BranchOut Food Inc. 10-K

ITEM 8. Financial Statements and Supplementary Data BRANCHOUT FOOD INC. CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2024 AND 2023 TABLE OF CONTENTS Page Report of Independent Registered Public Accounting Firm, M&K CPAS, PLLC (PCAOB ID: 2738 ) F-1 Consolidated Balance Sheets as of December 31, 2024 and 2023 F-2 Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2024 and 2023 F-3 Consolidated Statement of Stockholders’ Equity for the years ended December 31, 2024 and 2023 F-4 Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 F-5 Notes to Consolidated Financial Statements F-6 37 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders BranchOut Food Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of BranchOut Food, Inc. (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the years ended December 31, 2024 and 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years ended December 31, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America . Going Concern The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred recurring losses from operations resulting in an accumulated deficit, and had a working capital deficit as of December 31, 2024 which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved are especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. Going Concern Due to the net loss for the year, the Company evaluated the need for a going concern. Auditing management’s evaluation of a going concern can be a significant judgement given the fact that the Company uses management estimates on future revenues and expenses which are not able to be substantiated. As discussed in Note 2, the Company has a going concern due to recurring net losses from operations resulting in an accumulated deficit and working capital at December 31, 2024. To evaluate the appropriateness of the going concern, we examined and evaluated the financial information along with management’s plans to mitigate the going concern and management’s disclosure on going concern. /s/ M&K CPAS, PLLC M&K CPAS, PLLC PCAOB ID 2738 We have served as the Company’s auditor since 2021. The Woodlands, TX April 15, 2025 F- 1 BRANCHOUT FOOD INC. CONSOLIDATED BALANCE SHEETS December 31, December 31, 2024 2023 Assets Current assets: Cash $ 2,329,452 $ 657,789 Accounts receivable, net 418,463 635,549 Advances on inventory purchases 123,792 - Inventory 1,930,535 336,805 Other current assets 114,372 48,100 Total current assets 4,916,614 1,678,243 Property and equipment, net 4,056,299 914,999 Right-of-use assets 1,575,497 147,228 Other assets 1,947,483 - Note receivable 359,982 384,628 Total Assets $ 12,855,875 $ 3,125,098 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 1,194,079 $ 382,948 Accrued expenses 333,614 165,244 Other current liabilities 912,000 - Convertible notes payable, related parties, net of discounts 3,333,413 - Notes payable, current portion 251,647 200,000 Notes payable, related parties 2,760,000 - Notes payable, current portion 2,760,000 - Finance lease liability, current portion 29,243 30,901 Total current liabilities 8,813,996 779,093 Notes payable, net of current portion 34,500 34,500 Operating lease liability, net of current portion 1,573,035 - Finance lease liability, net of current portion 92,761 101,029 Total Liabilities 10,514,292 914,622 Stockholders’ Equity: Preferred stock, $ 0.001 par value, 8,000,000 shares authorized; no shares issued and outstanding - - Common stock, $ 0.001 par value, 80,000,000 shares authorized; 8,424,600 and 4,044,252 shares issued and outstanding at December 31, 2024 and 2023, respectively 8,425 4,044 Additional paid-in capital 19,903,796 15,016,973 Accumulated other comprehensive loss ( 8,581 ) - Accumulated deficit ( 17,562,057 ) ( 12,810,541 ) Total Stockholders’ Equity 2,341,583 2,210,476 Total Liabilities and Stockholders’ Equity $ 12,855,875 $ 3,125,098 The accompanying notes are an integral part of these financial statements. F- 2 BRANCHOUT FOOD INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS 2024 2023 For the Years Ended December 31, 2024 2023 Net revenue $ 6,516,337 $ 2,825,855 Cost of goods sold 5,652,717 2,922,085 Gross profit (loss) 863,620 ( 96,230 ) Operating expenses: General and administrative 1,870,720 1,581,474 Salaries and wages 1,604,200 1,129,858 Professional fees 1,291,141 694,596 Total operating expenses 4,766,061 3,405,928 Operating loss ( 3,902,441 ) ( 3,502,158 ) Other income (expense): Interest income 14,156 11,719 Interest expense ( 863,231 ) ( 435,271 ) Total other income (expense) ( 849,075 ) ( 423,552 ) Net loss $ ( 4,751,516 ) $ ( 3,925,710 ) Other comprehensive loss: Loss on foreign currency translation $ ( 8,581 ) $ - Net other comprehensive loss $ ( 4,760,097 ) $ ( 3,925,710 ) Weighted average common shares outstanding - basic and diluted 5,693,162 2,726,330 Net loss per common share - basic and diluted $ ( 0.83 ) $ ( 1.44 ) The accompanying notes are an integral part of these financial statements. F- 3 BRANCHOUT FOOD INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY Shares Amount Shares Amount Capital Income Deficit Equity Accumulated Additional Other Total Preferred Stock Common Stock Paid-In Comprehensive Accumulated Stockholders’ Shares Amount Shares Amount Capital Income Deficit Equity Balance, December 31, 2022 - $ - 1,200,769 $ 1,201 $ 3,743,902 $ - $ ( 8,884,831 ) $ ( 5,139,728 ) Common stock issued pursuant to initial public offering - - 1,190,000 1,190 4,940,856 - - 4,942,046 Common stock issued for services - - 81,312 81 159,059 - - 159,140 Stock options issued for services - - - - 99,434 - - 99,434 Common stock issued for debt conversions - - 1,572,171 1,572 6,027,632 - - 6,029,204 Common stock warrants granted to note holders pursuant to debt financing - - - - 46,090 - - 46,090 Net loss - - - - - - ( 3,925,710 ) ( 3,925,710 ) Balance, December 31, 2023 - $ - 4,044,252 $ 4,044 $ 15,016,973 $ - $ ( 12,810,541 ) $ 2,210,476 Balance - $ - 4,044,252 $ 4,044 $ 15,016,973 $ - $ ( 12,810,541 ) $ 2,210,476 Common stock issued pursuant to secondary public offering - - 1,972,500 1,973 1,162,712 - - 1,164,685 Common stock issued pursuant to ATM program - - 1,500,000 1,500 2,303,505 - - 2,305,005 - Authorized shares, 1,500,000 shares - Unissued shares, 182,693 shares Common stock units sold to related parties - - 692,429 692 524,308 - - 525,000 Common stock issued for services - - 215,419 216 289,869 - - 290,085 Stock options issued for services - - - - 414,614 - - 414,614 Common stock warrants granted to note holders pursuant to debt financing - - - - 101,866 - - 101,866 Amended warrants - - - - 89,949 - - 89,949 Loss on foreign currency translation - - - - - ( 8,581 ) - ( 8,581 ) Net loss - - - - - - ( 4,751,516 ) ( 4,751,516 ) Balance, December 31, 2024 - $ - 8,424,600 $ 8,425 $ 19,903,796 $ ( 8,581 ) $ ( 17,562,057 ) $ 2,341,583 Balance - $ - 8,424,600 $ 8,425 $ 19,903,796 $ ( 8,581 ) $ ( 17,562,057 ) $ 2,341,583 The accompanying notes are an integral part of these financial statements. F- 4 BRANCHOUT FOOD INC. CONSOLIDATED STATEMENTS OF CASH FLOWS 2024 2023 For the Years Ended December 31, 2024 2023 Cash flows from operating activities Net loss $ ( 4,751,516 ) $ ( 3,925,710 ) Adjustments to reconcile net loss to net cash used in operating activities: Bad debts expense 25,586 - Depreciation expense 205,907 223,856 Amortization of debt discounts 369,069 66,090 Impairment of assets - 761,085 Common stock issued for services 290,085 159,140 Options and warrants issued for services 414,614 99,434 Amended warrants 89,949 - Decrease (increase) in assets: Accounts receivable 191,500 ( 557,313 ) Advances on inventory purchases ( 123,792 ) ( 3,015 ) Inventory ( 1,593,730 ) ( 177,044 ) Other current assets ( 66,272 ) ( 278,891 ) Right-of-use asset 118,913 21,092 Other assets ( 1,947,483 ) - Increase (decrease) in liabilities: Accounts payable 811,131 143,009 Accounts payable, related parties - ( 40,140 ) Accrued expenses 1,080,370 ( 20,965 ) Operating lease liability 25,853 - Net cash used in operating activities ( 4,859,816 ) ( 3,529,372 ) Cash flows from investing activities Purchase of property and equipment ( 2,847,207 ) ( 116,565 ) Payments received on notes receivable 24,646 - Net cash used in investing activities ( 2,822,561 ) ( 116,565 ) Cash flows from financing activities Payment of deferred offering costs ( 534,107 ) ( 740,290 ) Proceeds received on convertible notes payable, related parties 3,325,000 25,000 Proceeds received on convertible notes payable, unrelated parties - 442,500 Proceeds received on notes payable - 350,000 Repayment of notes payable ( 448,353 ) ( 2,420,000 ) Proceeds received on notes payable, related parties 2,616,210 - Repayment of notes payable, related parties ( 115,000 ) - Repayments on revolving line of credit - ( 91,541 ) Principal payments on finance lease ( 9,926 ) ( 36,390 ) Proceeds from sale of common stock 4,528,797 6,226,000 Net cash provided by financing activities 9,362,621 3,755,279 Effect of exchange rate changes on cash ( 8,581 ) - Net increase in cash 1,671,663 109,342 Cash - beginning of period 657,789 548,447 Cash - ending of period $ 2,329,452 $ 657,789 Supplemental disclosures: Interest paid $ 196,007 $ 466,337 Income taxes paid $ - $ - Non-cash investing and financing transactions: Equipment purchased with debt financing $ 500,000 $ - Relative fair value of warrants issued as a debt discount $ 101,866 $ 46,090 Relative fair value of shares issued on debt conversions $ - $ 6,029,204 Initial recognition of right-of-use assets and lease liabilities $ 1,547,182 $ 184,592 The accompanying notes are an integral part of these financial statements. F- 5 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 – Nature of Business Nature of Business BranchOut Food Inc. (“BranchOut,” the “Company,” “we,” “our” or “us”) was incorporated as Avochips Inc. in Oregon on February 21, 2017, and converted into AvoLov, LLC, an Oregon limited liability company, on November 2, 2017. On November 19, 2021, the Company converted from an Oregon limited liability company into BranchOut Food Inc., a Nevada corporation. The Company is engaged in the development, marketing, sale, and distribution of plant-based, dehydrated fruit and vegetable snacks and powders. The Company’s products are currently manufactured at its new production facility that commenced production in Pisco Peru in December 2024, and is supported by contract manufacturers, as necessary. The Company’s products are manufactured using a new proprietary dehydration technology licensed by the Company. The Company’s customers are primarily located throughout the United States. Note 2 – Basis of Presentation Basis of Accounting The accompanying financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the U.S. Securities and Exchange Commission (“SEC”). All references to GAAP are in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and the GAAP hierarchy. When preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. These statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained therein. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the following entities, all of which were under common control and ownership at December 31, 2024: Name of Entity Jurisdiction Relationship BranchOut Food Inc. (1) Nevada, U.S. Parent BranchOut Food Sucursal Peru (2) Pisco, Peru Subsidiary (1) Holding company in the form of a corporation. (2) Peruvian wholly-owned subsidiary of BranchOut Food Inc. in the form of a branch. The consolidated financial statements herein contain the operations of the wholly-owned subsidiary listed above. The Company’s headquarters are located in Bend, Oregon. Initial Public Offering In June 2023, the Company completed its initial public offering (“IPO”) in which it issued and sold 1,190,000 shares of its common stock at a price of $ 6.00 per share pursuant to an Underwriting Agreement between the Company and Alexander Capital, L.P. (the “Underwriter”) . The Company 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. Pursuant to the Underwriting Agreement, the Company also issued to the Underwriter a Common Stock Purchase Warrant to purchase up to 82,110 shares of Common Stock at an exercise price of $ 7.20 , which may be exercised for a five-year period beginning December 18, 2023. F- 6 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Prior to the IPO, all deferred offering costs were capitalized in other noncurrent assets on the balance sheets. Deferred offering costs of $ 1,283,954 , primarily consisting of accounting, legal, and other fees related to the Company’s IPO, were offset against the IPO proceeds upon the closing of the IPO in June 2023. Reverse Stock Split On June 15, 2023, the Company effected a 2.5-for-1 reverse stock split of its outstanding shares of capital stock. There was no preferred stock outstanding prior to or after the reverse stock split. All issued and outstanding shares of common stock have been adjusted in these condensed financial statements, on a retrospective basis, to reflect the reverse stock split for all periods presented, as well as all common stock warrants and stock option awards which, by the terms thereof, were subject to adjustment in connection with the reverse stock split. The par value of the common stock was not adjusted by the reverse stock split. Going Concern As shown in the accompanying financial statements, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $ 17,562,057 , and a working capital deficit of $ 3,897,382 as of December 31, 2024. The Company’s $ 2,329,452 of cash on hand at December 31, 2024 may not be sufficient to sustain operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Subsequent to December 31, 2024, the Company received gross proceeds of approximately $ 2.5 million from sales of common stock in an “At-the-Market” registered offering. Although the Company anticipates that its results of operations will improve substantially as a result of the recent launch of its new facility in Peru, there can be no assurance in that regard. Management is actively pursuing new customers to increase revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. Management believes these factors will contribute toward achieving profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The 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. These 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. Note 3 – Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Segment Reporting Under 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. Fair Value of Financial Instruments ASC 820, Fair Value Measurements and Disclosures , establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. F- 7 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following: - 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. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Cash and Cash Equivalents Cash equivalents include money market accounts which have maturities of three months or less. For the purpose of the statements of cash flows, all highly liquid investments with an original maturity of three months or less are considered to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates market value. There were no cash equivalents on hand on December 31, 2024 and 2023. Cash in Excess of FDIC Insured Limits The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 , under current regulations. 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 accounts. Accounts Receivable Accounts receivable is carried at their estimated collectible amounts. Trade accounts receivable is periodically evaluated for collectability based on past credit history with customers and their current financial condition. 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. Inventory The Company’s products consist of pre-packaged and bulk-dried fruit and vegetable-based snacks, powders and ingredients purchased from contract-manufacturers in Chile and/or Peru. The Company’s contract manufacturer in Peru uses equipment purchased by the Company in its manufacturing process. Raw materials consist of packaging materials. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net realizable value. No reserve for obsolete inventories has been recognized. Inventory, consisting of raw materials and finished goods are stated at the lower of cost or net realizable value using the average cost valuation method, at December 31, 2024 and 2023, consisted of the following: Schedule of Inventory 2024 2023 December 31, 2024 2023 Raw materials $ 464,681 $ 13,734 Finished goods 1,465,854 323,071 Total inventory $ 1,930,535 $ 336,805 The 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 products. The remaining 30 % is paid upon receipt of finished goods. F- 8 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Property and Equipment Property and equipment are stated at the lower of cost or estimated net recoverable amount. The cost of property, plant and equipment is depreciated using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term based on the following life expectancy: Schedule of Estimated Useful Lives Office equipment 3 years Furniture and fixtures 5 years Equipment and machinery 5 - 10 years Repairs and maintenance expenditures are charged to operations as incurred. Major improvements and replacements, which extend the useful life of an asset, are capitalized, and depreciated over the remaining estimated useful life of the asset. When assets are retired or sold, the cost and related accumulated depreciation are eliminated, and any resulting gain or loss is reflected in operations. Depreciation expense was $ 171,873 and $ 223,856 for the years ended December 31, 2024 and 2023, respectively. For the year ended, December 31, 2024, a total of $ 34,034 of depreciation was included in the inventoried production costs, which gets expensed as Cost of Goods Sold as the inventory is sold. Impairment of Long-Lived Assets Long-lived assets held and used by the Company are reviewed for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable or is impaired. Recoverability is assessed using undiscounted cash flows based upon historical results and current projections of earnings before interest and taxes. Impairment is measured using discounted cash flows of future operating results based upon a rate that corresponds to the cost of capital. Impairments are recognized in operating results to the extent that carrying value exceeds discounted cash flows of future operations. Our indefinite-lived brand names and trademarks acquired and are assigned an indefinite life as we anticipate that these brand names will contribute cash flows to the Company perpetually. We evaluate the recoverability of intangible assets periodically by considering events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired. The Company expenses internally developed trademarks. License Agreement The 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. The 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 no ne 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. Derivatives The Company evaluates convertible notes payable, stock options, stock warrants and other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity. The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of 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. F- 9 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Revenue Recognition The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customer . Under ASC 606, the Company recognizes revenue from the sale of its plant-based snack products in accordance with a five-step model in which the Company evaluates the transfer of promised goods or services and recognizes revenue when customers obtain control of promised goods or services in an amount that reflects the consideration which the Company expects to be entitled to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The Company has elected, as a practical expedient, to account for the shipping and handling as fulfillment costs, rather than as separate performance obligations, and the related costs are recorded as selling expenses in general and administrative expenses in the statement of operations. Revenue is reported net of applicable provisions for discounts, returns and allowances. Methodologies for determining these provisions are dependent on customer pricing and promotional practices. The Company records reductions to revenue for estimated product returns and