NOTE 9 - RELATED-PARTY LEASES AND SUBLEASE ARRANGEMENTS

Lease of Premises at 10 N Newnan Street

In February 2023, the Company entered into a lease with 10 N Newnan LLC, an entity controlled by the Company’s CEO, for office space located at 10 N Newnan Street, Jacksonville, Florida 32202. The lease commenced on February 1, 2023 and had an initial term of 36 months.

In February 2024, the lease was extended for an additional two years through January 31, 2028. At the modification date, the Company remeasured the ROU asset and lease liability of $297,229 using a discount rate of 12%.

Following the extension, the landlord agreed to a discount in exchange for prepayment of the remaining lease obligation. In February 2024, the Company prepaid the lease by issuing a convertible promissory note. See Note 8. The Company recorded prepaid rental interest of $78,476 in connection with the transaction.

As of May 31, 2026 and 2025, the ROU asset associated with this lease was $141,246 and $213,444, respectively, and prepaid rental interest was $15,298 and $37,026, respectively. Lease expense related to this property was $93,926 for each of the years ended May 31, 2026 and 2025, of which $21,932 and $0, respectively, was allocated to cost of sales for the portion of the property that was subleased.

Lease of Premises at 2652 Blanding Boulevard

In February 2023, the Company entered into a lease with 2600 Blanding Blvd., LLC, an entity controlled by the Company’s CEO, for the property located at 2652 Blanding Boulevard, Jacksonville, Florida 32210. The lease commenced on February 1, 2023 and had a term of 36 months through January 31, 2026.

At the lease commencement date, the Company recognized an ROU asset and lease liability of $145,341 using a discount rate of 12%. The lease required monthly base rent of $5,000 and additional monthly direct costs of $350 and provided for free rent during the first three months. The Company also had the option to settle all or a portion of the rent through the issuance of shares of its common stock.

No monthly lease payments were made under this arrangement. Upon expiration of the lease in January 2026, the related ROU asset was fully amortized. As of May 31, 2026 and 2025, the ROU asset associated with this lease was $0 and $37,370, respectively.

As of May 31, 2026, the Company had unpaid rent of $107,000 relating to the expired lease. The amount remained classified as an operating lease liability in default as of May 31, 2026. As of May 31, 2025, the related operating lease liability was $105,137.

During the years ended May 31, 2026 and 2025, rental expenses related to this property was $39,233 and $58,850, respectively, of which $0 and $22,068, respectively, were allocated to cost of sales for the portion of property that was subleased.

Lease of Premises at 1268 Church Street

In January 2024, the Company entered into a lease with 1268 Church Street LLC, an entity controlled by the Company’s CEO, for the property located at 1268 Church Street, Jacksonville, Florida 32202. The lease commenced on January 1, 2024 and had an initial term of 37 months.

At the lease commencement date, the Company recognized an ROU asset and lease liability of $104,472 using a discount rate of 12%. In February 2024, the lease was extended through December 31, 2028. At the modification date, the Company remeasured the ROU asset and lease liability at $148,735 using a discount rate of 12%.

Following the extension, the landlord agreed to a discount in exchange for prepayment of the remaining lease obligation. The Company prepaid the lease by issuing a convertible promissory note. See Note 8. The Company also recorded prepaid rental interest of $48,001 in connection with the transaction.

As of May 31, 2026 and 2025, the ROU asset associated with this lease was $90,031 and $118,076, respectively, and prepaid rental interest was $15,121 and $27,780, respectively. Lease expense related to this property was $40,704 for each of the years ended May 31, 2026 and 2025.

Lease of Premises at 2502 Blanding Boulevard

In February 2024, the Company entered into a lease with 2600 Blanding Blvd., LLC, an entity controlled by the Company’s CEO, for the property located at 2502 Blanding Boulevard, Jacksonville, Florida 32210. The lease commenced on February 1, 2024 and has a term of 60 months through January 31, 2029.

At the lease commencement date, the Company recognized an ROU asset and lease liability of $176,213 using a discount rate of 12%. Also in February 2024, the landlord agreed to a discount in exchange for prepayment of the remaining lease obligation, and the Company prepaid the lease by issuing a convertible promissory note. See Note 8. The Company also recorded prepaid rental interest of $58,973 in connection with the transaction.

As of May 31, 2026 and 2025, the ROU asset associated with this lease was $106,890 and $138,977, respectively, and prepaid rental interest was $18,542 and $33,493, respectively. Lease expense related to this property was $47,037 for each of the years ended May 31, 2026 and 2025.

Sublease for Premises at 2652 Blanding Boulevard

In February 2023, the Company entered into a sublease, as lessor, for a portion of the property located at 2652 Blanding Boulevard to a third-party private company. The sublease was for one year and provided for monthly rent of $2,500, or $30,000 annually. Effective March 2024, the sublease continued on a month-to-month basis and was terminated on February 28, 2025. The Company recognized rental income of $22,500 and cost of sales of $22,068 related to this sublease during the year ended May 31, 2025.

Sublease for Premises at 10 N Newnan Street

Effective March 1, 2026, the Company entered into a new sublease agreement with RLSH, LLC (an entity controlled by the Company’s CEO) for 2,900 square feet located on the front portion of the first floor of the Company’s leased property at 10 N Newnan Street, Jacksonville, Florida. The 2,900 square feet subleased represents 93.4% of the 3,105 square feet covered by the primary lease.

The sublease provides for annual base rent of $84,000, payable in monthly installments of $7,000, plus additional costs and expenses incurred in connection with subleasing the premises. The sublease does not require a security deposit. The sublease is subordinate to the primary lease and will terminate if the primary lease is terminated before the scheduled expiration of the sublease. The sublease agreement provided for an initial term through August 31, 2026. Subsequent to August 31, 2026, the space is being leased on a month-to-month basis to the same related party for the same $7,000 monthly installment.

The Company recognized rental income of $21,000 under the new sublease and recognized cost of sales of $21,931 during the year ended May 31, 2026.

Lease Expense

The components of lease expense were as follows:

The following table summarizes lease expense by property:

Balance-Sheet Presentation

The Company’s weighted average remaining lease term is 2.23 years and weighted average discount rate is 12%. The following table summarizes the presentation in the Company’s balance sheet of its operating lease.

As of May 31, 2026, the Company had $107,000 of operating lease liabilities related to the expired 2652 Blanding Boulevard lease. The Company had no other outstanding operating lease liabilities associated with its active leases because the remaining contractual payments for those leases had previously been prepaid through the issuance of convertible promissory notes. The related ROU assets continue to be amortized over the remaining contractual lease terms.