What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-14 compared with 2023-11-14 · 159 added, 218 removed, 68 unchanged (85% of the section changed)

2 unchanged sentences

statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements included

in our prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, with the Securities and Exchange Commission

on Jun 21, 2023 (“Prospectus”).

In addition to historical condensed financial information, the following discussion contains

forward-looking statements that reflect our plans, estimates, and beliefs.

Our actual results could differ materially from those discussed

in the forward-looking statements.

For a discussion of limitations in the measurement of certain of our user metrics, see the section

entitled “—Limitations of Key Metrics.”

in our Annual Report on Form 10-K for the year ended December 31, 2023.

In addition to historical condensed financial information, the

following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs.

Our actual results could differ

materially from those discussed in the forward-looking statements.

were incorporated as Avochips Inc., an Oregon corporation, on February 21, 2017, and on November 2, 2017, we converted into Avochips,

2 unchanged sentences

Food Inc., a Nevada corporation.

Avochips, LLC redomiciled to Nevada in connection with a conversion from an Oregon limited liability

company to a Nevada corporation, named BranchOut Food Inc.

are engaged in the development, marketing, sale, and distribution of plant-based, dehydrated fruit and vegetable snacks and powders.

Our products are currently manufactured for us by two contract manufacturers, one based in the Republic of Chile, and the other in the

Republic of Peru.

The manufacturing facility in Peru houses our new large-scale continuous through-put dehydration machine that completed

its first production run in the first quarter of 2023, and which substantially increased our production capacity.

Both facilities produce

dehydrated fruit and vegetable products for BranchOut using a new proprietary dehydration technology licensed by us from a third party.

The Company’s customers are primarily located throughout the United States.

is an emerging natural food brand with a licensed technology platform for the manufacture of plant-based dehydrated foods.

has licensed rights from an independent third party to a new dehydration technology designed for drying and processing highly sensitive

fruits and vegetables such as avocados, bananas and others.

Using the licensed technology platform, we believe BranchOut’s line

of branded food products speak to 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 fruit, such as avocados and bananas, have not previously been successfully

offered as a dehydrated base for consumer products.

Other dried fruit- and vegetable-based products are on the market but are of low

We believe that BranchOut’s 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 as the base when compared to conventional drying and dehydration technologies.

With licenses to 17 patents registered

or pending in 14 countries, BranchOut has been granted the exclusive rights to use the licensed technology platform as applied to avocados,

in addition to BranchOut’s own patent pending process, and nonexclusive rights to use the licensed technology platform for other

time, BranchOut plans 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 to diversify our revenue base and increase BranchOut’s total addressable market (“TAM”) opportunity.

current products are primarily:

BranchOut Snacks:

fruit- and vegetable-based snacks, including Avocado Chips, Chewy Banana Bites, Pineapple Chips, Brussel Sprout Crisps and Bell Pepper

BranchOut Powders:

Powder, Banana Powder and Blueberry Powder.

BranchOut Industrial Ingredients:

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.

The manufacturing facility in Peru houses our new large-scale continuous through-put dehydration machine that

completed its first production run in the first quarter of 2023, and which substantially increased

our production capacity.

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.

our licensed technology platform, we believe our lines of both branded and private-labeled food products positively address current consumer

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.

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.

entered into a private labeling contract with one of the world’s largest retailers in late 2022 to supply the retailer with two

products for placement in half of their domestic stores.

In April 2023, the same retailer agreed to carry two additional products of

ours in certain of their stores.

In April 2024, we announced that we had entered into an additional contract with this retailer that

is expected to result in our products being placed in a total of 1,400 of its stores in September, 2024, and increase the total annualized

revenues that we may generate from this retailer to $8 million.

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.

primary branded products are:

dehydrated fruit and vegetable-based snacks, including Avocado Chips, Chewy Banana Bites, Pineapple Chips, Brussels Sprout

Crisps and Bell Pepper Crisps.

Avocado Powder, Banana Powder and Blueberry Powder.

Industrial Ingredients:

Bulk Avocado Powder, dried avocado pieces and other fruit powders/pieces.

is currently developing additional products, including chocolate covered fruit items and many private label products for large retailers.

of Operations for the Three Months Ended September 30, 2023 and 2022

following table summarizes selected items from the statement of operations for the three months ended September 30, 2023 and 2022, respectively.

Three Months Ended

September 30,

Cost of goods sold

are currently developing additional products, including chocolate covered fruit items and private label products for large retailers.

Concern Uncertainty

of March 31, 2024, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $13,861,508, with

working capital of only $399,444.

We are too early in our development stage to project revenue with a necessary level of certainty;

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.

condensed financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s

ability to continue as a going concern.

The condensed financial statements also do not include any adjustments relating to the recoverability

and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company

be unable to continue as a going concern.

Our ability to scale production and distribution capabilities and further increase the value

of our brands, is largely dependent on our success in raising additional capital.

to our Equipment in Peru;

NXTDried Superfoods

the fourth quarter of 2023, NXTDried Superfoods, our contract manufacturer located in Peru, became involved in a legal dispute with its

landlord and another third party, which resulted in that manufacturer suspending operations.

As a result of such dispute, we currently

do not have access to the dehydration machine that was previously operated by this manufacturer.

Although we have been able to continue

to fulfill orders by shifting fulfillment to other manufacturing sources, our costs of goods are expected to increase as a result.

addition, if we are unable to regain access to our dehydration machine and utilize it for the production of our products, our operating

results may be materially and adversely affected.

In addition, during 2023, we recognized $761,085

of impairment expense, consisting of $485,265, $243,305 and $32,515 on the collectability of a note receivable, VAT taxes receivable

and prepaid inventory, respectively , owed to us by NXTDried Superfoods.

Peru Facility Lease

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.

We expect to relocate our dehydration machine to the Peru Facility along with a new

large-scale machine we recently ordered form Enwave, and resume our Peruvian manufacturing operations there in the third quarter of 2024.

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.

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.

In connection with our lease of the Peru Facility,

we purchased 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, of which $275,000 was paid by us on May 10, 2024.

The remaining $992,000 will be due and payable by us on August 10, 2024.

of Operations for the Three Months Ended March 31, 2024 and 2023

following table summarizes selected items from the statement of operations for the three months ended March 31, 2024 and 2023, respectively.

of goods sold

and administrative

operating expenses

General and administrative

Salaries and benefits

Professional services

Depreciation and amortization

Total operating expenses

Operating loss

income (expense):

other income (expense)

Interest income

Interest expense

Total other income (expense)

net revenue for the three months ended September 30, 2023 was $906,996, compared to $181,930 for the three months ended September 30,

$ (1,050,967 )

net revenue for the three months ended March 31, 2024 was $1,467,016, compared to $97,340 for the three months ended March 31, 2023,

an increase of $1,056,446, or 1,407%.

The increase in revenue was primarily due to increased sales to big box retailers during the

three months ended September 30, 2023.

The increase in revenue was primarily due to increased sales to our largest customer during the three months

ended March 31, 2024.

of Goods Sold and Gross Profit

cost of goods sold for the three months ended September 30, 2023 was $878,664, compared to $172,830 for the three months ended September

cost of goods sold for the three months ended March 31, 2024 was $1,183,428, compared to $126,982 for the three months ended March 31,

2023, an increase of $1,056,446, or 832%.

Cost of goods sold increased primarily due to increased costs associated with our increased

sales to big box retailers during the three months ended September 30, 2023.

As a result of the foregoing, we had gross profit of $28,332,

or 3%, for the three months ended September 30, 2023 as compared to a gross profit of $9,100, or 5%, for the three months ended September

Our gross profit margin decreased slightly due to increased product costs incurred during the current period.

Cost of goods sold increased primarily due to increased sales during the three months ended

March 31, 2024.

As a result of the foregoing, we had gross profit of $283,588, representing gross margins of 19%, for the three months

ended March 31, 2024 as compared to a gross loss of $29,642, or negative gross margins of 30%, for the three months ended March 31, 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 March 31, 2024 of $56,336, compared

to $55,823 for the three months ended March 31, 2023, an increase of $513, or 1%.

and Administrative

general and administrative expense for the three months ended September 30, 2023 was $230,459, compared to $351,110 for the three months

ended September 30, 2022, a decrease of $120,651 or 34%.

general and administrative expense for the three months ended March 31, 2024 was $319,736, compared to $180,900 for the three months

ended March 31, 2023, an increase of $138,836, or 77%.

The largest components of our general and administrative expenses are advertising

and marketing, travel, and storage, shipping and handling expense.

Three Months Ended September 30,

Advertising and marketing

Storage, shipping and handling

and marketing expenses decreased for the three months ended September 30, 2023 as compared to the corresponding period in 2022 as we

focused our resources on our IPO.

Our travel expenses decreased for the same reason, as we reduced our international travel.

shipping and handling expenses increased primarily due to increased international shipping rates.

and wages for the three months ended September 30, 2023 was $222,764, compared to $110,091 for the three months ended September 30, 2022,

an increase of $112,673, or 102%.

This increase was primarily attributable to increased headcount in line with our expanded operations.

fees for the three months ended September 30, 2023 was $218,160, compared to $112,519 for the three months ended September 30, 2022,

an increase of $105,641, or 94%.

This increase was primarily attributable to increased consulting fees.

expense for the three months ended September 30, 2023 was $55,939, compared to $37,252 for the three months ended September 30, 2022,

an increase of $18,687, or 50%.

The increase was primarily due to depreciation associated with our EnWave 60kW Vacuum Microwave Dehydration

and Chiller Machines, which were installed at our contract manufacturer in Peru in the third quarter of 2022.

and marketing, travel, commissions, and storage, shipping and handling expense, as shown below.

Months Ended March 31,

and marketing

shipping and handling

and marketing expenses increased for the three months ended March 31, 2024, compared to the corresponding period in 2023, as we focused

our resources on our IPO in the prior period.

Our travel expenses increased for the same reason, as we resumed our international travel

after the IPO that was completed in the prior year.

Storage, shipping and handling expenses increased primarily due to increased international

shipping rates and increased production that was driven by our increased sales.

Likewise, commissions increased due to our increased

and wages for the three months ended March 31, 2024 was $598,286, compared to $251,810 for the three months ended March 31, 2023, an increase

of $346,476, or 138%.

This increase was primarily attributable to $376,384 of non-cash, stock-based compensation related to stock options awarded during the current period.

fees for the three months ended March 31, 2024 was $390,666, compared to $144,141 for the three months ended March 31, 2023, an increase

of $246,525, or 171%.

This increase was primarily attributable to increased legal and consulting fees in the current period, as a portion

of these fees were capitalized as offering costs on our IPO in the comparative period.

Professional fees included $149,594 and $50,446 of non-cash, stock-based compensation for the three months ended

March 31, 2024 and 2023, respectively.

Income (Expense)

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

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.

For the three months ended September 30, 2022, other expense was $214,409 on a net basis, consisting

For the three months ended March 31, 2023, other expense was $170,600 on a net basis, consisting

of $173,445 of interest expense, as partially offset by $2,845 of interest income.

1 unchanged sentence

due to the decreased interest on debt which was mostly settled in June of 2023.

loss for the three months ended September 30, 2023 was $705,993, compared to $816,281 for the three months ended September 30, 2022,

a decreased net loss of $110,288, or 14%.

The decreased net loss was primarily due to $207,342 of decreased interest expense on debt

that was mostly settled in June of 2023, as partially offset by $112,673 of increased salaries and wages as we expanded our staff during

the current period.

of Operations for the Nine Months Ended September 30, 2023 and 2022

following table summarizes selected items from the statement of operations for the nine months ended September 30, 2023 and 2022, respectively.

Nine Months Ended

September 30,

Cost of goods sold

Gross profit (loss)

Operating expenses:

General and administrative

Salaries and benefits

Professional services

Depreciation and amortization

Total operating expenses

Operating loss

Other income (expense):

Interest income

Interest expense

Total other income (expense)

$ (2,456,596 )

$ (3,796,536 )

$ (1,339,940 )

net revenue for the nine months ended September 30, 2023 was $1,347,401, compared to $725,649 for the nine months ended September 30,

2022, an increase of $621,752, or 86%.

The increase in revenue was primarily due to increased sales to big box retailers during the nine

months ended September 30, 2023.

of Goods Sold and Gross Profit (Loss)

cost of goods sold for the nine months ended September 30, 2023 was $1,255,526, compared to $875,336 for the nine months ended September

30, 2022, an increase of $380,190 or 43%.

Cost of goods sold increased primarily in line with the increase in our sales for the period

and a reduction in our shipping costs, which, in turn, was primarily a result of our transition to bulk shipping arrangements.

of the foregoing, we had gross profit of $91,875, or 7%, for the nine months ended September 30, 2023, as compared to a gross loss of

$149,687, or (21%), for the nine months ended September 30, 2022.

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.

and Administrative

general and administrative expense for the nine months ended September 30, 2023 was $552,390, compared to $745,686 for the nine months

ended September 30, 2022, a decrease of $193,296, or 26%.

The largest components of our general and administrative expenses are advertising

and marketing, travel, and storage, shipping and handling expense.

Nine Months Ended September 30,

Advertising and marketing

Storage, shipping and handling

and marketing expenses decreased for the nine months ended September 30, 2023, as compared to the corresponding period in 2022 as we

focused our resources on our IPO.

Our travel expenses increased minimally, and storage, shipping and handling expenses increased primarily

due to increased international shipping rates.

and wages for the nine months ended September 30, 2023 was $910,812, compared to $430,963 for the nine months ended September 30, 2022,

an increase of $479,849, or 111%.

This increase was primarily attributable to increased headcount in line with our expanded operations.

fees for the nine months ended September 30, 2023 was $520,506, compared to $395,954 for the nine months ended September 30, 2022, an

increase of $124,552, or 31%.

This increase was primarily attributable to increased consulting fees.

expense for the nine months ended September 30, 2023 was $167,520, compared to $37,414 for the nine months ended September 30, 2022,

an increase of $130,106, or 348%.

The increase was primarily due to depreciation associated with our EnWave 60kW Vacuum Microwave Dehydration

and Chiller Machines, which were installed at our contract manufacturer in Peru in the third quarter of 2022.

Income (Expense)

the nine months ended September 30, 2023, other expense was $397,243, consisting of $406,000 of interest expense, as partially offset

by $8,757 of interest income.

During the comparative nine months ended September 30, 2022, other expense was $2,036,832, consisting of

$2,046,792 of interest expense, as partially offset by $9,960 of interest income.

Other expense decreased by $1,639,589, or 80%, primarily

due to the decreased amortization of debt discounts and reductions in interest expense on debt which was mostly settled in June of 2023.

loss for the nine months ended September 30, 2023 was $2,456,596, compared to $3,796,536 during the nine months ended September 30, 2022,

a decreased net loss of $1,339,940, or 35%.

The decreased net loss was primarily due to $241,562 of improved gross profits and a reduction

of $1,640,792 of interest expense related to the amortization of debt discounts in the prior period that were not recognized in the current

period and reductions in interest expense on debt which was mostly settled in June of 2023, as partially offset by $479,849 of increased

salaries and wages as we expanded our headcount during the current period.

loss for the three months ended March 31, 2024 was $1,050,967, compared to $777,093 for the three months ended March 31, 2023, an increase

of $273,874, or 35%.

The increased net loss was primarily due to increased non-cash, stock-based compensation costs, and compliance costs related to reporting as a public company, as partially offset by decreased

interest on debt which was mostly settled in the prior year.

and Capital Resources

following table summarizes our total current assets, liabilities and working capital as of September 30, 2023 and December 31, 2022.

September 30,

Current Assets

Current Liabilities

Working Capital

$ (7,291,560 )

of September 30, 2023, we had working capital of $2,279,827.

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.

date, our primary sources of capital have been cash generated from the sales of our products, common stock sales, and debt financing.

As of September 30, 2023, we had cash of $1,008,484, total liabilities of $757,082, and an accumulated deficit of $11,341,427.

December 31, 2022, we had cash of $312,697, total liabilities of $8,404,033, and an accumulated deficit of $8,884,831.

of the Nine Months Ended September 30, 2023 and the Nine Months Ended September 30, 2022

following table summarizes our total current assets, liabilities and working capital as of March 31, 2024 and December 31, 2023.

of March 31, 2024, we had working capital of $399,444.

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.

our primary sources of capital have been cash generated from the sales of our products, common stock sales, and debt financing.

March 31, 2024, we had cash of $251,700, total liabilities of $997,069, and an accumulated deficit of $13,861,508.

As of December 31,

2023, we had cash of $657,789, total liabilities of $914,622, and an accumulated deficit of $12,810,541.

of the Three Months Ended March 31, 2024 and the Three Months Ended March 31, 2023

following table sets forth the primary sources and uses of cash for the periods presented below:

Nine Months Ended

September 30,

Net cash used in operating activities

$ (3,258,248 )

$ (2,013,591 )

Net cash used in investing activities

Net cash provided by financing activities

Net change in cash

cash used in operating activities

cash used in operating activities was $3,258,248 for the nine months ended September 30, 2023, compared to $2,013,591 for the nine months

ended September 30, 2022, an increase of $1,244,657, or 62%.

The increase was primarily due to increased accounts receivable, inventory

purchases and payments on accounts payable from our use of IPO proceeds.

cash used in investing activities

cash used in investing activities was $66,565 for the nine months ended September 30, 2023, compared to $22,436 for the nine months ended

September 30, 2022, a decrease of $44,129, or 197%.

This decrease was primarily attributable to decreased property and equipment purchases,

as partially offset by advances received on notes receivable in the prior period that were not replicated in the current period.

cash provided by financing activities

cash provided by financing activities was $3,784,850 for the nine months ended September 30, 2023, compared to $1,652,220 for the nine

months ended September 30, 2022, an increase of $2,132,630, or 129%.

Our increased cash provided by financing activities was primarily

from the net proceeds received in our IPO in the current period, as partially offset by debt repayments.

TO CONTINUE AS A GOING CONCERN

of September 30, 2023, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $11,341,427,

with working capital of only $2,279,827.

We are too early in our development stage to project future revenue levels, and may not be able

to generate sufficient funds to sustain our operations for the next twelve months.

Accordingly, we may need to raise additional cash

to fund our operations.

These factors raise substantial doubt about the Company’s ability to continue as a going concern.

the event sales do not materialize at the expected rates, management would seek additional financing and would attempt to conserve cash

by further reducing expenses.

There can be no assurance that we will be successful in achieving these objectives;

therefore, without

sufficient financing it would be unlikely for the Company to continue as a going concern.

condensed financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s

ability to continue as a going concern.

The condensed financial statements also do not include any adjustments relating to the recoverability

and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company

be unable to continue as a going concern.

Our ability to scale production and distribution capabilities and further increase the value

of our brands, is largely dependent on our success in raising additional capital.

change in cash

Cash Used in Operating Activities

cash used in operating activities was $503,578 for the three months ended March 31, 2024, compared to $656,593 for the three months ended

March 31, 2023, a decrease of $153,015, or 23%.

The decrease was primarily due to our increased gross profit.

Cash Used in Investing Activities

cash used in investing activities was $40,100 for the three months ended March 31, 2024, compared to $-0- for the three months ended

March 31, 2023, an increase of $40,100.

This increase was primarily attributable to $50,000 of property and equipment purchases, as partially

offset by $9,900 of advances received on notes receivable in the current period.

Cash Provided by Financing Activities

cash provided by financing activities was $137,589 for the three months ended March 31, 2024, compared to $544,105 for the three months

ended March 31, 2023, a decrease of $406,516, or 75%.

Our decreased cash provided by financing activities was primarily from $322,500

of decreased net proceeds received on debt financing and $200,000 of debt repayments in the current period, as partially offset by $98,298

of deferred offering cost payments in the prior period.

ACCOUNTING POLICIES AND ESTIMATES

financial results are affected by the selection and application of accounting policies and methods.

In the three-month period ended September

30, 2023 there were no changes to the application of critical accounting policies previously disclosed in the Prospectus.

In the three-month period ended March

31, 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.

NOTICE REGARDING FORWARD-LOOKING STATEMENTS

39 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis