What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-04-15 compared with 2024-04-01 · 274 added, 187 removed, 279 unchanged (62% 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 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.

our licensed technology platform, we believe our 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.

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.

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 its own patent pending process, and has the nonexclusive rights to use the licensed technology platform for

other products.

time, we plan to grow revenues strategically by penetrating the multi-billion dollar grocery market opportunity presented by our current

product lines, as well as expanding our platform to include additional products that meet our strict plant-based ingredient criteria.

Our current primary 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.

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

Our products have historically been manufactured for us by two contract manufacturers, one based in the Republic of Chile, and the other

in the Republic of Peru, which housed our large-scale continuous through-put dehydration machine that completed its first production

run in the first quarter of 2023.

Our dehydrated fruit and vegetable products are produced using a new proprietary dehydration technology

licensed by us from a third party.

Our customers are primarily located throughout the United States.

In 2024, we decided to initiate

our own production facility in Peru to become vertically integrated.

We recently completed the build out of the new facility, which commenced

operations in December 2024, and utilizes three large-scale REV machines (a REV 60, REV 100 and REV 120) that

we recently purchased from EnWave, as well as, a small REV 10 R&D machine that is being used for product development and customer

sample purposes.

We expect operating margins to be further improved in 2025, as we become more vertically integrated with the transition

of more of our production from third party contract manufacturers to internal production.

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

current consumer trends.

In our experience, conventional dehydration methods, such as freeze-drying and air drying, tend to degrade most

fruit and vegetables through oxidation, browning/color degradation, nutritional content reduction and/or flavor loss.

As a result, certain

highly sensitive fruits, such as avocados and bananas, have not previously been successfully offered as a dehydrated base for consumer

We believe that our licensed technology platform and process is the only way to produce quality avocado and banana-based snack

and powdered products.

Additionally, we believe our licensed technology platform produces superior products when using other fruits and

vegetables when compared to conventional drying and dehydration technologies.

We license technology, consisting of a portfolio of patents,

and purchased production machines, from EnWave, and we have been granted the exclusive rights to use the licensed technology platform

as applied to several products in Peru, and avocado based products in the United States.

In addition, BranchOut has the nonexclusive

rights to use the licensed technology platform for other products.

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

Our current product line includes:

BranchOut Snacks:

dehydrated fruit and vegetable-based

snacks, including Avocado Chips, Chewy Banana Bites, Pineapple Chips, Brussels Sprout Crisps, Strawberry Crisps and Bell Pepper Crisps.

Private Label:

Prunes, Carrots, Brussel

Sprouts and Raisins sold to major retailers.

BranchOut Industrial Ingredients:

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

are currently developing many additional products for all sales channels.

Concern Uncertainty

of December 31, 2023, we had a cash balance of $657,789, have incurred recurring losses from operations resulting in an accumulated deficit

of $12,810,541, and had total working capital of $899,150.

We are too early in our development stage to project revenue with a necessary

level of certainty;

therefore, we may not have sufficient funds to sustain our operations for the next twelve months and we may need

to raise additional cash to fund our operations.

These factors raise substantial doubt about our ability to continue as a going concern.

The Company continues to develop its operations.

In the event sales do not materialize at the expected rates, management would seek additional

financing or would attempt to conserve cash by further reducing expenses.

There can be no assurance that we will be successful in achieving

these objectives.

report of the Company’s independent registered public accounting firm that accompanies its audited financial statements in this

Annual Report on Form 10-K contains an explanatory paragraph regarding the substantial doubt about the Company’s ability to continue

as a going concern.

The financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty.

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.

In addition, 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

In 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

of December 31, 2024, we had a cash balance of $2,329,452, a working capital deficit of $3,897,382 and had incurred recurring losses

from operations resulting in an accumulated deficit of $17,562,057.

Subsequent to December 31, 2024, we received gross proceeds of approximately

$2.4 million from sales of our common stock in an “At-the-Market” registered offering.

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

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.

report of our independent registered public accounting firm that accompanies our audited financial statements in this Annual Report on

Form 10-K contains an explanatory paragraph regarding the substantial doubt about our ability to continue as a going concern.

financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty.

the fourth quarter of 2023, NXTDried Superfoods, one of our former contract manufacturers 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 had to fulfill orders by shifting fulfillment to other manufacturing sources until we commenced operations at our own fully integrated

production facility in Peru in the fourth quarter of 2024.

D uring 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

the situation with NXTDried Superfoods, we were required to shift fulfillment of orders to alternative manufacturing sources.

