PREPAID EXPENSE – NON-CURRENT PORTION	6 Months Ended
Jun. 30, 2025
Prepaid Expense Non-current Portion
PREPAID EXPENSE – NON-CURRENT PORTION	NOTE 6 - PREPAID EXPENSE – NON-CURRENT PORTION Effective June 3, 2025, we entered into a second manufacturing contract with Montrade S.p.A., Bologna, Italy, to manufacture and install a second machine for the automated manufacture of tobacco consumables for the Company’s proprietary, patented and patent pending Heat-not-Burn system. When operational, the Company expects this machine will produce 300 tobacco consumables per minute. Completion of the machine build is anticipated in the third quarter of 2026. We made an initial payment of $1,016,531 USD. We recorded $867,482 of this payment as Prepaid Expenses – non-current portion while we expensed $149,049 in the second quarter. We are required to make additional payments approximating $1,963,882 USD as certain stages are completed. Effective July 13, 2022, we entered into our first contract with Montrade to manufacture and install consumable manufacturing equipment capable of producing 100 tobacco consumables per minute. The Company made an initial payment of $589,265 USD on July 11, 2022 and was required to make additional payments, prior to Amendments, of up to $1,086,465 USD for the module as certain stages are completed. On February 23, 2023, we made a payment of $138,386 for completion of the design phase. On March 29, 2023, the Company signed Amendment 1 to the manufacturing contract for additional design work and paid $12,465 of the additional $36,809 cost. Amendment 1 was for design work so $12,465 was expensed. On October 18, 2023, the Company signed Amendment 2 to the manufacturing contract to modify certain components and paid $40,091 of the $114,546 cost. In 2022, $130,948 of the initial payment was expensed for design services completed by Montrade. The remaining payment of $458,317 and the additional payment on October 24, 2023, for Amendment 2 of $40,091 for a combined total of $498,408 are related to the manufacturing of the module for the automated manufacture of consumables for the Company’s proprietary, patented and patent pending Heat-not-Burn system. The $498,408 payment is recorded as Prepaid expenses – noncurrent portion. With the two amendments added and with payments made in 2023 the Company will be required to pay up to $1,046,878. On February 26, 2024, the Company signed Amendment 3 to the manufacturing contract, for a change to a component with a cost of $27,845 and made payment in full on March 6, 2024 for this change. In December 2024 the Company entered into Amendment 4 to the manufacturing contract amending the payment terms. In this Amendment, the Company agreed to pay an amount that when added to the payments already made would equal 90% of the equipment build portion of the contract. This amount is $813,875 and was paid in January 2025. Following this January 2025 payment, 90% of the build-cost for the manufacturing equipment has been made in line with Amendment 4. On February 14, 2025, we signed Amendment 5 to the agreement for the modification to one component of the machine. The cost for this modification is $160,106 of which half was paid on or about the time of signing, in line with the Amendment. We expect this machine to be in the US no later than the first quarter of 2026. Montrade is an industry leading designer and manufacturer of machines for a wide range of products, including heated tobacco products.

PREPAID EXPENSE – NON-CURRENT PORTION

6 Months Ended

Jun. 30, 2025

NOTE 6 - PREPAID EXPENSE – NON-CURRENT PORTION

Effective June 3, 2025, we entered into a second manufacturing contract with Montrade S.p.A., Bologna, Italy, to manufacture and install a second machine for the automated manufacture of tobacco consumables for the Company’s proprietary, patented and patent pending Heat-not-Burn system. When operational, the Company expects this machine will produce 300 tobacco consumables per minute. Completion of the machine build is anticipated in the third quarter of 2026. We made an initial payment of $1,016,531 USD. We recorded $867,482 of this payment as Prepaid Expenses – non-current portion while we expensed $149,049 in the second quarter. We are required to make additional payments approximating $1,963,882 USD as certain stages are completed.

Effective July 13, 2022, we entered into our first contract with Montrade to manufacture and install consumable manufacturing equipment capable of producing 100 tobacco consumables per minute. The Company made an initial payment of $589,265 USD on July 11, 2022 and was required to make additional payments, prior to Amendments, of up to $1,086,465 USD for the module as certain stages are completed.

On February 23, 2023, we made a payment of $138,386 for completion of the design phase. On March 29, 2023, the Company signed Amendment 1 to the manufacturing contract for additional design work and paid $12,465 of the additional $36,809 cost. Amendment 1 was for design work so $12,465 was expensed. On October 18, 2023, the Company signed Amendment 2 to the manufacturing contract to modify certain components and paid $40,091 of the $114,546 cost.

In 2022, $130,948 of the initial payment was expensed for design services completed by Montrade. The remaining payment of $458,317 and the additional payment on October 24, 2023, for Amendment 2 of $40,091 for a combined total of $498,408 are related to the manufacturing of the module for the automated manufacture of consumables for the Company’s proprietary, patented and patent pending Heat-not-Burn system. The $498,408 payment is recorded as Prepaid expenses – noncurrent portion. With the two amendments added and with payments made in 2023 the Company will be required to pay up to $1,046,878. On February 26, 2024, the Company signed Amendment 3 to the manufacturing contract, for a change to a component with a cost of $27,845 and made payment in full on March 6, 2024 for this change. In December 2024 the Company entered into Amendment 4 to the manufacturing contract amending the payment terms. In this Amendment, the Company agreed to pay an amount that when added to the payments already made would equal 90% of the equipment build portion of the contract. This amount is $813,875 and was paid in January 2025. Following this January 2025 payment, 90% of the build-cost for the manufacturing equipment has been made in line with Amendment 4. On February 14, 2025, we signed Amendment 5 to the agreement for the modification to one component of the machine. The cost for this modification is $160,106 of which half was paid on or about the time of signing, in line with the Amendment. We expect this machine to be in the US no later than the first quarter of 2026. Montrade is an industry leading designer and manufacturer of machines for a wide range of products, including heated tobacco products.