NOTE I – OPERATING LEASE COMMITMENTS

The Company leases its office and warehouse space through 2030 from a corporation that is partly owned by officers/shareholders of the Company (“Related Company”). Minimum rental payments to the Related Company approximated $218,000 for the nine months ended August 31, 2026, and increases at the rate of two per cent per annum throughout the lease term.

Pursuant to the lease agreement, lease expense recognized in operations differs from cash lease payments due to scheduled rent increases. Lease expense is recognized on a straight-line basis over the lease term. The difference between cash payments and lease expense is reflected in the carrying amount of the Company’s operating lease right-of-use asset 

The Company has a lease to rent office space and a warehouse in Hong Kong through November 2027. Annual minimum rental payments for this space are approximately $77,097.

The Company has a lease to rent additional warehouse space in Hong Kong through November 30, 2027. Annual minimum rental payments for this space are approximately $79,564.

The Company’s future minimum rental commitments at August 31, 2026 are as follows:

Net rental expense for the nine months ended August 31, 2026 and August 31, 2025 were $335,264 and $326,917 respectively, of which $217,772 and $214,689 respectively, were paid to the Related Company.

The remaining weighted average lease term is 3.56 years at August 31, 2026. The weighted average discount rate is 5.34 % at August 31, 2026.