2. SIGNIFICANT ACCOUNTING POLICIES

These unaudited condensed interim consolidated financial statements have been prepared on a historical cost basis, except where otherwise noted, in accordance with accounting principles generally accepted in the United States.

In the opinion of management, the accompanying unaudited condensed interim consolidated financial statements contain all adjustments (all of which are of a normal recurring nature) and disclosures necessary for a fair statement of the Company’s financial position as of June 30, 2026 and the results of its operations and cash flows for the six months then ended. The consolidated balance sheet as of December 31, 2025 is derived from the December 31, 2025 audited financial statements. The unaudited condensed interim consolidated financial statements do not include all disclosures required of annual consolidated financial statements and, accordingly, should be read in conjunction with our annual financial statements for the year ended December 31, 2025. Operating results for the six months ended June 30, 2026 may not be indicative of results expected for the full year ending December 31, 2026.

The Company recorded an income tax benefit for the six months ended June 30, 2026. The estimated effective tax rate for the period differs from the U.S. federal statutory rate primarily due to a full valuation allowance against the net deferred tax assets of the Company’s Canadian and Panamanian operations, partially offset by the accrual of interest and penalties on unfiled U.S. federal and state tax returns. The uncertain tax position underlying these returns was resolved during the year ended December 31, 2025; however, interest and penalties continue to accrue until the returns are filed, and these amounts are recognized as a component of income tax expense.

(a) Term Deposits.

Term deposits with original maturities greater than three months but less than one year are classified as current assets and carried at amortized cost, which approximates fair value. Interest income is recognized on the accrual basis.

At June 30, 2026, the Company had two term deposits that are maintained by commercial banks. The first term deposit is for $322,752 and matures in February 2027. This deposit pays 3% interest and, if withdrawn before maturity, a penalty may be applied. The second term deposit is for $330,058, matures in August 2026 and pays interest at a rate of 3%. If withdrawn before maturity, a penalty may be applied. A third term deposit for $761,074, matured in March 2026 and was not renewed.

(b) Inventories and Cost of Sales.

The Company has three major classes of inventory: completed goods, work in progress and raw materials and supplies. In all classes, inventories are stated at the lower of cost or net realizable value with cost determined using either weighted average cost or the first-in, first-out (FIFO) method, depending on the entity. Cost of sales includes all expenditures incurred in bringing the goods to the point of sale. Inventory costs and costs of sales include direct costs of the raw material, inbound freight charges, warehousing costs, handling costs (receiving and purchasing) and utilities and overhead expenses related to the Company’s manufacturing and processing facilities. The Company periodically reviews its inventory for slow-moving or obsolete items and writes down the inventory carrying value to its estimated net realizable value based on assumptions about future demand and market conditions.

The Company accounts for shipping and handling activities as fulfillment costs and shipping and handling charges included in the unaudited condensed interim consolidated statements of operations and comprehensive income (loss) are as follows:

 SCHEDULE OF SHIPPING AND HANDLING CHARGES

(c) Risk Management and Concentrations.

The Company’s credit risk is primarily attributable to its accounts receivable. The amounts presented in the consolidated balance sheets are net of allowances for doubtful accounts, estimated by the Company’s management based on prior experience and the current economic environment. The Company is exposed to credit-related losses in the event of non-payment by customers. Credit exposure is minimized by dealing with only credit worthy counterparties.

Excluding research and development services revenue that is listed separately, total revenue for the Company’s primary customers that have over 10% of sales in each period is as follows:

 SCHEDULE OF REVENUE

Total accounts receivable for the Company’s product customers with balances over 10% of accounts receivable at June 30, 2026 and December 31, 2025 is as follows:

The credit risk on cash is limited because the Company limits its exposure to credit loss by placing its cash with major financial institutions. The Company maintains cash balances at financial institutions which at times exceed federally insured amounts. The Company has not experienced any losses in such accounts.

(d) Reclassification.

Certain prior year amounts have been reclassified to conform to the 2026 financial statements presentation. Reclassifications had no effect on net income (loss), cash flows, or stockholders’ equity as previously reported.

(e) Recent Accounting Pronouncements.

In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure about the types of costs and expenses included in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company’s annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted, and may be applied either prospectively or retrospectively. The Company is currently evaluating the ASU to determine its impact on its unaudited condensed interim consolidated financial statements and disclosures.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.