What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-14 compared with 2024-08-14 · 148 added, 158 removed, 163 unchanged (65% of the section changed)

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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.

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 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

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we decided to initiate our own production facility in Peru to become vertically integrated.

Our new factory is currently being built

out and expected to be online and operational by October 2024.

We have two large-scale REV machines on order from Enwave Corporation, a

REV 100 and REV 120 machine.

Both are currently in transit to the Peru facility.

We also purchased a small REV 10 R&D machine

that is also being delivered to Peru for installation into our new facility.

In addition, we expect to move the REV 60 machine that is installed at our prior leased facility to our new facility in the near term .

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

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 is being used for product development

and customer sample purposes .

our licensed technology platform, we believe our lines of branded, private-label and industrial ingredient 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

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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 received a commitment from this retailer to carry another product of

ours in their stores.

Based on this most recent commitment, we anticipate that our products will be carried in a total of 1,400

of this retailer’s stores in September 2024, which will 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

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Concern Uncertainty

of June 30, 2024, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $14,804,062, with

working capital of $1,302,986.

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.

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

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 consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty as to

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Although we have been able to continue

to fulfill orders by shifting fulfillment to other manufacturing sources, our costs of goods have increased as a result.

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.

to fulfill orders by shifting fulfillment to other manufacturing sources, and have recently opened our new facility in Peru, our costs of goods for

the three and nine month periods ending September 30, 2024, have increased as a result.

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.

Facility Lease

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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

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the Peru Facility for $1,865,456.

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.

of Operations for the Three Months Ended June 30, 2024 and 2023

following table summarizes selected items from the statement of operations for the three months ended June 30, 2024 and 2023, respectively.

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.

of Operations for the Three Months Ended September 30, 2024 and 2023

following table summarizes selected items from the statement of operations for the three months ended September 30, 2024 and 2023, respectively.

Three Months Ended

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Total other income (expense)

net revenue for the three months ended June 30, 2024 was $1,362,986, compared to $343,065 for the three months ended June 30, 2023, an

increase of $1,019,921, or 297%.

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

months ended June 30, 2024.

$ (1,270,805 )

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.

of Goods Sold and Gross Profit

cost of goods sold for the three months ended June 30, 2024 was $1,214,227, compared to $361,461 for the three months ended June 30,

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 June

As a result of the foregoing, we had gross profit of $148,759, representing gross margins of 11%, for the three months ended

June 30, 2024 as compared to a gross loss of $18,396, or negative gross margins of 5%, for the three months ended June 30, 2023.

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 June 30, 2024 of $56,335, compared to

$55,758 for the three months ended June 30, 2023, an increase of $577, or 1%.

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

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%.

and Administrative

general and administrative expense for the three months ended June 30, 2024 was $321,201, compared to $141,031 for the three months ended

June 30, 2023, an increase of $180,170, or 128%.

The largest components of our general and administrative expenses are advertising and

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

Three Months Ended June 30,

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.

Months Ended September 30,

Advertising and marketing

Storage, shipping and handling

and marketing expenses increased for the three months ended June 30, 2024, compared to the corresponding period in 2023, as we focused

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 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 June 30, 2024 was $349,597, compared to $436,238 for the three months ended June 30, 2023, a

decrease of $86,641, or 20%.

This decrease was primarily attributable to bonuses awarded in the comparative period that were not recognized in the current period.

In addition, salaries and wages included $17,751 of non-cash, stock-based

compensation related to stock options awarded during the current period.

fees for the three months ended June 30, 2024 was $304,376, compared to $158,205 for the three months ended June 30, 2023, an increase

of $146,171, or 92%.

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 $140,491 and $18,046

of non-cash, stock-based compensation for the three months ended June 30, 2024 and 2023, respectively.

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.

and wages for the three months ended September 30, 2024 was $309,433, compared to $222,764 for the three months ended September 30, 2023,

an increase of $86,669, or 39%.

This increase was primarily attributable to an increased head count necessary to service our expanded

sales and build out of our production facility in Peru.

In addition, salaries and wages included $14,565 of non-cash, stock-based compensation

related to stock options awarded during the current period.

fees for the three months ended September 30, 2024 was $369,525, compared to $218,160 for the three months ended September 30, 2023,

an increase of $151,365, or 69%.

This increase was primarily attributable to increased legal and consulting fees in the current period.

Professional fees included $110,897 of non-cash, stock-based compensation for the three months ended September 30, 2023.

Income (Expense)

the three months ended June 30, 2024, other expense was $116,139 on a net basis, consisting of $118,957 of interest expense, as partially

offset by $2,818 of interest income.

For the three months ended June 30, 2023, other expense was $219,640 on a net basis, consisting

of $222,551 of interest expense, as partially offset by $2,911 of interest income.

Other expense decreased by $103,501, or 47%, primarily

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

loss for the three months ended June 30, 2024 was $942,554, compared to $973,510 for the three months ended June 30, 2023, a decrease

of $30,956, or 3%.

The decreased net loss was primarily due to increased gross profit and decreased interest on debt, as partially offset

by increased non-cash, stock-based compensation costs and compliance costs related to reporting as a public company.

of Operations for the Six Months Ended June 30, 2024 and 2023

following table summarizes selected items from the statement of operations for the six months ended June 30, 2024 and 2023, respectively.

Six Months Ended

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.

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.

of Operations for the Nine Months Ended September 30, 2024 and 2023

following table summarizes selected items from the statement of operations for the nine months ended September 30, 2024 and 2023, respectively.

Nine Months Ended

Cost of goods sold

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$ (2,456,596 )

net revenue for the six months ended June 30, 2024 was $2,830,002, compared to $440,405 for the six months ended June 30, 2023, an increase

of $2,389,597, or 543%.

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

June 30, 2024.

net revenue for the nine months ended September 30, 2024 was $5,011,497, compared to $1,347,401 for the nine months ended September 30,

2023, an increase of $3,664,096, or 272%.

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

the nine months ended September 30, 2024.

of Goods Sold and Gross Profit

cost of goods sold for the six months ended June 30, 2024 was $2,397,655, compared to $488,443 for the six months ended June 30, 2023,

cost of goods sold for the nine months ended September 30, 2024 was $4,242,810, compared to $1,423,046 for the nine months ended September

30, 2023, an increase of $2,819,764, or 198%.

Cost of goods sold increased primarily due to increased sales during the six months ended June 30,

As a result of the foregoing, we had gross profit of $432,347, representing gross margins of 15%, for the six months ended June

30, 2024 as compared to a gross loss of $48,038, or negative gross margins of 11%, for the six months ended June 30, 2023.

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 six months ended June 30, 2024 of $112,671, compared to $111,581

for the six months ended June 30, 2023, an increase of $1,091, or 1%.

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

September 30, 2024.

As a result of the foregoing, we had gross profit of $768,687, representing gross margins of 15%, for the nine months

ended September 30, 2024 as compared to a gross loss of $75,645, or negative gross margins of 6%, for the nine months ended September

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 nine months ended September 30, 2024 of $173,285,

compared to $167,520 for the nine months ended September 30, 2023, an increase of $5,765, or 3%.

and Administrative

general and administrative expense for the six months ended June 30, 2024 was $640,937, compared to $321,931 for the six months ended

June 30, 2023, an increase of $319,006, or 99%.

The largest components of our general and administrative expenses are advertising and

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

Six Months Ended June 30,

general and administrative expense for the nine months ended September 30, 2024 was $1,201,474, compared to $552,390 for the nine months

ended September 30, 2023, an increase of $649,084, or 118%.

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.

Months Ended September 30,

Advertising and marketing

Storage, shipping and handling

and marketing expenses increased for the six months ended June 30, 2024, compared to the corresponding period in 2023, as we focused

and marketing expenses increased for the nine 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 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 six months ended June 30, 2024 was $947,883, compared to $688,048 for the six months ended June 30, 2023, an increase

of $259,835, or 38%.

This increase was primarily attributable to $394,135 of non-cash, stock-based compensation related to stock options

awarded during the current period.

fees for the six months ended June 30, 2024 was $695,042, compared to $302,346 for the six months ended June 30, 2023, an increase of

$392,696, or 130%.

