LEASES AND LEASED PREMISES

6 Months Ended

Jun. 30, 2026

NOTE 13 – LEASES AND LEASED PREMISES

Rental Payments under Non-cancellable Operating Leases and Equipment Leases

The Company, through its purchase of Champion, acquired several long-term leases for two manufacturing facilities, three office spaces, five distribution centers, and five retail spaces. Four of its distribution centers also have retail operations for which it leases its facilities. Lease terms on the various spaces range from a month-to-month lease (30 days) to a long-term lease expiring in August of 2029. Of the acquired long-term leases the Company is no longer leasing four of the distribution centers and four of the retail spaces.

Rent expense for operating leases totaled approximately $268,000 and $278,000 for the three months ended June 30, 2026 and 2025, respectively. Rent expense for operating leases totaled approximately $536,000 and $563,000 for the six months ended June 30, 2026 and 2025, respectively. These amounts are included in our condensed consolidated statement of operations in Rental expense, warehousing, outlet expense, Administrative and other and cost of goods sold. Rental expense, warehousing, outlet expense is specific to warehousing and final manufacturing of our products.

The Company does not have any equipment leases whereby we finance this equipment needed for operations at competitive finance rates. New equipment to be financed in the near term, if necessary, may not be obtainable at competitive pricing with increasing interest rates.

Right of Use Assets and Lease Liabilities

Lease expense for operating leases consists of the lease payments plus any initial direct costs, net of lease incentives, and is recognized on a straight-line basis over the lease term.

The Company’s operating leases are comprised primarily of facility leases. and as such we have no finance leases for our vehicles or equipment currently at this time.

Balance sheet information related to our leases is presented below:

	Balance Sheet location	June 30, 2026		December 31, 2025
			(Unaudited)		(Audited)
Operating leases:
Right-of-use lease assets	Right-of-use operating lease assets	$	1,826,063	$	2,248,784
Right-of-use lease liability, current	Other current liabilities	$	739,411	$	797,447
Right-of-use lease liability, long-term	Right-of-use operating lease liability	$	1,093,856	$	1,475,523

As of June 30, 2026, weighted-average remaining lease term and discount rate were as follows:

	June 30, 2026
Weighted Average Remaining Lease Term:
Operating leases		2.56 years
Weighted Average Discount Rate:
Operating leases		12.00	%

The minimum future annual payments under non-cancellable leases during the next five years and thereafter, at rates now in force, are as follows:

	Operating leases
2026	$	497,104
2027		823,464
2028		520,241
2029		278,328
Total future minimum lease payments, undiscounted		2,119,137
Less: Imputed interest		(285,870	)
Present value of future minimum lease payments	$	1,833,267