What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-14 compared with 2025-11-12 · 260 added, 257 removed, 61 unchanged (89% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

should read the following discussion of our financial condition and results of operations in conjunction with the condensed financial

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

in our Annual Report on Form 10-K for the year ended December 31, 2024.

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.

Food Inc., is reimagining how the world eats fruits and vegetables.

We are engaged in the development, marketing, sale and distribution

of plant-based, dehydrated fruit and vegetable snacks and powders manufactured in a 50,000 square foot production facility that we lease

in Pisco, Peru (the “Peru Facility”).

At the Peru Facility, utilizing proprietary GentleDry™ Technology, we are able

to turn fresh fruits and vegetables into clean, crunchy snacks and industrial ingredients within just 10 days.

Technology is an advanced dehydration platform licensed to us exclusively by EnWave Corporation for certain fruits and vegetables.

technology allows us to develop differentiated fruit and vegetable products using optimized GentleDry™ settings that preserve taste,

texture, color, and nutrients.

believe GentleDry™ is superior to traditional freeze-dry processing because it retains:

times more natural flavor compounds,

to 22 times more aromatic compounds, and

to 95% of original vitamins and antioxidants.

Additionally,

our process speed is faster, making us more energy efficient;

our food doesn’t oxidize, preserving the flavor and color;

technology is protected by more than 17 patents.

plan to continue to grow revenues strategically by penetrating the multi-billion dollar grocery, industrial ingredient and online markets.

Our current product line includes:

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

Crisps, Strawberry Crisps and Bell Pepper Crisps.

Prunes, Carrots, Brussel Sprouts and Raisins sold to major retailers.

Industrial Ingredients:

Banana, Mango, Blueberry, Pineapple, Cherry Tomato, Avocado and many others.

are currently developing many additional products for all sales channels.

Concern Uncertainty

of September 30, 2025, we had a cash balance of $812,007, a positive working capital of $2,118,922, and had incurred recurring losses

from operations resulting in an accumulated deficit of $21,656,147.

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.

condensed consolidated 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 consolidated 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.

Facility Lease

May 10, 2024, we entered into a ten-year lease for the 50,000 square-foot Peru Facility, which commenced operations in December of 2024.

The lease of the Peru Facility requires 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 the Company plans to exercise the buy-out option and purchase the Peru

Facility for $1,865,456.

connection with the 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 payments were made in various installments totaling $355,000 as of December 31, 2024 and $912,000 during the nine months ended

September 30, 2025.

of Operations for the Three Months Ended September 30, 2025, and 2024

following table summarizes selected items from the statement of operations for the three months ended September 30, 2025, and 2024, respectively.

Three Months Ended

September 30,

Cost of goods sold

Operating expenses:

General and administrative

Salaries and benefits

Professional services

Advertising and promotions

Shipping and handling

Total operating expenses

Operating loss

Other income (expense):

Interest income

Interest expense

Total other income (expense)

$ (1,572,552 )

$ (1,270,805 )

net revenue for the three months ended September 30, 2025, was $3,220,027, compared to $2,181,495 for the three months ended September

30, 2024, an increase of $1,038,532, or 48%.

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

the three months ended September 30, 2025.

of Goods Sold and Gross Profit

cost of goods sold for the three months ended September 30, 2025, was $2,650,477, compared to $1,845,155 for the three months ended September

30, 2024, an increase of $805,322, or 44%.

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

September 30, 2025.

We had gross profit of $569,550, representing gross margins of 17.7%, for the three months ended September 30, 2025,

as compared to a gross profit of $336,340, or 15.4%, for the three months ended September 30, 2024.

margin increased primarily due to the transition of manufacturing operations from third-party suppliers to our facility located in Pisco,

This insourcing initiative created greater control over production processes, improved product quality, reduced contract manufacturing

costs, and improved overall efficiency shortening the production cycle and allowing for faster order fulfillment.

As production continues

to scale, we expect further margin expansion from manufacturing existing products more efficiently and from our enhanced ability to bring

new products to market more quickly.

should read the following discussion of our financial condition and results of operations in conjunction with the unaudited

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

our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended

December 31, 2025.

In addition to historical 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.

