NOTE 9: LEASES

The Company leases its manufacturing facility and it is classified as an operating lease. The Company recognized right of use assets and lease liabilities pursuant to these leases. Leases with an initial term of 12 months or less or leases that are immaterial are not included on the condensed consolidated balance sheets. The lease liability was calculated at the commencement date of each lease by discounting the future payments using the Company’s incremental borrowing rate of 10%.

The lease for the manufacturing facility commenced on June 1, 2022, and has a term of five years. For the first twelve months the monthly lease payments were $36,000. The monthly lease payments are subject to an annual increase of 3%.

Right-of-use lease asset is summarized below:

Operating lease liability is summarized below:

Future minimum lease payments required under this operating lease on an undiscounted cash flow basis as of January 31, 2026 were as follows:

The Company recognized rent expense pursuant to this lease on the straight-line basis in accordance with the guidance in ASC 842. The Company recognized rent expense of $89,430 and $100,019 for the three months ended January 31, 2026 and 2025, related to this lease, which is included within facilities expense on the condensed consolidated statements of operations.