pricing adjustments in the same period that the related revenue is recorded. These estimates are based on industry-based historical data, historical sales returns, if any, analysis of credit memo data, and other factors known at the time. The Company’s sales are predominantly generated from the sale of finished products to retailers, and to a lesser extent, direct to consumers through third party website platforms. These sales contain a single performance obligation, and revenue is recognized at a single point in time when ownership, risks and rewards transfer. Typically, this occurs when the goods are received by the retailer or customer, or when the title of goods is exchanged. Revenues are recognized in an amount that reflects the net consideration the Company expects to receive in exchange for the goods. The Company promotes its products with advertising, consumer incentives and trade promotions. These programs include discounts, slotting fees, coupons, rebates, in-store display incentives and volume-based incentives. Customer trade promotion and consumer incentive activities are recorded as a reduction to the transaction price based on amounts estimated as being due to customers and consumers at the end of a period. The Company derives these estimates based principally on historical utilization and redemption rates. The Company does not receive a distinct service in relation to the advertising, consumer incentives and trade promotions. Payment terms in the Company’s invoices are based on the billing schedule established in contracts and purchase orders with customers. Expenses such as slotting fees, sales discounts, and allowances are accounted for as a direct reduction of revenues as follows: Schedule of Revenue 2024 2023 December 31, 2024 2023 Gross revenue $ 6,777,079 $ 3,184,018 Less: slotting, discounts, and allowances 260,742 358,163 Net revenue $ 6,516,337 $ 2,825,855 Cost of Goods Sold Cost of goods sold represents costs directly related to the purchase, production and manufacturing of the Company’s products. Costs include purchase costs, product development, freight-in, packaging, and print production costs. Advertising Costs The Company expenses the cost of advertising and promotions as incurred. Advertising and promotions expense was $ 311,586 and $ 162,048 for the years ended December 31, 2024 and 2023, respectively. Stock-Based Compensation The Company accounts for equity instruments issued to employees and non-employees in accordance with the provisions of ASC 718 Stock Compensation (“ASC 718”). All transactions in which the consideration provided in exchange for the purchase of goods or services consists of the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The Company issued stock-based compensation in the amount of $ 704,699 and $ 258,574 for the years ended December 31, 2024 and 2023, respectively. F- 10 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Basic and Diluted Loss Per Share The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. 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. Income Taxes The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not. Uncertain Tax Positions In accordance with ASC 740, Income Taxes , the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. Various taxing authorities periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited, and fully resolved. The Company has not yet undergone an examination by any taxing authorities. The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions. Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption. Recently Adopted Accounting Standards In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, “S egment Reporting (Topic 280): Improvements to Reportable Segment Disclosure. ” The ASU updated reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance. The Company adopted ASU No. 2023-07 during the year ended December 31, 2024. See Note 22 “ Segment Reporting ” in the accompanying Notes to the Consolidated Financial Statements for additional information. Accounting Standards Not Yet Adopted In December 2023, the FASB issued ASU 2023-09, “ Income Taxes (Topic 740): Improvements to Income Tax Disclosures” . The amendments in this ASU add specific requirements for income tax disclosures to improve transparency and decision usefulness. The guidance in ASU 2023-09 requires that public business entities disclose specific categories in the income tax rate reconciliation and provide additional qualitative information for reconciling items that meet a quantitative threshold. In addition, the amendments in ASU 2023-09 require that all entities disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes and disaggregated by individual jurisdictions. The ASU also includes other disclosure amendments related to the disaggregation of income tax expense between federal, state and foreign taxes. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis and retrospective application is permitted. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures. F- 11 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In November 2024, the FASB issued Accounting Standards Update (“ASU”) 2024-03 and in January 2025, the FASB issued ASU 2025-01, “ Income Statement - Reporting Comprehensive Income -Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ” The guidance requires disclosures about specific expense categories, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization and selling expenses. The ASU is effective in the first annual reporting period beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently assessing the effect that adoption of this guidance will have on its Consolidated Financial Statements. Note 4 – Related Party Transactions Kaufman Convertible Note On July 15, 2024, the Company entered into a Securities Purchase Agreement (as amended, the “SPA”) with Daniel L. Kaufman, pursuant to which Mr. Kaufman agreed to purchase from the Company, in a private placement (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 the Company’s common stock at a fixed price of $ 0.7582 per share of common stock, a (ii) a warrant to purchase 1,000,000 shares of common stock at an exercise price of $ 1.00 per share (the “$ 1.00 Warrant”), and (iii) a warrant to purchase 500,000 shares of common stock at an exercise price of $ 1.50 per share (the “$ 1.50 Warrant” and, together with the $ 1.00 Warrant, the “Warrants” and together with the Convertible Note, the “Purchased Securities”), in consideration of an initial loan in the principal amount of $ 2,000,000 (the “Initial Loan”) made to the Company under the Convertible Note, subject to the terms and conditions thereof. On July 19, 2024, the Company, Mr. Kaufman and Kaufman Kapital LLC (“Kaufman Kapital”) entered into an amendment to the SPA, which among other things, replaced Mr. Kaufman with Kaufman Kapital as the “Investor” under the SPA. On July 24, 2024, the Company issued the Purchased Securities to Kaufman Kapital in consideration of making the Initial Loan to the Company. 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”). In addition, the Convertible Note includes affirmative and negative covenants, events of defaults and other terms and conditions, customary in transactions of this nature. Kaufman Promissory Note On 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 , as amended. 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. In addition, the Note includes affirmative and negative covenants, events of defaults and other terms and conditions, customary in transactions of this nature. Eagle Vision Promissory Notes In connection with the sale of the Purchased Securities to Kaufman Kapital LLC under the SPA, the Company entered into an Omnibus Amendment to Note Documents with substantially all of the holders (the “Holders”) of the Company’s Senior Notes and Warrants issued under that certain Subscription Agreement dated as of January 10, 2024, as amended, pursuant to which, among other things, (i) the exercise price of the Warrants issued to the Holders was reduced from $ 2.00 to $ 1.00 , (ii) the outside maturity date of the Senior Notes held by the Holders was extended from December 31, 2024 to December 31, 2025 (subject to further extension in the event the maturity date of the Convertible Note is extended), (iii) the Company’s obligation to make payments of principal under the Senior Notes held by the Holders beginning July 1, 2024 has been eliminated, and instead all obligations of the Company under such Senior Notes will be due in one lump sum on the maturity date of the Senior Notes, and (iv) the Company’s obligations under the Convertible Note and liens granted to the holder thereof, will be pari passu with the Company’s obligations under the Senior Notes held by the Holders and liens granted to the holders thereof. The amendment warrants resulted in $ 89,949 of additional interest expense. F- 12 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On 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 (“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. Pursuant to the subscription agreements, Eagle Vision was paid aggregate cash fees in the amount of $ 177,500 upon the closing of the transactions for due diligence fees in consideration of services rendered and to be rendered by Eagle Vision to the Company and the investors, including conducting due diligence with respect to the Company, monitoring the performance by the Company of its obligations under the senior secured notes, servicing the interest and principal payments for purchasers, engaging in ongoing discussions with the Company’s management regarding the Company’s operations and financial condition, acting as collateral agent, and evaluating financial and non-financial information related to the Company, which services are to be provided by Eagle Vision until the senior secured notes have been paid in full, and an aggregate $ 35,000 of legal fees was paid to Investors’ counsel. The Notes mature on the earlier of December 31, 2025 , or the occurrence of a Qualified Subsequent Financing or Change of Control (as such terms are defined in the Subscription Agreement) and bear interest at a rate of 15 % per annum. In addition, the Notes are subject to covenants, events of defaults and other terms and conditions set forth in the Subscription Agreement. 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. Each Warrant is exercisable for a 10 ten-year period at an exercise price of $ 1.00 per share. Unit Offering Sale of Common Stock and Warrants On July 15, 2024, the Company entered into Subscription Agreements (the “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. Common Stock Options Issued for Services On February 22, 2024, the Company granted options to purchase 140,000 shares of the Company’s common stock under its 2022 Equity Incentive Plan (the “2022 Plan”), having an exercise price of $ 1.92 per share, exercisable over a 10 -year term, to the Company’s CEO. The options vested immediately. On February 22, 2024, the Company granted options to purchase 75,000 shares of the Company’s common stock, having an exercise price of $ 1.92 per share, exercisable over a 10 -year term, to the Company’s CFO. The options vested immediately. On February 22, 2024, the Company also granted options to purchase an aggregate 79,166 shares of the Company’s common stock, having an exercise price of $ 1.92 per share, exercisable over a 10 -year term, to a total of three of the Company’s directors. The options vested immediately. On August 8, 2023, the Company granted options to purchase 30,000 shares of the Company’s common stock under the 2022 Plan, having an exercise price of $ 6.00 per share, exercisable over a 10 -year term, to the then chairman of the audit committee and now, Chief Financial Officer. The options vest monthly over a 1 one-year period. On August 8, 2023, the Company granted options to purchase 30,000 shares of the Company’s common stock under the 2022 Plan, having an exercise price of $ 2.51 per share, exercisable over a 10 -year term, to one of its directors. The options vest monthly over a 1 one-year period. F- 13 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Common Stock Issued for Services On October 26, 2023, the Company issued 12,500 shares, restricted in accordance with Rule 144, to a consultant, who later became a Company director, for services performed. The aggregate fair value of the shares was $ 19,000 , based on the closing traded price of the common stock on the date of grant . Note 5 – Formation of Subsidiary On April 26, 2024, the Company formed BranchOut Food Sucursal Peru, a wholly-owned subsidiary in Peru, in the form of a legal entity called a branch, for the purpose of operating the 50,000 square-foot Peru Facility. The Company began manufacturing products at the Peru Facility in December of 2024. Note 6 – Fair Value of Financial Instruments Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value. The Company has cash, notes receivable, derivative liabilities and debts that must be measured under the fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows: Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs). Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability. The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balances sheet as of December 31, 2024 and 2023: Schedule of Valuation of Financial Instruments at Fair Value on a Recurring Basis Level 1 Level 2 Level 3 Fair Value Measurements at December 31, 2024 Level 1 Level 2 Level 3 Assets Cash $ 2,329,452 $ - $ - Right-of-use-asset - - 1,575,497 Notes receivable - 359,982 - Total assets 2,329,452 359,982 1,575,497 Liabilities Convertible notes payable, related parties net of $ 66,587 of discounts - - 3,333,413 Notes payable - 1,846,147 - Notes payable, related parties - 1,200,000 - Lease liabilities - - 1,674,064 Total liabilities - 3,046,147 5,077,477 Total assets and liabilities $ 2,329,452 $ ( 2,686,165 ) $ ( 3,521,286 ) F- 14 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Level 1 Level 2 Level 3 Fair Value Measurements at December 31, 2023 Level 1 Level 2 Level 3 Assets Cash $ 657,789 $ - $ - Right-of-use-asset - - 147,228 Notes receivable - 384,628 - Total assets 657,789 384,628 147,228 Liabilities Notes payable - 235,000 - Lease liability - - 131,930 Total liabilities - 235,000 131,930 Total assets and liabilities $ 657,789 $ 149,628 $ 15,298 There were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the years ended December 31, 2024 and 2023. Note 7 – Major Customers and Accounts Receivable The Company had certain customers whose revenue individually represented 10 % or more of the Company’s total net revenue, or whose accounts receivable balances individually represented 10 % or more of the Company’s total accounts receivable, as follows: For the years ended December 31, 2024 and 2023, two customers accounted for 99 % and 90 % of net revenue, respectively, and 89 % and 85 % of accounts receivable, respectively. Note 8 – Other Current Assets Other current assets at December 31, 2024 and 2023, consisted of the following: Schedule of Other Current Assets 2024 2023 December 31, 2024 2023 Prepaid insurance costs $ 21,736 $ 2,403 Prepaid advertising and trade show fees 14,944 20,106 Prepaid professional & license fees 27,369 6,056 Miscellaneous prepaid expenses 19,583 - Interest receivable 30,740 19,535 Total other current assets $ 114,372 $ 48,100 Note 9 – Property and Equipment Property and equipment at December 31, 2024 and 2023, consisted of the following: Schedule of Property and Equipment 2024 2023 December 31, 2024 2023 Equipment and machinery $ 4,580,541 $ 1,233,334 Less: Accumulated depreciation ( 524,242 ) ( 318,335 ) Total property and equipment, net $ 4,056,299 $ 914,999 Depreciation of property and equipment was $ 171,873 and $ 223,856 for the years ended December 31, 2024 and 2023, respectively. For the year ended, December 31, 2024, a total of $ 34,034 of depreciation was included in the inventoried production costs, which gets expensed as Cost of Goods Sold as the inventory is sold. F- 15 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10 – Other Assets Other assets consisted of the following as of December 31, 2024 and 2023: Schedule of Other Assets December 31, December 31, 2024 2023 First position mortgage (1) $ 1,267,000 $ - VAT tax receivable (2) 680,483 - Total other current assets $ 1,947,483 $ - (1) On May 10, 2024, in connection with the lease of the Company’s facility in Peru, the Company paid $ 275,000 toward the purchase of a First Position Mortgage (“FPM”) 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 Company paid an additional $ 80,000 during the fourth quarter of 2024, and the remaining $ 912,000 due on the FPM is to be paid in monthly installments of $ 152,000 from January 24, 2025 to June 23, 2025 , as presented in other current liabilities on the balance sheet. The unpaid balance accrues interest at 9 %. At December 31, 2024, a total of $ 33,215 of interest was accrued. The FPM enables the Company to ensure that they have uninterrupted access to the leased facility, and secures the option to purchase the facility by becoming the primary lien holder on the facility. The Company intends to exercise its option to purchase the facility at some point in the future, in which case the FPM would either be repaid out of the proceeds from a mortgage, or the FPM would be used to reduce the purchase price of the facility. (2) VAT tax receivable is comprised of taxes that were paid as the Company imported equipment and raw materials into Peru. These taxes will be refunded as inventory is exported, or if equipment is exported for any unforeseeable reason. Note 11 – Notes Receivable Nanuva Note Receivable On February 4, 2021, the Company entered into a Manufacturing and Distributorship Agreement (“MDA”) with Natural Nutrition SpA, a Chilean company (“Nanuva”), in which the Company loaned $ 500,000 to Nanuva (“Advance Payment”) to help finance the capital investment needed for Nanuva to purchase two industrial fruit drying machines to be used in servicing the Company’s manufacturing needs. Pursuant to the MDA, the Company is entitled to recover the Advance Payment in full no later than May 31, 2027, which prior to repayment, will bear interest at 3 % per annum. The Advance Payment is to be repaid pursuant to a two-dollar ($2/kg) deduction in the price of any product exported by Nanuva to the Company with certain mandatory minimum annual payments. Repayments commence on the earlier of a) the first invoice issued by Nanuva after installation of the drying equipment, or b) June 30, 2021. The MDA expires on May 31, 2027, with automatic annual renewals thereafter, unless it is terminated in accordance with the terms of the MDA. The Company deferred collection of the minimum annual payment requirement for 2023 until 2024 when several large orders were placed. As of December 31, 2024, a total of $ 140,018 of the Advance Payment had been repaid as a reduction of inventory costs, consisting of $ 140,018 of principal and $ 16,223 of interest. All payments consisted of reductions in inventory costs, other than a payment of $ 15,000 in cash on March 24, 2021. As of December 31, 2024, a total of $ 390,722 was outstanding from Nanuva, consisting of $ 359,982 of principal and $ 30,740 of unpaid interest. As of December 31, 2023, a total of $ 404,163 was outstanding from Nanuva, consisting of $ 384,628 of principal and $ 19,535 of unpaid interest. The Advance Payment is collateralized by a second lien in the equipment. Pursuant to the MDA, the Company has been appointed as Nanuva’s exclusive distributor in the following territories: Summary of Nanuva’s Exclusive Distributor in Territories Product Exclusivity Territories Minimum Volume (Kg/month)(“MOQ”) Avocado Powder Worldwide (except Chile) 1,000 Banana Chips Worldwide (except Chile) 1,000 Avocado Snacks North America (Canada and USA) 1,000 Avocado Chips Worldwide 1,000 Other Powders No Exclusivity - 0 - Note 12 – Accrued Expenses Accrued expenses consist of the following: Schedule of Accrued Expenses 2024 2023 December 31, 2024 2023 Accrued payroll and taxes $ 82,338 $ 43,376 Accrued interest 210,783 2,577 Accrued chargebacks 26,663 119,291 Accrued royalties 13,830 - Total accrued expenses $ 333,614 $ 165,244 F- 16 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 13 – Convertible Notes Payable, Related Parties As discussed in further detail in Note 4, on July 24, 2024, the Company issued the $ 3.4 million Convertible Note to Kaufman Kapital, together with Warrants, convertible into shares of common stock at a fixed price of $ 0.7582 per share. 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 the Security Agreement. In addition, the Convertible Note includes affirmative and negative covenants, events of defaults and other terms and conditions, customary in transactions of this nature. In accordance with ASC 470, the Company recorded total discounts of $ 95,958 , consisting of $ 75,000 of legal fees and $ 20,958 related to the relative fair value of the Warrants. The discounts are amortized to interest expense over the term of the loan using the effective interest method. As of December 31, 2024, a total of $ 66,587 of unamortized debt discounts are expected to be expensed over the remaining life of the loan. The Company recognized $ 145,360 of interest expense on convertible notes payable, related parties for the year ended December 31, 2024, consisting of $ 115,989 of stated interest expense, $ 22,956 of amortized debt discounts and $ 6,415 of amortized debt discounts due to warrants. The Company recognized $ 3,696 of interest expense on convertible notes payable, related parties for the year ended December 31, 2023. Note 14 – Notes Payable Notes payable consists of the following as of December 31, 2024 and 2023: Schedule of Notes Payable December 31, December 31, 2024 2023 On May 22, 2023, the Company entered into an equipment purchase agreement with the EnWave Corporation (“EnWave”), for the purchase of a used 100kW Rev vacuum microwave dehydration machine (the “EnWave Machine”). Cash payments of $500,000 were paid towards the $1,000,000 purchase price on the EnWave Machine, while the $500,000 balance due is to be paid in twelve (12) monthly installments of $44,424, bearing interest 12% per annum, commencing August 1, 2024. $ 251,647 $ - On May 22, 2023, the Company entered into an equipment purchase agreement with the EnWave Corporation (“EnWave”), for the purchase of a used 100kW Rev vacuum microwave dehydration machine (the “EnWave Machine”). Cash payments of $ 500,000 were paid towards the $ 1,000,000 purchase price on the EnWave Machine, while the $ 500,000 balance due is to be paid in twelve (12) monthly installments of $ 44,424 , bearing interest 12 % per annum, commencing August 1, 2024. $ 251,647 $ - On March 15, 2023, the Company completed the sale of a $ 200,000 Promissory Note to The John & Kristen Hinman Trust Dated February 23, 2016 (the “Hinman Note”), pursuant to the Loan Agreement between the Company and the Hinman Trust. The Hinman Note carried interest at 18 % per annum. The Hinman Note was repaid on January 2, 2024. - 200,000 On May 17, 2020, the Company entered into a loan agreement with the United States Small Business Administration (the “SBA”), as lender, pursuant to the SBA’s Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business (the “EIDL Loan Agreement”) encompassing a $ 34,500 Promissory Note issued to the SBA (the “EIDL Note”) (together with the EIDL Loan Agreement, the “EIDL Loan”), bearing interest at 3.75 % per annum. In connection with entering into the EIDL Loan, the Company also executed a security agreement, dated May 17, 2020, between the SBA and the Company pursuant to which the EIDL Loan is secured by a security interest on all of the Company’s assets. Under the EIDL Note, the Company is required to pay principal and interest payments of $ 169 every month beginning May 17, 2021; however, the SBA extended the repayment date to November 17, 2022. All remaining principal and accrued interest is due and payable on May 17, 2050. The EIDL Note may be repaid at any time without penalty. 34,500 34,500 Total notes payable $ 286,147 $ 234,500 Less: current maturities 251,647 200,000 Notes payable, less current maturities $ 34,500 $ 34,500 The Company recognized $ 19,809 and $ 214,430 of interest expense on notes payable for the years ended December 31, 2024 and 2023, respectively. F- 17 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 15 – Notes Payable, Related Parties Kaufman Note As discussed in Note 4, on August 30, 2024, the Company borrowed $ 1,200,000 from Kaufman Kapital pursuant to a Senior Secured Promissory Note that, as amended, 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. In addition, the Note includes affirmative and negative covenants, events of defaults and other terms and conditions, customary in transactions of this nature. Eagle Vision Notes As discussed in Note 4, in connection with the sale of the Purchased Securities to Kaufman Kapital under the SPA, the Company entered into an Omnibus Amendment to Note Documents with substantially all of the Holders of the Company’s Senior Notes and Warrants issued under that certain Subscription Agreement dated as of January 10, 2024, as amended, pursuant to which, among other things, (i) the exercise price of the Warrants issued to the Holders was reduced from $ 2.00 to $ 1.00 , (ii) the outside maturity date of the Senior Notes held by the Holders was extended from December 31, 2024 to December 31, 2025 (subject to further extension in the event the maturity date of the Convertible Note is extended), (iii) the Company’s obligation to make payments of principal under the Senior Notes held by the Holders beginning July 1, 2024 has been eliminated, and instead all obligations of the Company under such Senior Notes will be due in one lump sum on the maturity date of the Senior Notes, and (iv) the Company’s obligations under the Convertible Note and liens granted to the holder thereof, will be pari passu with the Company’s obligations under the Senior Notes held by the Holders and liens granted to the holders thereof. The amendment warrants resulted in $ 89,949 of additional interest expense. During the period of May 14, 2024 through May 22, 2024, the Company completed the sale of an aggregate of $ 1,050,000 of Senior Notes, and Warrants to purchase an aggregate of 262,500 shares of the Company’s common stock, to a group of Investors led by Eagle Vision, an affiliate of John Dalfonsi, a director of the Company and its Chief Financial Officer. The sales were effected pursuant to a Subscription Agreement, dated January 10, 2024, between the Company and the investors in the Senior Notes, as amended by an amendment (“First Amendment”) to the Subscription Agreement dated as of April 16, 2024 (as so amended, the “Subscription Agreement”). The Senior Notes mature on the earlier of December 31, 2025, or the occurrence of a Qualified Subsequent Financing or Change of Control (as such terms are defined in the Subscription Agreement) and bear interest at a rate of 15 % per annum. In addition, the Senior Notes are subject to