NOTE 5 – RIGHT-OF-USE ASSETS AND OPERATING AND FINANCE LEASE LIABILITIES

Operating Leases

Operating lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is the incremental borrowing rate, estimated to be 10%, as the interest rate implicit in most of the Company’s leases are not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease term.

NAPC Defense Inc. entered into a lease agreement for approximately 2,900 square feet of commercial office space located in Clearwater, Florida that commenced on May 1, 2025 and that terminates on May 1, 2028. The base rent during the term of the lease is $3,138 per month in year one, $3,295 per month in year two, and $3,460 per month in year three. The Company was reimbursed $11,588 by the landlord for leasehold improvements which offset against fixed assets in the accompanying balance sheet during the year ended April, 2026.

On May 1, 2025, upon inception of the lease, the Company recorded a right-of-use asset and lease liability of $105,293. As a result of the lease incentive, the right of use asset and liability was adjusted to $94,083.

Right-of-use assets at April 30, 2026 and 2025 are summarized below:

Schedule of right-of-use assets

Rent expense is shown in the Company’s Statement of Operations as $150,368 for the year ended April 30, 2026 due to the Company having a month-to-month lease that is not included in the Right-of-use assets.

Operating Lease liabilities are summarized below:

Schedule of operating lease liabilities

Maturity of lease liabilities are as follows:

Schedule of Maturity of lease liabilities