Company: BOF
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001641172-25-010566
Chunk: 11

Company: BranchOut Food Inc.
Filing Date: 2025-05-15
Form: 10-Q
Item: Item 1
Chunk 11
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 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.

Impairment
of Long-Lived Assets

Long-lived
assets held and used by the Company are reviewed for possible impairment whenever events or circumstances indicate the carrying amount
of an asset may not be recoverable or is impaired. Recoverability is assessed using undiscounted cash flows based upon historical results
and current projections of earnings before interest and taxes. Impairment is measured using discounted cash flows of future operating
results based upon a rate that corresponds to the cost of capital. Impairments are recognized in operating results to the extent that
carrying value exceeds discounted cash flows of future operations.

Our
indefinite-lived brand names and trademarks acquired and are assigned an indefinite life as we anticipate that these brand names will
contribute cash flows to the Company perpetually. We evaluate the recoverability of intangible assets periodically by considering events
or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired. The Company expenses
internally developed trademarks.

License
Agreement

The
Company is party to a license agreement under which it is licensed to utilize certain technology and production equipment developed and
manufactured by another company, relating on an exclusive basis to avocado products and on a non-exclusive basis to other products. The
license is not discernible from the equipment; therefore, the license costs have been capitalized and depreciated over the useful life
of the equipment. The license agreement also entitles the licensor to a royalty on all revenue from the sale of products produced using
the equipment. These royalties are recognized as royalty expenses as the products are sold. There was a total of $40,585 of royalty payments
made during the three months ended March 31, 2025, and none during the three months ended March 31, 2024. Any future minimum royalty
payments or equipment purchases under this license agreement are an unrecognized commitment as they relate to retaining exclusivity of
the avocado products going forward and the Company can elect not to pay as disclosed in See Note 14, below.

Derivatives

The
Company evaluates convertible notes payable, stock options, stock warrants and other contracts to determine if those contracts or embedded
components of those contracts qualify as derivatives to be separately accounted for under