Business Overview

(collectively with its subsidiary, “BranchOut,” the “Company,” “we,” “us”

or “our”), is a growth-stage consumer packaged foods company focused on developing, manufacturing, marketing, and

distributing clean-label, plant-based dried fruit and vegetable snacks for retail and foodservice markets through BranchOut-branded

products, private-label offerings, and ingredient sales.

The Company operates a 50,000 square foot manufacturing facility in Pisco,

Peru, (“Peru Facility”) where it produces finished goods using proprietary GentleDry™ technology licensed from

EnWave Corporation.

operating model is manufacturing-led and dependent on agricultural sourcing, production scale, and retail distribution.

We continue to scale manufacturing operations at our Peru Facility while supporting

existing customer programs and pursuing new product opportunities.

Including expansion of a new production

area intended to support high-protein dehydrated cheese products in an allergen-free environment.

We believe additional capacity may

support future revenue growth, improved production flexibility and margin enhancement, although no assurance can be given regarding timing

Organizational

Realignment and Manufacturing Transition

in 2024, we initiated an operational transition from reliance on third-party manufacturers to in-house production through the development

and ramp-up of the Peru Facility.

As of December 31, 2025, the principal build-out and start-up phase of this transition was substantially

We develop, manufacture and market dehydrated fruit and vegetable products

using licensed GentleDry™ technology at the Peru Facility.

Our products are sold through three primary channels:

BranchOut branded

retail snack products, private-label products for major retailers, and fruit and vegetable ingredient products sold to food manufacturers.

BranchOut branded products consist primarily of shelf-stable fruit and vegetable snacks designed to preserve the natural flavor, color

and texture of the underlying produce.

These products are distributed through grocery, club, online and direct-to-consumer channels.

also manufacture private-label dehydrated snack products for major North American retailers, which are sold under customer brands through

their existing retail distribution channels.

In addition, we produce dehydrated fruit and vegetable ingredients, including pieces, powders

and inclusions, for use in cereals, snack bars, baked goods, salads, ready-to-eat meals and other packaged food applications.

continue to develop additional fruit and vegetable snack products and ingredient formats for both branded and private label customers.

Product development efforts are focused on expanding our snack portfolio, supporting private label programs for large retailers, and

developing new ingredient applications for food manufacturers.

From time to time, we engage with potential commercial partners and institutional

customers to develop products tailored to specific applications.

Strategy and Key Performance Drivers

is focused on executing a growth-stage strategy that balances product innovation, distribution expansion, and disciplined manufacturing

As a manufacturing-led business, our strategy emphasizes aligning customer growth and product development with production capacity,

supply-chain execution, and cost control.

elements of our strategy include:

revenue growth through customer onboarding and product expansion , by developing new snack and ingredient products designed to

generate repeat consumer demand and support scalable retail and foodservice placement.

distribution channels across national and regional retail, club, grocery, and private-label platforms to increase product availability

while maintaining disciplined customer and channel selection.

manufacturing utilization and capacity , with a focus on achieving high utilization at our Peru Facility while investing in incremental

capacity expansion to support anticipated demand, operational efficiency, and margin improvement.

operational discipline during scale-up , including production planning, inventory management, quality control, and supply-chain

coordination, to support consistent product quality, reliable fulfillment, and cost management as volumes increase.

believes that executing a manufacturing-led growth strategy allows us to compete effectively by pairing differentiated products with

scalable operations, while managing the complexity and execution demands inherent in expanding within the consumer-packaged foods industry.

Gross margin performance may be affected by sales mix, throughput levels,

manufacturing efficiencies, uptime, yields, agricultural raw materials, packaging, labor and freight costs, as well as sourcing timing

and spot market purchases when necessary.

Model and Margin Considerations

Our operating results are closely tied to production

volume, facility utilization, sales mix and input costs.

We are focused on scaling production and optimizing manufacturing performance,

while expanding our product portfolio to align with evolving customer demand and support growth across our core sales channels.

Gross margin performance continues to reflect

underlying improvements in production volumes, throughput and manufacturing efficiencies, including gains in uptime, yields and production

However, on a quarter-over-quarter basis, gross margin declined due to increased downtime at the plant, lower production levels

during January and February, and an unfavorable sales mix driven by a higher proportion of lower-margin bulk ingredient sales.

Gross margin is also influenced by sales mix across

our branded, private-label and ingredient channels, as well as variability in agricultural raw materials, packaging, labor and freight

The timing of raw material sourcing and reliance on spot market purchases, when necessary, may also affect margins.

Our operating results for the current period continue

to reflect the ongoing scale-up of internal manufacturing operations.

levels have remained below normalized capacity during the scale-up phase.

As a result, a portion of fixed manufacturing costs has not

been fully absorbed into inventory and has been recognized as idle capacity expense within operating expenses.

As production volumes

and utilization increase, we expect improved fixed-cost absorption and greater operating leverage.

Operating expenses primarily reflect costs associated with supporting

our Peru Facility, growth initiatives, distribution expansion and public company requirements.

We continue to operate at a net loss and

with negative working capital.

Future operating performance will depend on revenue growth, production scale, cost management, working

capital efficiency and continued access to capital.

Gross Margin (Non-GAAP)

addition to gross margin calculated in accordance with U.S.

generally accepted accounting principles (“GAAP”), we use adjusted

gross margin, a non-GAAP supplemental measure to evaluate underlying manufacturing performance.

Non-GAAP adjusted gross margin excludes

depreciation included in cost of goods sold and certain air freight costs incurred during the three months ended March 31, 2026 and 2025.

As of March 31, 2026 gross profit (GAAP) was $0.40 million versus adjusted gross profit (non-GAAP) of $0.54 million, and gross margin

was 15.4% compared to adjusted gross margin of 20.8%.

As of March 31, 2025 gross profit (GAAP) was $0.53 million versus adjusted gross

profit (non-GAAP) of $0.84 million, and gross margin was 16.7% compared to adjusted gross margin of 26.7%.

Adjusted gross margin was higher than reported gross margin, reflecting

the impact of depreciation and air freight costs incurred to support customer-required timelines, primarily related to new product introductions.

These air freight costs were driven by specific timing and fulfillment requirements and are not expected to recur at similar levels.

believe adjusted gross margin provides additional visibility into the underlying unit economics of our manufacturing model during this

scale-up phase.

As the plant gains operating experience and throughput increases, we expect reported gross margin to improve as additional

products achieve manufacturing efficiency.

Currently, a limited number of products are produced at or near optimal manufacturing efficiency,

while other products remain in earlier stages of production and optimization.

New product introductions also begin at lower efficiency

levels as they transition from development into scaled production and improve over time.

A reconciliation of gross profit (GAAP) to adjusted gross profit (non-GAAP),

and the related gross margin measures, for the three months ended March 31, 2026 and 2025, is presented below:

profit (GAAP)

included in cost of goods sold

freight related to customer fulfillment timing requirements

gross profit (non-GAAP)

margin (GAAP)

gross margin (non-GAAP)

of Operations for the Three Months Ended March 31, 2026, and 2025

following table summarizes selected items from the statement of operations for the three months ended March 31, 2026, and 2025, respectively.

of goods sold

and administrative

general and administrative expense for the three months ended September 30, 2025, was $897,512, compared to $316,688 for the three months

ended September 30, 2024, an increase of $580,824, or 183%.

The largest components of our general and administrative expenses are plant

idle capacity, research and development, rent, travel, and commissions, as shown below.

Three Months Ended September 30,

Idle Capacity

Research and development

capacity increased due to the opening of the production facility located in Pisco, Peru.

In December 2024 operations commenced at the

As our factory scales, idle capacity will decrease.

Commissions increased due to increased sales.

and wages for the three months ended September 30, 2025, was $422,069, compared to $309,433 for the three months ended September 30,

2024, an increase of $112,636, or 36%.

This increase was primarily attributable to $55,206 of amortization of stock options issued to

employees for services performed and $42,238 in salaries and wages relates to the hiring of employees to support production ramp-up at

the Peru facility.

fees for the three months ended September 30, 2025, was $248,640, compared to $369,525 for the three months ended September 30, 2024,

a decrease of $120,885, or 33%.

The decrease is mostly attributable to a decrease in legal fees related to establishing the Company’s

Peru facility in 2024.

and handling for the three months ended September 30, 2025, was $156,961, compared to $118,252 for the three months ended September 30,

2024, an increase of $38,709 or 33%.

