Leases

12 Months Ended

Dec. 31, 2025

Note 11 – Leases

Equipment Lease

The Company has financed production equipment with an acquisition cost of approximately $168,141 under a finance lease with a five-year term and a bargain purchase price of $1.00 at the end of the lease term. The finance lease commenced on May 9, 2023, and expires on May 31, 2028, with monthly lease payments of $3,657 commencing June 1, 2023, and a pre-funding and acceptance fee of $18,079, subject to the ASU 2016-02. As the Company’s lease does 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.

Peru Facility Lease

On May 10, 2024, the Company entered into a ten-year lease for the 50,000 square-foot manufacturing facility in Pisco, Peru (the “Peru Facility”), which commenced operations in December of 2024. The lease of the Peru Facility requires monthly lease payments of $8,000 in the first two years of the lease, $20,000 in the third year of the lease, $22,000 in the fourth year of the lease, $24,000 in the fourth year of the lease, and $25,000 thereafter. The lease also has a 10-year renewal option, and a buy-out option under which the Company may purchase the Peru Facility for $1,865,456.

In connection with the lease of the Peru Facility, the Company purchased a first position mortgage receivable in the amount of $1,267,000, which is secured by the Peru Facility and was owed by the landlord of the Peru Facility to its former tenant, for a purchase price of $1,267,000, of which payments were made in various installments totaling $355,000 during the year ended December 31, 2024; and $912,000 during the year ended December 31, 2025. As of December 31, 2025, the $1,267,000 balance has been paid in full. See Notes 7 and 8 for additional details.

The components of lease expense for the years ended December 31, 2025 and December 31, 2024 were as follows:


	For the Years Ended December 31,
	2025			2024
Operating lease cost:
Amortization of right-of-use asset	$	154,718		$	103,146
Interest on lease liability		137,675			89,853
Capitalized inventory costs		(104,691	)		(15,313	)
Total operating lease cost		187,702			177,686
Finance lease cost:
Amortization of right-of-use asset	$	34,887		$	31,563
Interest on lease liability		11,836			18,164
Total finance lease cost		46,723			49,727
Other short-term leases		-			12,800
Total lease costs	$	234,425		$	240,213

Supplemental balance sheet information related to leases as of December 31, 2025 and December 31, 2024 was as follows:


	December 31,
	2025			2024
Operating lease:
Operating lease assets	$	1,289,318		$	1,444,036

Current portion of operating lease liability	$	53,031			-
Noncurrent operating lease liability		1,561,679			1,573,035
Total operating lease liability	$	1,614,710		$	1,573,035
Finance lease:
Finance lease assets	$	96,574		$	131,461

Current portion of finance lease liability	$	32,627			29,243
Noncurrent finance lease liability		57,327			92,761
Total finance lease liability	$	89,954		$	122,004

Weighted average remaining lease term:
Operating lease		9.69 years			9.86 years
Finance lease		2.19 years			3.13 years

Weighted average discount rate:
Operating lease		9	%		9	%
Finance lease		11	%		11	%

Supplemental cash flow and other information related to finance leases for the years ended December 31, 2025 and December 31, 2024 was as follows:


	For the Years Ended December 31,
	2025		2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	41,675	$	25,853
Finance cash flows used for finance leases	$	32,050	$	9,926
Leased assets obtained in exchange for lease liabilities:
Total operating lease liabilities	$	-	$	1,547,182
Total finance lease liabilities	$	-	$	184,592

The future minimum lease payments due under operating leases as of December 31, 2025 are as follows:

Year Ending	Minimum Lease
December 31,	Commitments
2026	$	192,000
2027		256,000
2028		280,000
2029		296,000
2030		300,000
Thereafter		1,000,000
Total minimum lease payments		2,324,000
Less effects of discounting		709,290
Lease liability recognized		1,614,710
Less current portion		53,031
Long-term operating lease liability	$	1,561,679

The future minimum lease payments due under finance leases as of December 31, 2025 are as follows:

Year Ending	Minimum Lease
December 31,	Commitments
2026	$	43,886
2027		43,886
2028		14,629
Total minimum lease payments		102,401
Less effects of discounting		12,447
Lease liability recognized		89,954
Less current portion		32,627
Long-term finance lease liability	$	57,327