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Leases
 6 Months Ended
Jun. 30, 2025
Leases  
Leases

Note 13 – Leases

 

Equipment Lease

 

The Company has financed production equipment with an acquisition cost of approximately $168,141 under a finance lease with a five-year term and a bargain purchase price of $1.00 at the end of the lease term. The finance lease commenced on May 9, 2023, and expires on May 31, 2028, with monthly lease payments of $3,657 commencing June 1, 2023, and a pre-funding and acceptance fee of $18,079, subject to the ASU 2016-02. As the Company’s lease does not provide implicit discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

 

Peru Facility Lease

 

On May 10, 2024, the Company entered into a ten-year lease for the 50,000 square-foot Peru Facility, which commenced operations in December of 2024. The lease of the Peru Facility requires monthly lease payments of $8,000 in the first two years of the lease, $20,000 in the third year of the lease, $22,000 in the fourth year of the lease, $24,000 in the fourth year of the lease, and $25,000 thereafter. The lease also has a 10-year renewal option, and a buy-out option under which the Company may purchase the Peru Facility for $1,865,456.

 

In connection with the lease of the Peru Facility, the Company purchased a first position mortgage receivable in the amount of $1,267,000, which is secured by the Peru Facility and was owed by the landlord of the Peru Facility to its former tenant, for a purchase price of $1,267,000, of which payments were made in various installments totaling $355,000 as of December 31, 2024 and $912,000 during the six months ended June 30, 2025.

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

The components of lease expense were as follows:

  

   2025   2024 
   For the Six Months Ended 
   June 30, 
   2025   2024 
Operating lease cost:          
Amortization of right-of-use asset  $77,359   $32,389 
Interest on lease liability   20,243    14,124 
Total operating lease cost   97,602    46,513 
Finance lease cost:          
Amortization of right-of-use asset  $17,005   $17,114 
Interest on lease liability   6,357    6,915 
Total finance lease cost   23,362    24,029 
Total lease costs  $120,964   $70,542 

 

Supplemental balance sheet information related to leases was as follows:

  

   June 30,   December 31, 
   2025   2024 
Operating lease:          
Operating lease assets  $1,366,677   $1,444,036 
           
Current portion of operating lease liability  $-    - 
Noncurrent operating lease liability   1,593,424    1,573,035 
Total operating lease liability  $1,593,424   $1,573,035 
Finance lease:          
Finance lease assets  $114,456   $131,461 
           
Current portion of finance lease liability  $30,888    29,243 
Noncurrent finance lease liability   75,529    92,761 
Total finance lease liability  $106,417   $122,004 
           
Weighted average remaining lease term:          
Operating lease   9.77 years    9.86 years 
Finance lease   2.66 years    3.13 years 
           
Weighted average discount rate:          
Operating lease   9%   9%
Finance lease   11%   11%

 

Supplemental cash flow and other information related to finance leases was as follows:

  

   2025   2024 
   For the Six Months Ended 
   June 30, 
   2025   2024 
Cash paid for amounts included in the measurement of lease liabilities:          
Operating cash flows (provided by) used for operating leases  $(20,389)  $1,875 
Finance cash flows used for finance leases  $15,587   $15,027 
Leased assets obtained in exchange for lease liabilities:          
Total operating lease liabilities  $-   $1,943,358 
Total finance lease liabilities  $-   $168,320 

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

The future minimum lease payments due under operating leases as of June 30, 2025, is as follows:

  

Year Ending  Minimum Lease 
December 31,  Commitments 
2025 (for the six months remaining)  $48,000 
2026   192,000 
2027   256,000 
2028   280,000 
2029   296,000 
Thereafter   1,300,000 
Total minimum lease payments   2,372,000 
Less effects of discounting   778,576 
Lease liability recognized   1,593,424 
Less current portion   - 
Long-term operating lease liability  $1,593,424 

 

The future minimum lease payments due under finance leases as of June 30, 2025, is as follows:

  

Year Ending  Minimum Lease 
December 31,  Commitments 
2025 (for the six months remaining)  $21,943 
2026   43,886 
2027   43,886 
2028   14,629 
Total minimum lease payments   124,344 
Less effects of discounting   17,927 
Lease liability recognized   106,417 
Less current portion   30,888 
Long-term finance lease liability  $75,529