This increase was primarily attributable to an increase in sales volumes.

and promotions

and promotions for the three months ended September 30, 2025, was $271,872, compared to $125,597 for the three months ended September

30, 2024, an increase of $146,275, or 116%.

Advertising and promotions expenses increased for the three months ended September 30, 2025,

mostly due to increased in-store product demos with one of our largest customers.

Income (Expense)

the three months ended September 30, 2025, other expense was $145,048 on a net basis, consisting of $148,964 of interest expense, as

partially offset by $3,916 of interest income.

For 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.

Other expense decreased by $222,602, or

61%, primarily due to the 2024 $150,462 write-off of deferred financing costs and $89,949 of additional interest expense related to the

modification of warrants.

loss for the three months ended September 30, 2025, was $1,572,552, compared to $1,270,805 for the three months ended September 30, 2024,

an increase of $301,747, or 24%.

The increased net loss was due to scaling up production at our in-house manufacturing facility.

objective is to achieve 100% utilization, which we believe will allow us to leverage fixed costs, improve operating efficiency, and capture

additional gross margin benefits as production volumes grow.

of Operations for the Nine Months Ended September 30, 2025, and 2024

following table summarizes selected items from the statement of operations for the nine months ended September 30, 2025, and 2024, respectively.

Nine Months Ended

September 30,

Cost of goods sold

shipping and handling

operating expenses

General and administrative

Salaries and benefits

Professional services

Advertising and promotions

Storage, shipping and handling

Total operating expenses

Operating loss

income (expense):

other income (expense)

Interest income

Interest expense

Total other income (expense)

$ (1,792,284 )

$ (3,264,326 )

net revenue for the nine months ended September 30, 2025, was $9,713,287, compared to $5,011,497 for the nine months ended September

30, 2024, an increase of $4,701,790, or 94%.

The increase in revenue was primarily due to increased sales to our two largest customers

during the nine months ended September 30, 2025.

Our net revenue for the three months ended March

31, 2026 was $2.6 million, compared to $3.2 million for the three months ended March 31, 2025, a decrease of $0.56 million, or 18%.

decrease in revenue was primarily due to planned maintenance at the Peru Facility and the timing of a major customer order scheduled for

delivery in the second quarter.

Production levels recovered by the end of the quarter, resulting in the highest monthly kilogram output

to date for the month of March 2026.

Inventory increased from $2.4 million at December 31, 2025 to $4.0 million at March 31, 2026, or

69%, reflecting production in advance of the scheduled second quarter shipment.

Our results may fluctuate period to period due

to the timing and size of customer orders, as well as the seasonal nature of raw material harvest cycles.

of Goods Sold and Gross Profit

cost of goods sold for the nine months ended September 30, 2025, was $7,984,763, compared to $4,242,810 for the nine months ended September

30, 2024, an increase of $3,741,953, or 125%.

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

September 30, 2025.

As a result of the foregoing, we had gross profit of $1,728,524, representing gross margins of 17.8%, for the nine

months ended September 30, 2025, as compared to a gross margin of $768,687, of 15.3%, for the nine months ended September 30, 2024.

margin increased primarily due to the transition of manufacturing operations from third-party suppliers to our facility located in Pisco,

This insourcing initiative created greater control over production processes, improved product quality, reduced contract manufacturing

costs, and improved overall efficiency shortening the production cycle and allowing for faster order fulfillment.

As production continues

to scale, we expect further margin expansion from manufacturing existing products more efficiently and from our enhanced ability to bring

new products to market more quickly.

and Administrative

general and administrative expense for the nine months ended September 30, 2025, was $2,204,559, compared to $666,600 for the nine months

ended September 30, 2024, an increase of $1,537,959, or 231%.

The largest components of our general and administrative expenses are plant

idle capacity, research and development, rent, travel, and commissions, as shown below.

Nine Months Ended September 30,

Cost of goods sold for the three months ended

March 31, 2026 was $2.2 million, compared to $2.6 million for the three months ended March 31, 2025, a decrease of $0.4 million, or 16%.

The decrease in cost of goods sold was primarily due to lower sales volumes during the period.

