NOTE 10 – LEASING ARRANGEMENTS

The Company conducts its retail operations in facilities leased under non-cancelable operating leases of up to ten years. Certain leases contain renewal options for between five and ten additional years at increased monthly rentals. Some of the leases provide for contingent rentals based on sales in excess of predetermined base levels.

The Company acts as primary lessee for one franchised store premises, which the Company then subleases to franchisee, but the majority of existing franchised locations are leased by the franchisee directly. When the Company-owned location was sold or transferred, the store was subleased to the franchisee who is responsible for the monthly rent and other obligations under the lease.

The Company also leases trucking equipment and warehouse space in support of its production operations. Expense associated with trucking and warehouse leases is included in cost of sales on the consolidated statements of operations.

The Company accounts for payments related to lease liabilities on a straight-line basis over the lease term. During the years ended February 28 or 29, 2026, 2025, and 2024, lease expense recognized in the consolidated statements of operations was $0.6 million, $0.5 million and $0.6 million, respectively.

The lease liability reflects the present value of the Company’s estimated future minimum lease payments over the life of its leases. This includes known escalations and renewal option periods reasonably assured of being exercised. Typically, renewal options are considered reasonably assured of being exercised if the sales performance of the location remains strong. Therefore, the right of use asset and lease liability include an assumption on renewal options that have not yet been exercised by the Company and are not currently a future obligation. The Company has separated non-lease components from lease components in the recognition of the Asset and Liability except in instances where such costs were not practical to separate. To the extent that occupancy costs, such as site maintenance, are included in the asset and liability, the impact is immaterial. For franchised locations, the related occupancy costs including property taxes, insurance and site maintenance are generally required to be paid by the franchisees as part of the franchise arrangement. In addition, the Company is the lessee under non-store related leases such as storage facilities and trucking equipment. For leases where the implicit rate is not readily determinable, the Company uses an incremental borrowing rate to calculate the lease liability that represents an estimate of the interest rate the Company would incur to borrow on a collateralized basis over the term of a lease. The weighted average discount rate used for operating leases was 10.29%, 3.9%, and 3.9% as of February 28, 2026, February 28, 2025, and February 29, 2024 respectively. The total estimated future minimum lease payments is $2.2 million as of February 28, 2026.

The weighted average lease term at February 28 and 29, 2026, 2025, and 2024 was 8.4 years, 5.8 years, and 5.8 years, respectively.

The Company entered into three new leases during the year ended February 28, 2026, including the lease for the Durango retail location for 15 years in November 2025, for the Camarillo retail location for 10 years in August 2025, and the Miami office location for 3.5 years in August 2025 with a total increase in future lease payments of $1.3 million. The Company did not enter into any new leases during the year ended February 28, 2025. During the year ended February 29, 2024, the Company entered into new leases representing a future lease liability of $0.1 million.

The Company did not have any leases categorized as finance leases as of February 28, 2026 or February 28, 2025.