3. LEASES

Panama Operating Lease

In 2024, the Company executed a contract to lease 37,500 sq. ft for manufacturing space with a lease term of 122 months with the option to renew the lease for a further 36 months at the end and total payments during the term, starting at $31,324 per month with a 3% increase each year, or $3,461,568 in total. The Company recorded the present value of the lease payments over the term as a lease liability and an ROU asset. The Company’s incremental borrowing rate of 7% was used as the discount rate since the rate implicit in the lease was not readily determinable.

The lease liability related to this operating lease, which represents the present value of the lease payments, and the corresponding ROU asset were both $2,341,339 at inception of the lease. As of March 31, 2026, the ROU asset was $2,067,018 (December 31, 2025 - $2,111,027) and the lease liability was $2,586,253 (December 31, 2025 - $2,543,723). During the three months ended March 31, 2026, the Company recognized $86,539 (2025 – nil) of lease expense related to this lease in “Selling, general and administrative” in the consolidated statements of income and comprehensive income. There were no payments made or expense recorded for this lease in 2024. The Company is waiting for final requirements to be met by the lessor before starting to pay rent. At December 31, 2025 and March 31, 2026, the difference between the ROU asset and lease liability is attributable to the timing of the commencement of rent payments.

Mendota, Illinois Operating Leases

In October 2025, in connection with the sale of a building previously occupied by the Company’s subsidiary ENP Investments (see Note 6), ENP Investments entered into operating leases with the new owner for a total of 125,500 square feet of manufacturing and office space, comprised of two lease sections. The Company’s incremental borrowing rate of 7% was used as the discount rate for both leases as the implicit rate was not readily determinable.

Section A (110,000 sq. ft.): Initial term of 60 months with an option to renew. Monthly base rent begins at $27,492 and escalates at approximately 3.6% annually, for total undiscounted payments of $1,771,552. At inception, both the ROU asset and lease liability were recorded at $1,483,227. The option to renew was not considered in calculating the initial carrying values. As of March 31, 2026, both the ROU asset and lease liability were $1,368,664 (December 31, 2025 - $1,426,447). For the three months ended March 31, 2026, operating lease expense of $82,475 (2025 – $nil) was recognized in “Cost of sales” in the condensed interim consolidated statements of loss and comprehensive income (loss).

Section B (15,500 sq. ft.): Initial term of 60 months with an option to renew. Monthly base rent begins at $4,856 and escalates at approximately 3.6% annually, for total undiscounted payments of $312,625. At inception, both the ROU asset and lease liability were recorded at $263,383. The option to renew was not considered in calculating the initial carrying values. As of March 31, 2026, both the ROU asset and lease liability were $242,870 (December 31, 2025 - $253,213). For the three months ended March 31, 2026, operating lease expense of $14,567 (2025 – $nil) was recognized in “Cost of sales” in the condensed interim consolidated statements of loss and comprehensive income (loss).

The following table summarizes expense and cash payments for operating leases during the periods noted:

SCHEDULE OF CASH PAYMENTS FOR OPERATING LEASE

The following table contains the weighted average remaining lease term and discount rate for operating leases as of the end of the period:

SCHEDULE OF WEIGHTED AVERAGE REMAINING LEASE TERM AND DISCOUNT RATE

The table below presents a maturity analysis of the future minimum lease payments for operating leases as of March 31, 2026:

 SUMMARY OF RIGHT-OF-USE ASSET AND LEASE LIABILITY