BranchOut Food Inc.

Previous wording

We are engaged in the development, marketing, sale, and distribution of plant-based, dehydrated fruit and vegetable snacks and powders. Our products have historically been manufactured for us by two contract manufacturers, one based in the Republic of Chile, and the other in the Republic of Peru, which housed our large-scale continuous through-put dehydration machine that completed its first production run in the first quarter of 2023. Our dehydrated fruit and vegetable products are produced using a new proprietary dehydration technology licensed by us from a third party. Our customers are primarily located throughout the United States. In 2024, we decided to initiate our own production facility in Peru to become vertically integrated. We recently completed the build out of the new facility, which commenced operations in October 2024, and utilizes three large-scale REV machines(a REV 60, REV 100 and REV 120) that we recently purchased from EnWave Corporation, as well as, a small REV 10 R&D machine that isbeing used for product development and customer sample purposes.

Current wording

We are engaged in the development, marketing, sale, and distribution of plant-based, dehydrated fruit and vegetable snacks and powders. Our products have historically been manufactured for us by two contract manufacturers, one based in the Republic of Chile, and the other in the Republic of Peru, which housed our large-scale continuous through-put dehydration machine that completed its first production run in the first quarter of 2023. Our dehydrated fruit and vegetable products are produced using a new proprietary dehydration technology licensed by us from a third party. Our customers are primarily located throughout the United States. In 2024, we decided to initiate our own production facility in Peru to become vertically integrated. We recently completed the build out of the new facility, which commenced operations in December 2024, and utilizes three large-scale REV machines (a REV 60, REV 100 and REV 120)thatwe recently purchased from EnWave, as well as, a small REV 10 R&D machine that is being used for product development and customer sample purposes. We expect operating margins to be further improved in 2025, as we become more vertically integrated with the transition of more of our production from third party contract manufacturers to internal production.

Previous wording

Using our licensed technology platform, we believe our lines of branded, private-label and industrial ingredient products positively address current consumer trends. In our experience, conventional dehydration methods, such as freeze-drying and air drying, tend to degrade most fruit and vegetables through oxidation, browning/color degradation, nutritional content reduction and/or flavor loss. As a result, certain highly sensitive fruits, such as avocados and bananas, have not previously been successfully offered as a dehydrated base for consumer products. We believe that our licensed technology platform and process is the only way to produce quality avocado and banana-based snack and powdered products. Additionally, we believe our licensed technology platform produces superior products when using other fruits and vegetables when compared to conventional drying and dehydration technologies. We license technology, consisting of a portfolio of patents, and purchased production machines, from EnWave, and we have been granted the exclusive rights to use the licensed technology platform as applied to avocados. In addition, BranchOut has the nonexclusive rights to use the licensed technology platform for other products.

Current wording

Using our licensed technology platform, we believe our lines of branded, private-label and industrial ingredient products positively address current consumer trends. In our experience, conventional dehydration methods, such as freeze-drying and air drying, tend to degrade most fruit and vegetables through oxidation, browning/color degradation, nutritional content reduction and/or flavor loss. As a result, certain highly sensitive fruits, such as avocados and bananas, have not previously been successfully offered as a dehydrated base for consumer products. We believe that our licensed technology platform and process is the only way to produce quality avocado and banana-based snack and powdered products. Additionally, we believe our licensed technology platform produces superior products when using other fruits and vegetables when compared to conventional drying and dehydration technologies. We license technology, consisting of a portfolio of patents, and purchased production machines, from EnWave, and we have been granted the exclusive rights to use the licensed technology platform as applied to several products in Peru, and avocado based products in the United States. In addition, BranchOut has the nonexclusive rights to use the licensed technology platform for other products.

Previous wording

We plan to grow revenues strategically by penetrating the multi-billion dollar grocery market opportunity presented by our current product lines, as well as expanding our platform to include additional products that meet our strict plant-based ingredient criteria. Our current primary branded products are:

Current wording

We plan to continue to grow revenues strategically by penetrating the multi-billion dollar grocery, industrial ingredient and online markets. Our current product line includes:

Previous wording

As of September 30, 2024, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $16,074,867, with working capital of $702,541. We are too early in our development stage to project revenue with a necessary level of certainty; therefore, we may not have sufficient funds to sustain our operations for the next twelve months and we may need to raise additional cash to fund our operations. These factors raise substantial doubt about our ability to continue as a going concern. The Company continues to develop its operations. In the event sales do not materialize at the expected rates, management would seek additional financing or would attempt to conserve cash by further reducing expenses. There can be no assurance that we will be successful in achieving these objectives.

Current wording

As of March 31, 2025, we had a cash balance of $2,386,381, a working capital deficit of $2,736,656 and had incurred recurring losses from operations resulting in an accumulated deficit of $18,480,439. Although we anticipate that our results of operations will improve substantially as a result of the recent launch of our new facility in Peru, there can be no assurance in that regard. If we continue to generate substantial operating losses, we will not have sufficient funds to sustain our operations for the next twelve months and we will need to raise additional cash to fund our operations. These factors raise substantial doubt about our ability to continue as a going concern.

Previous wording

Given the situation with NXTDried Superfoods, we were required to shift fulfillment of orders to alternative manufacturing sources. On May 10, 2024 we entered into a ten-year lease for a 50,000 square-foot food processing plant located in Peru. The lease of the Peru Facility requires us to make 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 we may purchase the Peru Facility for $1,865,456.

Current wording

On April 26, 2024, we formed BranchOut Food Sucursal Peru for the purpose of developing a production facility to produce our products in Peru. On May 10, 2024 we entered into a ten-year lease for our 50,000 square-foot food processing plant located in Peru (the “Peru Facility”). The lease of the Peru Facility requires us to make 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 we may purchase the facility for $1,865,456. We began manufacturing products at the Peru Facility in December of 2024, and produced approximately $1,450,000 of products during the first quarter of 2025.

Previous wording

In connection with our lease of the Peru Facility, we paid $275,000 on May 10, 2024, toward the purchase of 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. The remaining $992,000 was due and payable by us on August 10, 2024, subject to certain requirements which haven’t yet been met, therefore the Company has deferred payment until a later date, to be determined.

Current wording

In connection with our lease of the Peru Facility, we paid $275,000 on May 10, 2024, $80,000 during the fourth quarter of 2024, and another $456,000 during the first quarter of 2025 as part of the purchase of 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. The remaining $456,000 is due and payable in monthly installments of $152,000 through June 23, 2025, at which time an additional $55,604 of interest is due, based on a 9% financing rate.

Previous wording

Our net revenue for the three months ended September 30, 2024 was $2,181,495, compared to $906,996 for the three months ended September 30, 2023, an increase of $1,274,499, or 141%. The increase in revenue was primarily due to increased sales to our largest customer during the three months ended September 30, 2024.

Current wording

Our net revenue for the three months ended March 31, 2025 was $3,193,522, compared to $1,467,016 for the three months ended March 31, 2024, an increase of $1,726,506, or 118%. The increase in revenue was primarily due to increased sales to our two largest customers during the three months ended March 31, 2025.

Previous wording

Our cost of goods sold for the three months ended September 30, 2024 was $1,845,155, compared to $934,603 for the three months ended September 30, 2023, an increase of $910,552, or 97%. Cost of goods sold increased primarily due to increased sales during the three months ended September 30, 2024. As a result of the foregoing, we had gross profit of $336,340, representing gross margins of 15%, for the three months ended September 30, 2024 as compared to a gross loss of $27,607, or negative gross margins of 3%, for the three months ended September 30, 2023. Our gross profit margin increased primarily due to cost savings realized as a result of our transition to bulk shipping arrangements during the current period. Cost of goods sold included depreciation expense for the three months ended September 30, 2024 of $60,614, compared to $55,939 for the three months ended September 30, 2023, an increase of $4,675, or 8%.

Current wording

Our cost of goods sold for the three months ended March 31, 2025 was $2,641,007, compared to $1,183,428 for the three months ended March 31, 2024, an increase of $1,457,579, or 123%. Cost of goods sold increased primarily due to increased sales during the three months ended March 31, 2025. As a result of the foregoing, we had gross profit of $552,515, representing gross margins of 17%, for the three months ended March 31, 2025 as compared to a gross profit of $283,588, or gross margins of 19%, for the three months ended March 31, 2024. Our gross profit margin decreased slightly due primarily to costs incurred transitioning the production of our products to the Peru Facility. We anticipate that our margins will increase as we ramp up production and utilize more of the facility’s capacity. Cost of goods sold included depreciation expense for the three months ended March 31, 2025 of $152,262, compared to $55,823 for the three months ended March 31, 2024, an increase of $96,439, or 173%.

Previous wording

Our general and administrative expense for the three months ended September 30, 2024 was $560,537, compared to $230,459 for the three months ended September 30, 2023, an increase of $330,078, or 143%. The largest components of our general and administrative expenses are advertising and marketing, rent, travel, commissions, and storage, shipping and handling expense, as shown below.

Current wording

Our general and administrative expense for the three months ended March 31, 2025 was $685,779, compared to $319,736 for the three months ended March 31, 2024, an increase of $366,043, or 114%. The largest components of our general and administrative expenses are advertising and marketing, rent, travel, commissions, and storage, shipping and handling expense, as shown below.

Previous wording

Advertising and marketing expenses increased for the three months ended September 30, 2024, compared to the corresponding period in 2023, as we focused our resources on our IPO in the prior period. Our rent increased primarily due to leases entered into in the current year, as we began to develop our operating facility in Peru, which resulted in increased travel expenses for the same reason. Sales commissions decreased as we focused most of our resources on servicing our largest customer. We expect commissions to increase as we grow. Storage, shipping and handling expenses increased primarily due to increased international shipping rates and increased production that was driven by our increased sales.

Current wording

Advertising and marketing expenses increased for the three months ended March 31, 2025, compared to the corresponding period in 2024, as we increased our marketing efforts in the current period, given greater available resources. Our rent increased primarily due to leases entered into in the latter half of the prior year, as we began to develop our operating facility in Peru, which resulted in increased travel expenses for the same reason. Sales commissions decreased as we focused most of our resources on servicing our largest customer. We expect commissions to increase as we grow. Storage, shipping and handling expenses increased primarily due to increased international shipping rates and increased production that was driven by our increased sales.

Previous wording

Salaries and wages for the nine months ended September 30, 2024 was $1,257,316, compared to $910,812 for the nine months ended September 30, 2023, an increase of $346,504, or 38%. This increase was primarily attributable to $408,700 of non-cash, stock-based compensation related to stock options awarded during the current period.

Current wording

Salaries and wages for the three months ended March 31, 2025 was $314,242, compared to $598,286 for the three months ended March 31, 2024, a decrease of $284,044, or 47%. This decrease was primarily attributable to $376,384 of non-cash, stock-based compensation related to stock options awarded during the prior period, compared to $4,024 of non-cash, stock-based compensation related to stock options awarded during the current period.

Previous wording

In the three months ended September 30, 2024, other expense was $367,650 on a net basis, consisting of $370,532 of interest expense, as partially offset by $2,882 of interest income. For the three months ended September 30, 2023, other expense was $7,003 on a net basis, consisting of $10,004 of interest expense, as partially offset by $3,001 of interest income. Other expense increased by $360,647, or 5,150%, primarily due to interest on increased outstanding debt as we funded our expansion into Peru during the current period.

Current wording

In the three months ended March 31, 2025, other expense was $235,842 on a net basis, consisting of $240,978 of interest expense, as partially offset by $5,136 of interest income. For the three months ended March 31, 2024, other expense was $25,867 on a net basis, consisting of $28,744 of interest expense, as partially offset by $2,877 of interest income. Other expense increased by $209,975, or 812%, primarily due to interest on increased outstanding debt as we funded our expansion into Peru during 2024.

Previous wording

Net loss for the three months ended September 30, 2024 was $1,270,805, compared to $705,993 for the three months ended September 30, 2023, an increase of $564,812, or 80%. The increased net loss was primarily due to increased compensation and compliance costs related to reporting as a public company during the current period and increased interest expense, as partially offset by increased gross profits and a $96,332 decrease in stock-based compensation.

Current wording

Net loss for the three months ended March 31, 2025 was $918,382, compared to $1,050,967 for the three months ended March 31, 2024, a decrease of $132,585, or 13%. The decreased net loss was primarily due to increased gross profits and a $521,954 decrease in stock-based compensation, as partially offset by $366,043 of increased general and administrative expenses.

Previous wording

As of September 30, 2024, we had working capital of $702,541. We have incurred net losses since our inception and we anticipate net losses and negative operating cash flows for the near future, and we may not be profitable or realize growth in the value of our assets. To date, our primary sources of capital have been cash generated from the sales of our products, common stock sales, and debt and equity financing. As of September 30, 2024, we had cash of $1,069,193, total liabilities of $8,042,725, and an accumulated deficit of $16,074,867. As of December 31, 2023, we had cash of $657,789, total liabilities of $914,622, and an accumulated deficit of $12,810,541.

Current wording

As of March 31, 2025, we had negative working capital of $2,736,656. We have incurred net losses since our inception and we anticipate net losses and negative operating cash flows for the near future, and we may not be profitable or realize growth in the value of our assets. To date, our primary sources of capital have been cash generated from the sales of our products, common stock sales, and debt and equity financing. As of March 31, 2025, we had cash of $2,386,381, total liabilities of $10,230,144, and an accumulated deficit of $18,480,439. As of December 31, 2024, we had cash of $2,329,452, total liabilities of $10,514,292, and an accumulated deficit of $17,562,057.

Previous wording

Comparison of the Nine Months Ended September 30, 2024 and the Nine Months Ended September 30, 2023

Current wording

Comparison of the Three Months Ended March 31, 2025 and the Three Months Ended March 31, 2024

Previous wording

Net cash used in operating activities was $3,259,049 for the nine months ended September 30, 2024, compared to $3,258,248 for the nine months ended September 30, 2023, an increase of $801. The increase was primarily due to our increased net loss and increased inventory purchases, as adjusted for increased stock-based compensation, increased accounts payable, and a $275,000 payment for other assets.

Current wording

Net cash used in operating activities was $1,927,122 for the three months ended March 31, 2025, compared to $503,578 for the three months ended March 31, 2024, an increase of $1,423,544, or 283%. The increase was primarily due to our increased accounts receivable as of March 31, 2025.

Previous wording

Net cash used in investing activities was $2,095,691 for the nine months ended September 30, 2024, compared to $66,565 for the nine months ended September 30, 2023, an increase of $2,029,126, or 3,048%. This increase was primarily attributable to $2,120,337 of property and equipment purchases, as partially offset by $24,646 of advances received on notes receivable in the current period, compared to $66,565 of property and equipment purchases in the comparative period.

Current wording

Net cash used in investing activities was $377,841 for the three months ended March 31, 2025, compared to $40,100 for the three months ended March 31, 2024, an increase of $337,741, or 842%. This increase was primarily attributable to $377,841 of property and equipment purchases, compared to $50,000 of property and equipment purchases, as partially offset by $9,900 of advances received on notes receivable, in the comparative period.

Previous wording

Net cash provided by financing activities was $5,767,938 for the nine months ended September 30, 2024, compared to $3,784,850 for the nine months ended September 30, 2023, an increase of $1,983,088, or 52%. Our increased cash provided by financing activities was primarily from $3,703,710 of increased net proceeds received on debt financing, $2,071,439 of decreased debt repayments, $326,975 of decreased deferred offering cost payments, and $3,964 of decreased principal payments on finance leases, as partially offset by $4,123,000 of decreased proceeds received on the sale of common stock.

Current wording

Net cash provided by financing activities was $2,353,683 for the three months ended March 31, 2025, compared to $137,589 for the three months ended March 31, 2024, an increase of $2,216,094, or 1,611%. Our increased cash provided by financing activities was primarily from $2,445,605 of increased net proceeds received on the sale of common stock, net of $15,610 of offering costs, and $115,765 of decreased debt repayments, as partially offset by $345,000 of decreased proceeds received from related party debt financing and $276 of increased principal payments on finance leases.

Previous wording

Our financial results are affected by the selection and application of accounting policies and methods. In the nine-month period ended September 30, 2024 there were no changes to the application of critical accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Current wording

Our financial results are affected by the selection and application of accounting policies and methods. In the three-month period ended March 31, 2025 there were no changes to the application of critical accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.