10, 2024 we entered into a ten-year lease for our 50,000 square-foot food processing plant located in Peru.

The lease of the Peru Facility

requires us to make monthly lease payments of $8,000 in the first two years of the lease, $20,000 in the third year of the lease, $22,000

in the fourth year of the lease, $24,000 in the fourth year of the lease, and $25,000 thereafter.

The lease also has a 10-year renewal

option, and a buy-out option under which we may purchase the facility for $1,865,456.

connection with our lease of the Peru Facility, we paid $275,000 on May 10, 2024 and another $80,000 during the fourth quarter of 2024,

as part of the purchase of a first position mortgage receivable in the amount of $1,267,000, which is secured by the Peru Facility and

was owed by the landlord of the Peru Facility to its former tenant.

The remaining $912,000 is due and payable in monthly installments

of $152,000 through June 23, 2025, at which time an additional $55,604 of interest is due, based on a 9% financing rate.

Accounting Policies

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(the “Underwriter”) .

The Company received

net proceeds of $6,226,000, after deducting underwriters’ discounts and commissions and before consideration of other issuance

In connection with the IPO, a total of $6,029,204 of convertible debt, consisting of $5,526,691 of principal and $502,513 of interest,

was converted into 1,572,171 shares of common stock, inclusive of $179,687, consisting of $165,000 of principal and $14,687 of interest,

that converted into 43,562 shares of common stock issued upon the conversion of debts held by related parties.

received net proceeds of $6,226,000, after deducting underwriters’ discounts and commissions and before consideration of other

issuance costs.

In connection with the IPO, a total of $6,029,204 of convertible debt, consisting of $5,526,691 of principal and $502,513

of interest, was converted into 1,572,171 shares of common stock, inclusive of $179,687, consisting of $165,000 of principal and $14,687

of interest, that converted into 43,562 shares of common stock issued upon the conversion of debts held by related parties.

to the Underwriting Agreement, we also issued the Underwriter a Common Stock Purchase Warrant to purchase up to 82,110 shares of Common

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proceeds upon the closing of the IPO in June 2023.

As of December 31, 2023, all deferred offering costs were paid.

Unpaid deferred offering

costs totaled $543,664 as of December 31, 2022.

June 15, 2023, we effected a 2.5-for-1 reverse stock split of our outstanding shares of capital stock.

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Actual results could differ from these estimates.

280, Segment Reporting , requires annual and interim reporting for an enterprise’s operating segments and related disclosures

about its products, services, geographic areas and major customers.

An operating segment is defined as a component of an enterprise that

engages in business activities from which it may earn revenues and expenses, and about which separate financial information is regularly

evaluated by the chief operating decision maker in deciding how to allocate resources.

The Company operates as a single segment and will

evaluate additional segment disclosure requirements as it expands its operations.

ASC 280, Segment Reporting , operating segments are defined as components of an enterprise where discrete financial information

is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources

and in assessing performance.

The Company has two components, consisting of its sales operations in the United States, and its production

operations in Peru.

Therefore, the Company’s Chief Executive Officer, who is also the CODM, makes decisions and manages the Company’s

operations based on these two operating segments for the manufacture and distribution of its products.

Value of Financial Instruments

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in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:

1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that

are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

3 inputs to valuation methodology are unobservable and significant to the fair measurement.

Level 1 inputs to the valuation methodology

are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology

include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability,

either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 inputs to valuation methodology

are unobservable and significant to the fair measurement.

assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

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the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000, under current regulations.

The Company had $407,789 and

$62,697 in excess of FDIC insured limits on December 31, 2023 and 2022, respectively, and has not experienced any losses in such accounts.

The Company had $1,555,223

and $407,789 in excess of FDIC insured limits on December 31, 2024 and 2023, respectively, and has not experienced any losses in such

receivable is carried at their estimated collectible amounts.

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based on past credit history with customers and their current financial condition.

The Company had no allowance for doubtful accounts

on December 31, 2023 and 2022.

The Company had an allowance for doubtful accounts

of $25,586 at December 31, 2024.

No allowance for doubtful accounts was necessary at December 31, 2023.

Company’s products consist of pre-packaged and bulk-dried fruit and vegetable-based snacks, powders and ingredients purchased from

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Finished goods

Total inventory

Company had prepaid inventory advances on product in the amount of $29,500 as of December 31, 2022.

Advances of 70% of estimated finish

product costs are made to enable manufacturer’s purchase of raw materials to produce finished products.

