lease Liability of $1,738,941. Since there is no income statement impact of the capital lease calculations, management has chosen to make the adjustment annually. However, if a significant event impacts the capital lease values, management will recalculate the lease values in the quarter of the event.

The discount rate is the interest rate that equates the present value of future lease payments to the Right-of-Use (ROU) asset or lease liability. The leasehold amortization was calculated using an incremental borrowing rate based on the 7-year risk-free Treasury rate as of the month the lease began. This rate was applied to determine the present value of the lease payments and record the right-of-use asset and lease liability as recorded on the balance sheet.

Maturities of lease liabilities on December 31, 2025, are as follows: