NOTE 10 – LEASES

In February 2016, the FASB issued ASU No. 2016-02, “Leases” (Topic 842) (“ASU 2016-02”). The amended guidance, which was effective for the Company on January 1, 2019, requires the recognition of lease assets and lease liabilities on the balance sheet for those leases with terms in excess of 12 months and currently classified as operating leases. Leases with an initial term of one year or less are not recorded on the balance sheet; lease expense for these types of leases are recognized on a straight-line basis over the lease term. Options to extend or terminate a lease are not included in the determination of the right-of-use asset or lease liability unless it is reasonably certain to be exercised. Operating lease right-of-use assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. Lifted adopted ASU 2016-02 using the modified retrospective approach, electing the package of practical expedients.

The Company currently has operating leases for its leased facilities located at 8910 58^th Place, Suites 100, 600 and 700, Kenosha, WI 53144 and 5732 95^th Avenue, Suites 100-400, Kenosha, WI 53144. These facilities are used for manufacturing, packaging, storage and office space in Kenosha, Wisconsin. The Company has paid security deposits for these leases. From time to time, the Company maintains inventory at third party facilities around the USA. 

The following table is the maturity analysis of the Company’s operating leases as of the reported period end:

Weighted Average Discount Rate

In calculating the right-of-use assets and liabilities, the Company uses a discount rate based on a published range of conventional commercial mortgage interest rates corresponding to the life of each lease. The Company uses the higher end of the range due to the Company’s limited credit history and the riskiness of the industries in which the Company operates.

Lease Costs

The table below summarizes the components of lease costs for the following periods: 

Balance Sheet Classification of Operating Lease Assets and Liabilities

Allocation of a Portion of Lease Expense to Finished Goods 

Reference is hereby made to the disclosures in the following section, which are hereby incorporated by reference thereto:

NOTE 2 – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Inventory

Other Deposits and Bonds

The majority of the Company’s security deposit for the lease of 789 Tech Center Drive, Unit C, Durango, Colorado 81301 was returned to the Company in the second quarter of 2025 after the termination of the lease. The Company’s security deposit for its former sublease of the space located at 2701-09 West Fulton PH, Chicago, Illinois 60612 was written off in the second quarter of 2025. The Company is required to, and has, paid bonds and deposits to various state departments and vendors for licenses and utilities, respectively.