Leases

12 Months Ended

Dec. 31, 2025

7. Leases

The Company leases certain equipment from third-parties. The determination of whether an arrangement is a lease is made at the lease’s inception. In accordance with US GAAP, a contract is (or contains) a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is defined as having both the right to obtain substantially all of the economic benefits from use of the asset and the right to direct the use of the asset. Management only reassesses its determination if the terms and conditions of the contract are changed.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease obligations represent the Company’s obligation to make lease payments over that term. ROU assets and lease obligations are recognized at the lease commencement date based on the present value of lease payments calculated using the implicit rate when it is readily determinable. In the absence of an implicit rate, management may use the Company’s incremental borrowing rate based on the information available at lease commencement. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised.

ROU assets associated with operating leases recorded net of accumulated amortization were approximately $158,000 and $64,000 as of December 31, 2025 and December 31, 2024, respectively. ROU assets associated with finance leases recorded net of accumulated amortization of approximately $754,000 and $1,390,000 at December 31, 2025 and 2024, respectively, and are included with property, plant and equipment, net. The Company recognized interest expense on its lease obligations of approximately $282,000 and $417,000 during the years ended December 31, 2025 and 2024, respectively.

For the years ended December 31, 2025 and 2024, the Company recognized rent expense associated with leases as follows:

	2025		2024
Operating lease cost:
Fixed rent expense	$	46,123	$	44,643
Finance lease cost:
Amortization of ROU assets		636,034		636,034
Net lease cost	$	682,157	$	680,677
Lease cost - SG&A	$	46,123	$	44,643
Lease cost - Depreciation and Amortization		636,034		636,034
Net lease cost	$	682,157	$	680,677

ROU assets and lease liabilities consist of the following as of December 31, 2025 and 2024:

	2025			2024
Operating leases - ROU assets:
Operating lease, ROU assets, gross	$	161,598		$	179,849
Accumulated amortization		(3,237	)		(116,023	)
Operating leases - ROU assets, net	$	158,361		$	63,826
Operating lease liabilities:
Operating leases, current portion	$	39,982		$	55,116
Operating leases, non-current portion		118,528			12,015
Total operating lease liabilities	$	158,510		$	67,131
Finance leases, ROU assets:
Property and equipment, gross	$	3,180,169		$	3,180,169
Accumulated depreciation		(2,425,725	)		(1,789,691	)
Finance leases, ROU assets, net	$	754,444		$	1,390,478
Finance lease liabilities:
Finance leases payable, current portion	$	642,474		$	538,845
Finance leases payable, non-current portion		489,461			1,143,829
Total finance lease liabilities:	$	1,131,935		$	1,682,674

Future minimum payments due under operating and finance leases as of December 31, 2025 consisted of the following:

Years Ending December 31,	Operating Leases			Finance Leases
2026	$	54,051		$	776,818
2027		54,795			519,093
2028		55,751			-
2029		23,484			-
Total		188,081			1,295,911
Less: effect of discounting		(29,571	)		(163,976	)
Lease liability recognized	$	158,510		$	1,131,935

As of December 31, 2025 the weighted average remaining lease term and weighted average discount rate for operating leases was 3.4 years and 10.00%, respectively.

As of December 31, 2024 the weighted average remaining lease term and weighted average discount rate for operating leases was 1.41 years and 10.00%, respectively.

As of December 31, 2025 the weighted average remaining lease term and weighted average discount rate for finance leases was 1.67 years and 19.04%, respectively.

As of December 31, 2024 the weighted average remaining lease term and weighted average discount rate for finance leases was 2.64 years and 18.89%, respectively.