NOTE 9. COMMITMENTS AND CONTINGENCIES

Leases

The Company determines if an arrangement is or contains a lease at contract inception. In arrangements that involve an identified asset, there is also judgment in evaluating if we have the right to direct the use of that asset.

Operating leases are recorded in our balance sheet. Right-of-use (“ROU”) assets and lease liabilities are measured at the lease commencement date based on the present value of the remaining lease payments over the lease term, determined using the discount rate for the lease at the commencement date. 

Finance lease right-of-use assets are included in property, plant, and equipment, net, and finance lease liabilities are included in other current liabilities and other liabilities on the consolidated balance sheets.

Office Lease

On December 4, 2019, the Company executed a non-cancellable lease in a warehouse complex for a monthly base rent of $21,460, with a 3% annual increase and initial cams of $4,442.63. The lease commenced on May 1, 2020, and extends for a term of five years, to expire on April 30, 2025. On May 1, 2025, the Company executed a non-cancellable lease in a warehouse complex at a new location at 7770 Dean Martin Dr.; Las Vegas, NV 89139 for a base rent of $16,390.00, $19,668.00, $23,437.70, $23,437.70 and $23,437,70 for May 2025, June 2025, July 2025, August 2025 and September 2025 respectively. Base rent increased to $24,421 beginning on October 1, 2025, with a 4.3% annual increase and initial cams of $4,442.63. The lease will expire on October 31, 2028. The rent is payable on the first day of each month. The Company recorded an initial lease liability and right-of-use asset of $1,059,987 on May 1, 2025. The Company reported the following summary of non-cancellable operating leases in accordance with the provisions of ASC 842 Topic 842 “Leases” as follows: 

Summary of Non-Cancellable Operating Leases:

Maturities of operating lease liabilities

The following table summarizes the undiscounted cash payments for operating leases as of June 30, 2026, and a reconciliation to the operating lease liabilities recognized in the balance sheet:

Year ending December 31 Operating lease payments

Equipment Leases

Related Party - Notes

On May 18, 2022, the Company entered into an agreement to borrow $66,557 at an interest rate of 9.95% from its CEO, Mr. Wright, to acquire a 2012 Freightliner truck for product deliveries. The agreement is an on-demand note. Mr. Wright is the recorded lienholder on the vehicle’s title and has received monthly payments in the amount of $1,989 with a remaining balance of $17 on June 30, 2026, and $26,847 on June 30, 2025. These amounts are included within notes payable – related party in the accompanying balance sheets. Interest expense recognized on the note was $243 and $1,347 for the six months ended June 30, 2026, and 2025, respectively, and is included within interest expense in the statements of operations. The Company repaid principal of $9,703 to Mr. Wright during the six months ended June 30, 2026, and $10,590 during the six months ended June 30, 2025.

The terms of this related-party financing arrangement were not negotiated at arm’s length with an unrelated third-party lender and may differ from those that would have been available to the Company from an independent source.

From time to time, the Company may, at its discretion, provide payroll advances to employees as part of its normal operating activities. Employees who receive a payroll advance must sign an agreement authorizing repayment through future payroll deductions in accordance with Nevada law. These advances are not made to officers or directors on terms different from those offered to other employees and are not considered related-party transactions under ASC 850.