The remaining 30% is paid

upon receipt of finished goods.

Company had prepaid inventory advances on products in the amount of $123,792 and $-0- as of December 31, 2024 and 2023, respectively.

Advances of 70% of estimated finish product costs are made to enable manufacturer’s purchase of raw materials to produce finished

The remaining 30% is paid upon receipt of finished goods.

and Equipment

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internally developed trademarks.

2021, the Company entered into a license agreement to license the rights to certain production equipment developed and manufactured by

another company through the purchase of that company’s equipment.

The license is not discernable from the equipment;

the license costs have been capitalized and depreciated over the useful life of the equipment.

The license agreement also entitles the

licensor to a royalty on all revenue from the sale of products produced using the equipment.

These royalties are recognized as royalty

expenses as the products are sold.

There have been no royalty payments to date, and any future minimum royalty payments or equipment

purchases under this license agreement are an unrecognized commitment as they relate to retaining exclusivity of the avocado products

going forward and the Company can elect not to pay as disclosed in Note 17 to the financial statements included in this 10-K.

Company is party to a license agreement under which it is licensed to utilize certain technology and production equipment developed and

manufactured by another company, relating on an exclusive basis to avocado products and on a non-exclusive basis to other products.

license is not discernible from the equipment;

therefore, the license costs have been capitalized and depreciated over the useful life

of the equipment.

The license agreement also entitles the licensor to a royalty on all revenue from the sale of products produced using

the equipment.

These royalties are recognized as royalty expenses as the products are sold.

There was a total of $41,673 of royalty payments

made during the year ended December 31, 2024, and none during the year ended December 31, 2023.

Any future minimum royalty

payments or equipment purchases under this license agreement are an unrecognized commitment as they relate to retaining exclusivity of

the avocado products going forward and the Company can elect not to pay as disclosed in Note 17 to the financial statements included

in this 10-K.

Company evaluates convertible notes payable, stock options, stock warrants and other contracts to determine if those contracts or embedded

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a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified

to a liability account at the fair value of the instrument on the reclassification date.

Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are

reclassified to a liability account at the fair value of the instrument on the reclassification date.

Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customer .

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Gross revenue

slotting, discounts, and allowances

slotting, discounts,

and allowances

of Goods Sold

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Company expenses the cost of advertising and promotions as incurred.

Advertising and promotions expense was $162,048 and $199,287 for

the years ended December 31, 2023 and 2022, respectively.

Advertising and promotions expense was $311,586 and $162,048

for the years ended December 31, 2024 and 2023, respectively.

Company accounts for equity instruments issued to employees and non-employees in accordance with the provisions of ASC 718 Stock Compensation

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number of common shares outstanding plus potential dilutive securities.

For the years ended December 31, 2023 and 2022, potential dilutive

securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

For the years ended December 31, 2024 and 2023, potential

dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and

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Cost of goods sold

profit (loss)

Operating expenses:

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Salaries and benefits

Professional services

Depreciation and amortization

Total operating expenses

operating expenses

Operating loss

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Interest income

Interest expense

Total other income (expense)

other income (expense)

$ (4,751,516 )

$ (3,925,710 )

net revenue for the year ended December 31, 2023 was $2,825,855, compared to $752,178 for the year ended December 31, 2022, an increase

of $2,073,677, or 276%.

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

of Goods Sold and Gross Loss

net revenue for the year ended December 31, 2024 was $6,516,337, compared to $2,825,855 for the year ended December 31, 2023, an

increase of $3,690,482, or 131%.

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

ended December 31, 2024.

of Goods Sold and Gross Profit (Loss)

cost of goods sold for the year ended December 31, 2024 was $5,652,717, compared to $2,922,085 for the year ended December 31, 2023,

an increase of $2,730,632, or 93%.

Cost of goods sold included $223,856 of depreciation on production equipment during the year

ended December 31, 2023.

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 a gross operating loss of $96,230, or (3%), for the year ended December 31, 2023, as compared to a gross

operating loss of $170,550, or (23%), for the year ended December 31, 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.

Cost of goods sold included $171,843 and $223,856 of depreciation on production equipment during the

years ended December 31, 2024 and 2023, respectively.

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

sales for the period.

As a result of the foregoing, we had a gross profit of $863,620, or 13% of revenues, for the year ended December 31,

2024, compared to a gross operating loss of $96,230, or (3%) of revenues, for the year ended December 31, 2023.

Our gross profit

margin increased primarily due to cost savings realized as a result of our transition to bulk shipping arrangements and transitioning

to our own production facility during the current period.

and Administrative Expense

general and administrative expense for the year ended December 31, 2023 was $1,581,474, compared to $929,726 for the year ended December

31, 2022, an increase of $651,748, or 70%.

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

travel, storage, shipping and handling, commissions and asset impairment expense.

Year Ended December 31,

general and administrative expense for the year ended December 31, 2024 was $1,870,720, compared to $1,581,474 for the year ended

December 31, 2023, an increase of $289,246, or 18%.

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.

Ended December 31,

Advertising and marketing

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Asset impairment expense

and marketing, and travel, expenses decreased for the year ended December 31, 2023, as compared to the corresponding period in 2022 as

we focused our resources on our IPO in the current year.

Our storage, shipping and handling expenses increased primarily due to increased

international shipping rates, and commissions increased due to our increased shipments on sales during the current year.

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 , respectively, related to amounts owed from NXTDried

Superfoods SAC, one of our co-manufacturers.

and wages for the year ended December 31, 2023 was $1,129,858, compared to $628,637 for the year ended December 31, 2022, an increase

of $501,221, or 80%.

and marketing expenses increased for the year ended December 31, 2024, as compared to the corresponding period in 2023, as we focused

our resources on growing our sales.

Our rent increased primarily due to leases entered into in the current year, as we began to develop

our operating facility in Peru, which also resulted in increased travel expenses.

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.

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 , related to amounts owed from NXTDried Superfoods, one of our prior co-manufacturers.

and wages for the year ended December 31, 2024 was $1,604,200, compared to $1,129,858 for the year ended December 31, 2023,

an increase of $474,342, or 42%.

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

fees for the year ended December 31, 2023 was $694,596, compared to $583,920 for the year ended December 31, 2022, an increase of $110,676,

including $414,614 of non-cash, stock-based compensation related to stock options awarded during the current year.

fees for the year ended December 31, 2024 was $1,291,141, compared to $694,596 for the year ended December 31, 2023, an increase

of $596,545, or 86%.

This increase was primarily attributable to increased consulting fees.

expense for the year ended December 31, 2023 was $-0-, compared to $93,253 for the year ended December 31, 2022, a decrease of $93,253.

The decrease 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 commenced production activities on January 1, 2023, resulting in

the recognition of depreciation as a component of cost of goods sold.

Professional fees included $290,085 and $258,574

of non-cash, stock-based compensation related to common stock and stock options awarded during the years ended December 31, 2024

and 2023, respectively.

Income (Expense)

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$14,156 of interest income.

During the year ended December 31, 2022, other expense was $2,237,266, consisting of $2,250,893 of interest expense,

as partially offset by $13,627 of interest income.

Other expense decreased by $1,813,714, or 81%, 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 year ended December 31, 2023 was $3,925,710, compared to $4,643,352 during the year ended December 31, 2022, a decreased

net loss of $717,642, or 15%.

The decreased net loss was primarily due to $74,320 of improved gross profits and a reduction of $1,815,622

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 $1,170,392 of increased operating

expenses, including $761,085 of impairment expense.

During the year ended December 31, 2023, other expense was $423,552, consisting of $435,271 of interest

expense, as partially offset by $11,719 of interest income.

Other expense increased by $425,523, or 100%, primarily due to interest on

increased outstanding debt as we funded our expansion into Peru during the current year.

loss for the year ended December 31, 2024 was $4,751,516, compared to $3,925,710 during the year ended December 31, 2023, an

increased net loss of $825,806, or 21%.

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

to reporting as a public company, $427,960 of increased interest expense, and $536,074 of increased stock-based compensation during the

current year, as partially offset by increased gross profits during the current year, in addition to $761,085 of impairment expense in

2023 that wasn’t incurred in the current year.

and Capital Resources

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

Current Assets

Current Liabilities

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$ (3,897,382 )

of December 31, 2023, we had working capital of $899,150.

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 December 31, 2023, we had cash of $657,789, total liabilities of $914,622, and an accumulated deficit of $12,810,541.

As of December

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

of December 31, 2024, we had negative working capital of $3,897,382.

We have incurred net losses since our inception and we anticipate

net losses and negative operating cash flows for the near future.

To date, our primary sources of capital have been cash generated from

the sales of our products, common stock sales, and debt and convertible debt financing.

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.

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 Year Ended December 31, 2024 and the Year Ended December 31, 2023

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Net cash provided by financing activities

Effect of exchange rate

changes on cash

Net change in cash

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2023, an increase of $1,330,444, or 38%.