Gross profit for the three months ended March

31, 2026 was $0.4 million, or 15.4% of net revenue, compared to $0.5 million, or 16.7% of net revenue, for the three months ended March

The decrease in gross profit and gross margin was primarily due to lower sales volumes and a less favorable product mix, including

a higher proportion of lower-margin bulk ingredient sales, compared to the prior year period.

Current margins continue to reflect early-stage

production inefficiencies.

and Administrative Expense

General and administrative expense for the three months ended March

31, 2026 was $0.86 million, compared to $0.39 million for the three months March 31, 2025, an increase of $0.47 million, or 123%.

increase was primarily related to idle capacity expense increased during the three months ended March 31, 2026 due to unallocated fixed

overhead resulting from operating the Peru Facility below normal utilization levels.

The facility began operations in December 2024, and

idle capacity was not measured as of March 31, 2025.

As production volumes increase, a greater portion of these fixed costs are expected

to be absorbed into inventory.

The largest components of our general and administrative expenses are

plant idle capacity, research and development, travel, sales commissions, and royalties as shown below.

Three Months Ended

Idle capacity

Research & Development

capacity increased due to the opening of the production facility located in Pisco, Peru.

In December 2024 operations commenced at the

As our factory scales, idle capacity will decrease.

Rent increase is related to the Pisco, Peru production facility.

increased due to the opening of the facility in Peru and sales initiatives to expand production distribution.

Commissions increased due

to increased sales.

and wages for the nine months ended September 30, 2025, was $1,172,474, compared to $1,257,316 for the nine months ended September 30,

2024, a decrease of $84,842, or 7%.

This decrease was primarily attributable to $408,700 of non-cash, stock-based compensation for the

nine months ended September 30, 2024, compared to $102,289 of non-cash, stock-based compensation related to stock options awarded during

the current period.

This decrease is mostly offset by increases in salaries and wages related to the hiring of employees to support production

ramp-up at the Peru facility.

fees for the nine months ended September 30, 2025, was $806,736, compared to $1,064,567 for the nine months ended September 30, 2024,

a decrease of $257,831, or 24%.

This decrease was primarily attributable to $290,085 of non-cash, stock-based compensation for the nine

months ended September 30, 2024.

and handling for the nine months ended September 30, 2025, was $421,313, compared to $311,073 for the nine months ended September 30,

2024, an increase of $110,240 or 35%.

This increase was primarily attributable to an increase in sales volumes.

Research and development

Sales commissions

Research and development expense increased due

to continued product development activities.

Sales commissions decreased consistently with lower sales volumes.Travel expense remained

relatively consistent, reflecting ongoing travel between the United States and Peru to support operations.

Royalties increased primarily due to higher production

volumes on EnWave equipment.

Salaries and wages for the three months ended March 31, 2026 were $0.66

million, compared to $0.31 million for the prior year period, an increase of $0.35 million, or 112%.

The increase was primarily due to

$0.24 million of stock-based compensation expense, as well as annual wage increases.

fees for the three months ended March 31, 2026 were $0.26 million, compared to $0.24 million for the three months ended March 31, 2025,

an increase of $0.02 million, or 11%.

The increase was primarily attributable to higher compensation for the Chief Financial Officer

under a consulting agreement.

and handling expense for the three months ended March 31, 2026 was $0.15 million, compared to $0.11 million for the three months ended

March 31, 2025, an increase of $0.04 million, or 46%.

The increase was primarily due to higher shipping rates for deliveries to customers.

and Promotions

and promotions for the nine months ended September 30, 2025, was $579,507, compared to $223,801 for the nine months ended September 30,

2024, an increase of $355,706, or 159%.

Advertising and promotions expenses increased for the nine months ended September 30, 2025, compared

to the corresponding period in 2024, mostly due to increased in-store product demos with one of our largest customers.

Advertising and promotions expense for the three

months ended March 31, 2026 was $0.08 million, compared to $0.13 million for the three months ended March 31, 2025, a decrease of $0.05

million, or 42%.

The decrease was primarily due to the timing of product demonstration programs in line with lower branded product sales

during the quarter.

