Note 8: Leases

In 2024, the Company signed a 5 five-year lease to move our offices into a one-story facility in Edison, New Jersey. The 5,100 square foot facility houses our administrative offices, a warehouse, freezers, and refrigerators The lease commenced on July 1 2024, with an option to extend for an additional five years at the end of the lease. Annual rent for the lease escalates by 3% year over year until the end of the lease term. We completed the move into the new facility in September 2024. The Company determined that this lease met the criteria for classification as an operating lease under ASC 842. Rent expense was $21 and $27 for the thirteen weeks ended June 28, 2025 and June 29, 2024. Rent expense was $42 and $55 for the twenty-six weeks ended June 28, 2025 and June 29, 2024. The Company also rents warehouse storage space at various outside facilities. Outside warehouse expenses were $100 for the thirteen weeks ended June 28, 2025 and $98 for the thirteen weeks ended June 29, 2024. Outside warehouse expenses were $177 for the twenty-six weeks ended June 28, 2025 and $181 for the twenty-six weeks ended June 29, 2024. The Company has determined that these warehouse leases do not fall within the scope of ASC 842, as they are either month-to-month leases or have terms of 12 months or less. The Company rents a copier and mail machine under a finance lease. In 2022, the Company entered into a copier and mail machine lease, which still exists as of June 28, 2025. Payments for the copier and mail machine amounted to $4 for the thirteen weeks ended June 28, 2025 and $0 for the thirteen weeks ended June 29, 2024. Payments for the copier and mail machine amounted to $6 for the twenty-six weeks ended June 28, 2025 and $0 for the twenty-six weeks ended June 29, 2024.

Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. The standard requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease.

Under Topic 842, finance lease cost includes amortization, which is recognized on a straight-line basis over the expected life of the leased asset, and interest expense, which is recognized following an effective interest rate method. The Company has a finance lease consisting of a copier lease with a term of four years. The standard requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease.

The Company’s lease agreements generally do not provide an implicit borrowing rate; therefore, an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. The Company used the incremental borrowing rates of between 5.5% and 6.5% for all leases.

TOFUTTI BRANDS INC.

Notes to Unaudited Condensed Financial Statements

(in thousands, except share and per share data)

ROU lease assets and lease liabilities for our operating leases were recorded in the balance sheet as follows:

 Schedule of ROU Lease Assets and Liabilities for Operating Lease

ROU lease asset and lease liability for our finance lease were recorded in the balance sheet as follows:

 Schedule of ROU Lease Assets and Liabilities for Finance Leases

Future lease payments included in the measurement of lease liabilities on the balance sheet as of June 28, 2025 are as follows:

 Schedule of Future Lease Payments