The increase was primarily due to increased accounts receivable, inventory purchases and

payments on accounts payable from the proceeds of our IPO, in addition to $761,085 of impairment

expense on the collectability of a note receivable, VAT taxes receivable and prepaid inventory .

The increase was primarily due to our increased net loss and increased purchases of inventory

and other assets, as adjusted for increased stock-based compensation, increased accounts payable, and $761,085

of impairment expense on the collectability of a note receivable, VAT taxes receivable and prepaid inventory during the prior year .

Cash Used in Investing Activities

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2023, an increase of $2,705,996, or 2,321%.

This increase was primarily attributable to increased 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.

This increase was primarily attributable to increased property and equipment purchases of

$2,847,207 during the current year, as partially offset by $24,646 of advances received on notes receivable in the current year that

were not replicated in the prior year, and $116,565 of property and equipment purchases in the prior year.

Cash Provided by Financing Activities

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December 31, 2023, an increase of $5,607,342, or 149%.

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.

Our increased cash provided by financing activities was primarily from $7,071,898

of increased net proceeds received on debt and convertible debt financing, $206,183 of decreased deferred offering cost payments, and

$5,489 of decreased principal payments on finance leases, as partially offset by $1,697,203 of decreased proceeds received on the sale

of common stock.

Our financing activities during the year ended December 31, 2024 are further described below.

Convertible Note

to a Securities Purchase Agreement dated July 15, 2025 (as amended, the “SPA”) on July 24, 2024 Kaufman Capital LLC (“Kaufman

Capital”) purchased from us (i) a 12% Senior Secured Convertible Promissory Note in the principal amount of up to $3,400,000 (the

“Convertible Note”), convertible into shares of common stock at a fixed price of $0.7582 per share, (ii) a warrant to purchase

1,000,000 shares of common stock at an exercise price of $1.00 per share, and (iii) a warrant to purchase 500,000 shares of common stock

at an exercise price of $1.50 per share, in consideration of an initial loan in the principal amount of $2,000,000 made to the Company

under the Convertible Note.

On December 9, 2024, Kaufman Kapital made an additional loan to the Company under the Convertible Note in

the amount of $1,400,000.

The Convertible Note matures on the earlier of (i) December 31, 2025, (ii) the sale by the Company of $5,000,000

of equity or debt securities in a single transaction or series of related transactions (excluding certain specified transactions), or

(iii) the closing of a change of control transaction as provided in the Convertible Note.

Loans outstanding under the Convertible Note

bear interest at an initial rate of 12% per annum, and together with accrued principal are convertible into common stock.

The Company’s

obligations under the Convertible Note are secured by a lien granted to Kaufman Kapital on substantially all of the Company’s assets

pursuant to a Security Agreement entered between the Company and Kaufman Kapital (the “Security Agreement”).

Promissory Note

August 30, 2024, the Company borrowed $1,200,000 from Kaufman Kapital pursuant to a Senior Secured Promissory Note in the principal amount

of $1,200,000 (the “Note”) issued by the Company to Kaufman Kapital.

The Note matures on June 30, 2025.

The loan under

the Note bears interest at a rate of 15% per annum.

The Company’s obligations under the Note are secured by a lien on substantially

all of the Company’s assets pursuant to the Security Agreement.

Vision Promissory Notes

various dates from January 9, 2024 through May 22, 2024, the Company completed the sale of an aggregate $1,675,000 of Senior Secured

Promissory Notes (“Senior Notes”) and warrants to purchase an aggregate of 518,750 shares of the Company’s common stock,

to a group of Investors (“Investors”) led by Eagle Vision Fund LP (“Eagle Vision”), an affiliate of John Dalfonsi,

CFO of the Company, pursuant to a subscription agreement between the Company and the Investors.

The Notes mature on the earlier of December

31, 2025, or the occurrence of a “Qualified Subsequent Financing” or “Change of Control” and bear interest at

a rate of 15% per annum.

The Company’s obligations under the Notes are secured by liens on substantially all of the Company’s

assets pursuant to the terms of a Security Agreement between the Company and the Investors.

October 23, 2024, we entered into an ATM Agreement with Alexander Capital for the sale of shares of common stock from time to time through

Alexander Capital having an aggregate offering price of up to $3 million.

As of December 31, 2024, we had sold 1,317,307 shares

of common stock under the ATM Agreement resulting in gross proceeds of approximately $2.5 million and aggregate net proceeds of approximately

$2.3 million, after deducting expenses, including a 3% commission paid to Alexander Capital.

Subsequent to December 31, 2024, the ATM

Agreement was amended to increase the aggregate offering price of shares of common stock that may

be sold under the ATM Agreement to $5 million.

Following December 31, 2024, we sold 1,303,115 additional shares of common stock

under the ATM Agreement for gross proceeds of approximately $2.5 million and aggregate net proceeds of approximately $2.4 million.

As of the date of the filing of this Annual Report on Form 10-K, as a result of such sales of common stock under the ATM Agreement, the

Company believes it has stockholders’ equity in excess of $2.5 million, in compliance with Nasdaq Listing Rule 5550(b)(1).

Party Financing

July 15, 2024, the Company entered into subscription agreements with three related parties, consisting of Eric Healy, the Company’s

Chief Executive Officer;

Eagle Vision, an affiliate of John Dalfonsi, the Company’s Chief Financial Officer;

and the Company’s

President, pursuant to which such investors agreed to purchase $525,000 of “Units” from the Company, each Unit consisting

of (i) 100 shares of common stock, and (ii) a warrant to purchase 125 shares of common stock over the following ten years at an exercise

price of $1.00 per share, at a purchase price per Unit equal to $75.82.

The Company completed the sale of the Units to Eric Healy and

the Company’s President on July 23, 2024, and the sale of the Units to Eagle Vision on August 30, 2024, resulting in the issuance

of an aggregate of 692,429 shares of common stock and warrants to purchase 865,536 shares of common stock.

Public Offering

June 26, 2024, we sold 1,750,000 shares of common stock in a public offering at a price of $0.80 per share, less underwriting discounts

and commissions, and on July 19, 2024, the underwriter in the offering exercised its over-allotment option to purchase an additional

222,500 shares of common stock.

We received aggregate net proceeds in this offering of $1,164,685 after deducting the underwriting

discounts and commissions and offering expenses.

of our Cash Obligations for the Next 12 Months

of December 31, 2023, we had incurred recurring losses from operations resulting in an accumulated deficit of $12,810,541, cash on hand

of $657,789 and working capital of $899,150.

We do not currently have sufficient funds to fund our operations at their current levels

for the next twelve months.

As we implement our business plan and attempt to expand operational activities, we expect to continue to

experience net negative cash flows from operations in amounts not now determinable, and will be required to obtain additional financing

to fund operations.

Our ability to continue as a going concern is dependent upon our ability to raise additional capital and to achieve

sustainable revenues and profitable operations.

Since inception, we have raised funds primarily through debt financing and the sale of

equity securities.

We will need, and are currently seeking, additional funds to operate our business.

No assurance can be given that

any future financing will be available or, if available, that it will be on terms that are satisfactory to us.

Even if we are able to

obtain additional financing, it may contain undue restrictions on our operations or cause substantial dilution for our stockholders.

If we are unable to obtain additional funds, our ability to carry out and implement our planned business objectives and strategies will

be significantly delayed, limited or may not occur.

of December 31, 2024, we had incurred recurring losses from operations resulting in an accumulated deficit of $17,562,057, cash

on hand of $2,329,452 and negative working capital of $3,897,382.

Subsequent to December 31, 2024, we received gross proceeds of approximately

$2.4 million from sales of our common stock in an “At-the-Market” offering.

However, assuming we continue to generate substantial

losses from operations, we will not have sufficient funds to fund our operations at their current levels for the next twelve months.

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, and we may be required to obtain additional financing to fund operations.

Since inception,

we have raised funds primarily through debt and convertible debt financing, and the sale of equity securities.

No assurance can be given

that any future financing will be available if required, or, if available, that it will be on terms that are satisfactory to us.

if we are able to obtain additional financing, it may contain undue restrictions on our operations or cause substantial dilution for

our stockholders.

We cannot guarantee that we will become profitable.

Even if we achieve profitability,

given the competitive and evolving nature of the industry in which we operate, we may not be able to sustain or increase profitability

and our failure to do so would adversely affect our business, including our ability to raise additional funds.

Even if we achieve profitability, given the competitive and evolving

nature of the industry in which we operate, we may not be able to sustain or increase profitability and our failure to do so would adversely

affect our business, including our ability to raise additional funds.

accompanying financial statements appearing in this 10-K have been prepared assuming that we will continue as a going concern, which

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What changed 10-K

Item 7. Management’s Discussion and Analysis