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 $290,85 and $68,492

of non-cash, stock-based compensation for the six months ended June 30, 2024 and 2023, respectively.

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.

Commissions increased due

to our increased sales, and storage, shipping and handling expenses increased primarily due to increased international shipping rates

and increased production that was driven by our increased sales.

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.

fees for the nine months ended September 30, 2024 was $1,064,567, compared to $520,506 for the nine months ended September 30, 2023,

an increase of $544,061, or 105%.

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 $290,085

and $179,389 of non-cash, stock-based compensation for the nine months ended September 30, 2024 and 2023, respectively.

Income (Expense)

the six months ended June 30, 2024, other expense was $142,006 on a net basis, consisting of $147,701 of interest expense, as partially

the nine months ended September 30, 2024, other expense was $509,656 on a net basis, consisting of $518,233 of interest expense, as partially

offset by $8,577 of interest income.

For the six months ended June 30, 2023, other expense was $390,240 on a net basis, consisting of

$395,996 of interest expense, as partially offset by $5,756 of interest income.

For the nine months ended September 30, 2023, other expense was $397,243 on a net basis, consisting

of $406,000 of interest expense, as partially offset by $8,757 of interest income.

Other expense decreased by $112,413, or 28%, primarily

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

loss for the six months ended June 30, 2024 was $1,993,521, compared to $1,750,603 for the six months ended June 30, 2023, an increase

of $242,918, or 14%.

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 increased gross profits and decreased interest on debt which was mostly

settled in the prior year.

due to interest on increased outstanding debt as we funded our expansion into Peru during the current period.

loss for the nine months ended September 30, 2024 was $3,264,326, compared to $2,456,596 for the nine months ended September 30, 2023,

an increase of $807,730, or 33%.

The increased net loss was primarily due to increased compensation and compliance costs related to reporting

as a public company, including a $519,396 increase in stock-based compensation during the current period and increased interest expense,

as partially offset by increased gross profits.

and Capital Resources

following table summarizes our total current assets, liabilities and working capital as of June 30, 2024 and December 31, 2023.

following table summarizes our total current assets, liabilities and working capital as of September 30, 2024 and December 31, 2023.

September 30,

Current Assets

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Working Capital

of June 30, 2024, we had working capital of $1,302,986.

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.

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

As of June 30, 2024, we had cash of $936,061, total liabilities of $4,672,312, and an accumulated deficit of $14,804,062.

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 Six Months Ended June 30, 2024 and the Six Months Ended June 30, 2023

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

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.

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

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

Six Months Ended

Nine Months Ended

Net cash used in operating activities

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Cash Used in Operating Activities

cash used in operating activities was $1,357,463 for the six months ended June 30, 2024, compared to $2,799,724 for the six months ended

June 30, 2023, a decrease of $1,442,261, or 52%.

The decrease was primarily due to our increased stock-based compensation, accounts receivable,

and accounts payable, as partially offset by the $275,000 payment for other assets.

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.

Cash Used in Investing Activities

cash used in investing activities was $566,431 for the six months ended June 30, 2024, compared to $10,100 for the six months ended June

30, 2023, an increase of $556,331, or 5,508%.

This increase was primarily attributable to $576,331 of property and equipment purchases,

as partially offset by $9,900 of advances received on notes receivable in the current period, compared to $10,100 of property and equipment

purchases in the comparative period.

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.

Cash Provided by Financing Activities

cash provided by financing activities was $2,202,108 for the six months ended June 30, 2024, compared to $3,850,171 for the six months

ended June 30, 2023, a decrease of $1,648,063, or 43%.

Our decreased cash provided by financing activities was primarily from $4,826,000

of decreased proceeds received on the sale of common stock and $10,779 of increased principal payments on finance leases, as partially

offset by $578,710 of increased net proceeds received on debt financing, $2,268,791 fewer debt repayments, and $341,215 of decreased

deferred offering cost payments in the prior period.

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.

ACCOUNTING POLICIES AND ESTIMATES

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

In the six-month period ended June

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

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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