Note 9 – Leases

The Company determines if an arrangement is a finance lease or operating lease at inception and recognizes right-of-use (“ROU”) assets and lease liabilities at commencement date based on the present value of the lease payments over the lease term. For operating leases, our right-of-use assets are amortized on a straight-line basis over the lease term with rent expense recorded to operating expenses. The Company has elected the practical expedient of not separating lease components from nonlease components. The depreciable life of related leasehold improvements is based on the shorter of the useful life or the lease term.

The Company leases its 20,945 square foot facility under a non-cancelable real property lease agreement with an expiration date of August 31, 2025, with two five-year options to extend, at a monthly lease rate of $11,296, with approximately a 3% annual escalation of lease payments commencing September 15, 2021, under which an entity owned entirely by Ira Goldfarb, the Company's Executive Chairman, is the landlord. The lease liability and right-of-use asset were recorded under the assumption that the Company would elect to extend. The Company is currently The facility lease contains provisions requiring payment of property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise. As the Company’s leases do not provide implicit discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in

determining the present value of lease payments. The incremental borrowing rate for the lease at the time of commencement was 5.75%.

On May 22, 2024, the Company entered into an industrial lease with USCIF Pinnacle Building B LLC. The Company leased approximately 324,000 rentable square feet from the Lessor at 4024 Rock Quarry Road, Dallas, Texas for a term of approximately 62 months, which the Company intends to use as industrial and manufacturing space. The term of the lease commenced on May 22, 2024. The lease provides for graduated rent payments starting at $122,175 per month, increasing up to $297,289 per month by the end of the lease, plus taxes, insurance and common area maintenance costs. The Company has provided a security deposit in the amount of $1,000,000 in connection with the lease. The lease may be renewed upon the extension in writing between the Company and the lessor for a period of up to 60 months. The incremental borrowing rate for the lease at the time of commencement was 10.84%. Effective September 30, 2025, the Company agreed with Pinnacle to exit the facility on January 31, 2026. As a result of reducing the lease term by 42 months, the company reduced the related right-of-use asset by $10,397,922 and the lease liability by $11,829,536, resulting in a noncash gain $1,431,614.

On October 26, 2023, the Company entered into a lease agreement with Prologis, Inc., a Maryland corporation, which the Company intends to use as production space. The Company leased approximately 51,264 square feet in Dallas, Texas for an initial term of approximately five years and two months. The lease commenced on November 1, 2023. The base rent payments started at approximately $42,500 per month in the first year, and increase each year, up to approximately $51,700 per month during the last year of the initial term. The Company is also responsible for operating expenses of the premises, which start at $7,835 per month, with an annual escalation of 4.3%. As a deposit on the lease, the Company is required to provide a letter of credit to Prologis, Inc. in the amount of $300,000. Effective September 30, 2025, the Company agreed with Prologis to exit the lease as of September 30, 2025. As a result of reducing the lease term by 39 months, the company derecognized the related right-of-use asset $2,325,675 and the lease liability of $2,673,619, resulting in a noncash gain of $347,943.

On July 1, 2023, the Company entered into a lease for additional warehouse space in Irving, Texas, of approximately 9,000 feet under a 37-month lease at a rate of $8,456 per month, with approximately a 4% annual escalation of lease payments. The facility lease contains provisions requiring payment of property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise. As the Company’s leases do not provide implicit discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate for the lease at the time of commencement was 8%.