Income (Expense)

the nine months ended September 30, 2025, other expense was $638,025 on a net basis, consisting of $653,677 of interest expense, as partially

offset by $15,652 of interest income.

For 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.

Other expense increased by $128,369, or 25%, primarily

due to interest on the Kaufman Convertible Note and notes payable with related parties.

loss for the nine months ended September 30, 2025, was $4,094,090, compared to $3,264,326 for the nine months ended September 30, 2024,

an increase of $829,764, or 25%.

The increased net loss was due to scaling up production at our in-house manufacturing facility.

objective is to achieve 100% utilization, which we believe will allow us to leverage fixed costs, improve operating efficiency, and capture

additional gross margin benefits as production volumes grow.

For the three months ended March 31, 2026, other expense was $173,154,

consisting of $174,903 of interest expense, partially offset by $1,749 of interest income.

For the three months ended March 31, 2025,

other expense was $273,211, consisting of $278,347 of interest expense, partially offset by $5,136 of interest income.

Other expense decreased

by $100,057, or 37%, primarily due to lower interest expense following the repayment of certain debt financing during 2025.

Net loss for the three months ended March 31,

2026 was $1.8 million, compared to $0.9 million for the three months ended March 31, 2025, an increase of $0.9 million, or 95%.

in net loss was primarily due to lower sales and reduced gross margin in the current quarter, reflecting lower production in January and

February due to planned facility maintenance and an unfavorable sales mix.

In addition, the Company incurred higher idle capacity costs

as it continued the build-out and ramp-up of the Peru Facility, with production remaining below normalized levels.

Operating expenses

increased due to higher personnel costs associated with increased headcount at the Peru Facility and higher stock-based compensation expense.

Operating results remain sensitive to production volumes, capacity utilization and sales mix.

and Capital Resources

following table summarizes our total current assets, liabilities and working capital as of September 30, 2025 and December 31, 2024.

September 30,

Current Assets

Current Liabilities

Working Capital

following table summarizes our total current assets, liabilities and working capital as of March 31, 2026 and December 31, 2025.

$ (1,110,891 )

of September 30, 2025, we had positive working capital of $2,118,922.

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

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, 2025, we had cash of $812,007, total liabilities of $9,544,563, and an accumulated deficit

of $21,656,147.

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.

of the Nine Months Ended September 30, 2025, and the Nine Months Ended September 30, 2024

As of March 31, 2026, we had negative working

capital of $1.1 million, compared to negative working capital of $0.6 million as of December 31, 2025.

The decrease in working capital

was primarily driven by increased inventory levels for anticipated second quarter deliveries, continued investment in the Peru Facility

and our net loss.

To date, our primary sources of capital have been

cash generated from the sales of our products, common stock sales, and debt and equity financings.

As of March 31, 2026, we had cash of

$0.9 million, total liabilities of $11.2 million, and an accumulated deficit of $25.5 million, compared to cash of $0.6 million, total

liabilities of $8.9 million, and an accumulated deficit of $23.7 million as of March 31, 2025.

Our ability to meet our cash requirements is dependent on our ability

to increase sales volumes, improve operating cash flows, manage working capital, and, as needed, access additional capital.

current operating plan, we expect that existing cash balances and cash generated from operations will not be sufficient to fund our operating

requirements for at least the next twelve months, and we may need to obtain additional financing.

Historically, we have raised capital primarily

through debt and convertible debt financings and the issuance of equity securities.

Any additional financing may not be available when

needed or may not be available on acceptable terms.

In addition, any future financings may result in dilution to existing stockholders

and may contain restrictive covenants that could limit our operating flexibility.

Financing Activities

to March 31, 2026, we borrowed $750,000 from Kaufman Kapital LLC (“Kaufman Kapital”) pursuant to a senior secured promissory

note that matures on January 28, 2027 and bears interest at 8% per annum.

The obligations under the note are secured by a lien on substantially

all of our assets under an existing security agreement.

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.

These conditions raise substantial doubt about our ability to

continue as a going concern within one year after the date the condensed consolidated financial statements are issued.

are pursuing initiatives to increase revenues and are seeking additional sources of capital to fund operations.

While these actions may

improve our liquidity position, there can be no assurance that they will be sufficient to alleviate the substantial doubt regarding our

ability to continue as a going concern.

The accompanying condensed

consolidated financial statements have been prepared assuming we will continue as a going concern, which contemplates the

realization of assets and the settlement of liabilities in the normal course of business.

The condensed consolidated financial

statements do not include any adjustments that might result from the outcome of this uncertainty, including adjustments to the

recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary

should we be unable to continue as a going concern.

of the Three Months Ended March 31, 2026, and the Three Months Ended March 31, 2025

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

$ (5,064,017 )

cash used in operating activities

$ (2,095,942 )

Net cash used in investing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash

Net change in cash

$ (1,937,207 )

cash used in investing activities

cash provided by financing activities

of exchange rate changes on cash

change in cash

Cash Used in Operating Activities

cash used in operating activities was $5,064,017 for the nine months ended

September 30, 2025, compared to $3,259,049 for the nine months ended September 30, 2024, an increase of $1,804,968, or 55%.

was primarily due to a $1,065,942 increase in accounts receivable due to increased sales volumes and a $573,303 increase in prepaid inventory

to secure raw materials.

Cash used in operating activities was $2.1 million for the three months

March 31, 2026, compared to $1.9 million for the three months March 31, 2025, an increase of $0.2 million, or 8%.

Cash used in operating

activities was relatively consistent with the prior year period, as higher net losses and increased inventory investment to support anticipated

second quarter deliveries were substantially offset by improved collections of accounts receivable and higher accounts payable balances.

Cash Used in Investing Activities

cash used in investing activities was $573,991 for the nine months ended September 30, 2025, compared to $2,095,691 for the nine

months ended September 30, 2024, a decrease of $1,521,700, or 73%.

This decrease was primarily attributable to less equipment

purchases and capital expenditures for the build out of the Peru facility.

Cash used in investing activities was $0.5 million for the three months

ended March 31, 2026, compared to $0.4 million for the three months ended March 31, 2025, an increase of $0.1 million, or 36%.

was primarily attributable to purchases of property and equipment related to the build-out of new production space at the Peru Facility

intended to manufacture high-protein dehydrated cheese products in an allergen-free environment.

Cash Provided by Financing Activities

cash provided by financing activities was $4,093,929 for the nine months

ended September 30, 2025, compared to $5,767,938 for the nine months ended September 30, 2024, an decrease of $1,674,009, or 29%.

Our decreased

cash provided by financing activities was primarily due to principal repayments on notes payable to related parties offset by proceeds

from the sale of common stock and exercise of warrants.

provided by financing activities was $3.0 million for the three months ended March 31, 2026, compared to $2.4 million for the three months

ended March 31, 2025, an increase of $0.6 million, or 26%.

The increase was primarily attributable to $1.5 million in proceeds received

from a promissory note issued in January 2026, partially offset by lower proceeds from equity issuances during the current period.

of Exchange Rate Changes on Cash

the nine months ended September 30, 2025, the effect of exchange rate changes on cash and cash equivalents primarily reflects the translation

impact from fluctuations in the value of the Peruvian sol relative to the U.S.

During the period, the sol experienced modest

depreciation against the U.S.

dollar, resulting in a gain on foreign currency translation of $26,634 compared to a loss of $1,794 in

the comparative period.

For the three months ended March 31, 2026, the effect of exchange rate

changes on cash and cash equivalents was a $56,245 decrease in cash, compared to an $8,209 increase in the prior-year period.

primarily reflects fluctuations in the value of the Peruvian sol relative to the U.S.

dollar on cash balances held by the Company’s

Peru subsidiary.

ACCOUNTING POLICIES AND ESTIMATES

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

As of April 1, 2025, we changed our

manufacturing cost allocation methodology from kilograms produced, to machine hours used in production, to improve costing as we scale

product mix and invest in research and development.

The change resulted in an immaterial impact to the valuation of inventory and resulting

costs of goods sold from our Annual Report on Form 10-K for the year ended December 31, 2024.

In the three-month period ended March

31, 2026 there were no material changes in the Company’s critical accounting policies and estimates from those disclosed in the

Annual Report on Form 10-K for the year ended December 31, 2025.

NOTICE REGARDING FORWARD-LOOKING STATEMENTS

39 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis