Company: BOF
Filing Date: 2025-08-13
Form Type: 10-Q
Source: 0001641172-25-023605
Chunk: 70

Company: BranchOut Food Inc.
Filing Date: 2025-08-13
Form: 10-Q
Item: Item 8
Chunk 70
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Research
and development costs include salaries, building costs, utilities, administrative expenses and other corporate costs. For the six months
ending June 30, 2025, our research and development expenses totaled $17,390, compared to $16,448 for the same period in 2024.

Property
and Equipment

Property
and equipment are stated at the lower of cost or estimated net recoverable amount. The cost of property, plant and equipment is depreciated
using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term based on the following
life expectancy:

 Schedule of Estimated Useful Lives 

    Office
    equipment
     
    3
    years
  
    Furniture
    and fixtures
     
    5
    years
  
    Equipment
    and machinery
     
    5-10
    years
  
    Leasehold
    Improvements
     
    15
    years

Repairs
and maintenance expenditures are charged to operations as incurred. Major improvements and replacements, which extend the useful life
of an asset, are capitalized, and depreciated over the remaining estimated useful life of the asset. When assets are retired or sold,
the cost and related accumulated depreciation are eliminated, and any resulting gain or loss is reflected in operations.

The
Company leases a manufacturing facility located in Pisco, Peru, which is accounted for as an operating lease (see Note 13). The lease
includes a purchase option that allows the Company to acquire the facility at the end of the lease term. During 2024, the landlord of
this facility entered bankruptcy proceedings.

To
protect its long-term strategic interests, the Company purchased the first mortgage position on the facility and continues to hold its
contractual purchase option under the lease. Management currently intends to acquire ownership of the facility either (i) through the
landlord’s bankruptcy settlement process or (ii) by exercising the purchase option at the end of the lease term, although there
can be no assurance that the Company will be successful in this regard. The Company accounts for the facility as a leased asset. The
first mortgage position is included on the balance sheet in other assets of $1,267,000 as of June 30, 2025 and December 31, 2024. The
Company capitalizes leasehold improvements related to the buildout of the facility, which expanded the Company’s production capacity.

Impairment
of Long-Lived Assets

Long-lived