Borealis Foods Inc. Leases Disclosure
7. Leases
The Company leases certain equipment from third-parties. The determination of whether an arrangement is a lease is made at the lease’s inception. In accordance with US GAAP, a contract is (or contains) a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Control is defined as having both the right to obtain substantially all of the economic benefits from use of the asset and the right to direct the use of the asset. Management only reassesses its determination if the terms and conditions of the contract are changed.
Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term, and lease obligations represent the Company’s obligation to make lease payments over that term. ROU assets and lease obligations are recognized at the lease commencement date based on the present value of lease payments calculated using the implicit rate when it is readily determinable. In the absence of an implicit rate, management may use the Company’s incremental borrowing rate based on the information available at lease commencement. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the option will be exercised.
ROU assets associated with operating leases recorded net of accumulated amortization were approximately $158,000 and $64,000 as of December 31, 2025 and December 31, 2024, respectively. ROU assets associated with recorded net of accumulated amortization of approximately $754,000 and $1,390,000 at December 31, 2025 and 2024, respectively, and are included with property, plant and equipment, net. The Company recognized interest expense on its lease obligations of approximately $282,000 and $417,000 during the years ended December 31, 2025 and 2024, respectively.
For the years ended December 31, 2025 and 2024, the Company recognized rent expense associated with leases as follows:
| 2025 | 2024 | |||||||
| Operating lease cost: | ||||||||
| Fixed rent expense | $ | 46,123 | $ | 44,643 | ||||
| Finance lease cost: | ||||||||
| Amortization of ROU assets | 636,034 | 636,034 | ||||||
| Net lease cost | $ | 682,157 | $ | 680,677 | ||||
| Lease cost - SG&A | $ | 46,123 | $ | 44,643 | ||||
| Lease cost - Depreciation and Amortization | 636,034 | 636,034 | ||||||
| Net lease cost | $ | 682,157 | $ | 680,677 | ||||
ROU assets and lease liabilities consist of the following as of December 31, 2025 and 2024:
| 2025 | 2024 | |||||||
| Operating leases - ROU assets: | ||||||||
| Operating lease, ROU assets, gross | $ | 161,598 | $ | 179,849 | ||||
| Accumulated amortization | (3,237 | ) | (116,023 | ) | ||||
| Operating leases - ROU assets, net | $ | 158,361 | $ | 63,826 | ||||
| Operating lease liabilities: | ||||||||
| Operating leases, current portion | $ | 39,982 | $ | 55,116 | ||||
| Operating leases, non-current portion | 118,528 | 12,015 | ||||||
| Total operating lease liabilities | $ | 158,510 | $ | 67,131 | ||||
| Finance leases, ROU assets: | ||||||||
| Property and equipment, gross | $ | 3,180,169 | $ | 3,180,169 | ||||
| Accumulated depreciation | (2,425,725 | ) | (1,789,691 | ) | ||||
| Finance leases, ROU assets, net | $ | 754,444 | $ | 1,390,478 | ||||
| Finance lease liabilities: | ||||||||
| Finance leases payable, current portion | $ | 642,474 | $ | 538,845 | ||||
| Finance leases payable, non-current portion | 489,461 | 1,143,829 | ||||||
| Total finance lease liabilities: | $ | 1,131,935 | $ | 1,682,674 | ||||
Future minimum payments due under operating and finance leases as of December 31, 2025 consisted of the following:
| Years Ending December 31, | Operating Leases | Finance Leases | ||||||
| 2026 | $ | 54,051 | $ | 776,818 | ||||
| 2027 | 54,795 | 519,093 | ||||||
| 2028 | 55,751 | |||||||
| 2029 | 23,484 | |||||||
| Total | 188,081 | 1,295,911 | ||||||
| Less: effect of discounting | (29,571 | ) | (163,976 | ) | ||||
| Lease liability recognized | $ | 158,510 | $ | 1,131,935 | ||||
As of December 31, 2025 the weighted average remaining lease term and weighted average discount rate for operating leases was 3.4 years and 10.00%, respectively.
As of December 31, 2024 the weighted average remaining lease term and weighted average discount rate for operating leases was 1.41 years and 10.00%, respectively.
As of December 31, 2025 the weighted average remaining lease term and weighted average discount rate for finance leases was 1.67 years and 19.04%, respectively.
As of December 31, 2024 the weighted average remaining lease term and weighted average discount rate for finance leases was 2.64 years and 18.89%, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Jun 2, 2026 | Showing above |
| 2024 | Apr 15, 2025 | |
About Leases Disclosures
Lease disclosures under ASC 842 provide a comprehensive view of a company's leased asset portfolio, including the split between operating and finance leases, discount rates used to present-value future payments, and the maturity schedule of lease obligations. This section reveals a significant source of off-balance-sheet commitments that were largely hidden before the current standard.
Key signals: the weighted-average discount rate affects the size of recorded lease liabilities — a higher rate reduces the reported obligation, so compare the chosen rate against the company's incremental borrowing rate. The operating versus finance lease mix affects both EBITDA and operating income presentation. Watch the maturity table for concentration risk: large payment cliffs in specific years may create cash flow pressure. Variable lease payments excluded from the liability measurement represent real obligations that do not appear on the balance sheet. Compare total lease costs against prior-year operating lease expense to assess the true economic burden.