covenants, events of defaults and other terms and conditions set forth in the Subscription Agreement. The Company’s obligations under the Notes are secured by liens on substantially all of the Company’s assets pursuant to the terms of the Security Agreement entered into by the Company on January 10, 2024 in favor of holders of the Senior Notes (the “Security Agreement”). Each Warrant is exercisable for a 10 ten-year period at an exercise price of $ 1.00 per share. On April 16, 2024, the Company completed the sale of $ 225,000 of Senior Notes, and Warrants to purchase an aggregate of 56,250 shares of the Company’s common stock, to a group of seven Investors, pursuant to a First Amendment to the Subscription Agreement between the Company and the Investors dated as of April 16, 2024. The First Amendment incorporates and amends certain provisions of the Subscription Agreement, dated January 10, 2024, previously entered into by the Company and investors that purchased Notes and Warrants from the Company on January 10, 2024 (the “January Investors”). On July 30, 2024, the Company repaid an aggregate total of $ 115,000 of principal to three of the seven Investors in settlement of their promissory notes. The First Amendment also (i) increased the aggregate principal amount of the Senior Notes available to be sold from time to time under the Subscription Agreement from $ 400,000 to $ 2,000,000 , (ii) increased the number of shares of common stock of the Company available to be issued under Warrants sold from time to time under the Subscription Agreement from 100,000 to 600,000 , (iii) provides for an aggregate one-time payment in the amount of $ 46,290 to the January Investors and the issuance to them of Warrants to purchase 100,000 shares of common stock, in consideration of their agreement to enter into the First Amendment, and (iv) provided for the payment of up to $ 80,000 to Eagle Vision Fund with the proceeds of Notes to be issued by the Company at subsequent closings of sales of Senior Notes and Warrants, in consideration of services rendered and to be rendered by Eagle Vision to holders of the Senior Notes while the Notes are outstanding, including acting as collateral agent and due diligence and collateral monitoring services. F- 18 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On January 9, 2024, the Company completed the sale of $ 400,000 of Senior Notes and Warrants to purchase an aggregate of 100,000 shares of the Company’s common stock, to a group of six Investors led by Eagle Vision, pursuant to a Subscription Agreement between the Company and the Investors. In accordance with ASC 470, the Company recorded total discounts of $ 339,698 , including $ 80,908 on the relative fair value of the Warrants, incurred as of December 31, 2024. The discounts are being amortized to interest expense over the term of the debentures using the effective interest method. The Company recorded an aggregate $ 339,698 of interest expense pursuant to the amortization of note discounts for the year ended December 31, 2024. Eagle Vision has been paid aggregate cash fees in the amount of $ 177,500 from the sales of the Senior Notes in consideration of services rendered and to be rendered by Eagle Vision to the Company and the holders of the Senior Notes, including for conducting due diligence with respect to the Company, monitoring the performance by the Company of its obligations under the Senior Notes, servicing the interest and principal payments for holders of the Senior Notes, engaging in ongoing discussions with the Company’s management regarding the Company’s operations and financial condition, acting as collateral agent, and evaluating financial and non-financial information related to the Company. The Company has also paid an aggregate of $ 35,000 of the investors’ legal fees from sales of the Senior Notes. To date, in a series of closings pursuant to the Subscription Agreement, including the most recent sales described above, the Company has issued an aggregate $ 1,675,000 of principal pursuant to the Senior Notes, and Warrants to purchase an aggregate 518,750 shares of common stock. Notes payable, related parties, consists of the following as of December 31, 2024 and 2023: Schedule of Notes Payable Related Parties December 31, December 31, 2024 2023 Total Kaufman Note $ 1,200,000 $ - Total Senior Notes held by Eagle Vision 1,560,000 - Total Senior Notes payable 1,560,000 - Total notes payable, related parties 2,760,000 - Less: current maturities 2,760,000 - Notes payable, related parties, less current maturities $ - $ - The Company recognized $ 664,847 and $ 66,090 of interest expense on notes payable, related parties for the years ended December 31, 2024 and 2023, respectively. Interest expense for the year ended December 31, 2024, consisted of $ 235,200 of stated interest expense, $ 258,790 of amortized debt discounts and $ 80,908 of amortized debt discounts due to warrants, along with $ 89,949 of additional interest expense related to the modification of warrants, issued to Eagle Vision Investors. Interest expense for the year ended December 31, 2023, consisted of $ 66,090 of amortized debt discounts, including $ 46,090 of amortized debt discounts due to warrants issued on a Subordinated Note during the year ended December 31, 2023. The Company recognized aggregate interest expense for the years ended December 31, 2024 and 2023 respectively, as follows: Schedule of Recognized Interest Expense December 31, December 31, 2024 2023 Interest on convertible notes payable, related parties $ 115,989 $ 3,696 Amortization of debt discounts on related party convertible notes 22,956 - Amortization of debt discounts on related party convertible notes, warrants 6,415 - Amortization of debt discounts on related party convertible notes 6,415 - Interest on convertible notes payable - 138,316 Interest on notes payable 19,809 214,430 Interest on notes payable, related parties 235,200 - Interest on notes payable 235,200 - Amortization of debt discounts on related party notes 258,790 20,000 Amortization of debt discounts on modification of Eagle Vision warrants 89,949 - Amortization of debt discounts on related party notes, warrants 80,908 46,090 Amortization of debt discounts on related party notes 80,908 46,090 Interest on other current liability, first position mortgage 33,215 - Interest on revolving line of credit - 8,251 Finance charge on letter of credit - 2,082 Interest on credit cards - 2,406 Total interest expense $ 863,231 $ 435,271 F- 19 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 16 – Leases Equipment Lease The Company has financed production equipment with an acquisition cost of approximately $ 168,141 under a finance lease with a five-year term and a bargain purchase price of $ 1.00 at the end of the lease term. The finance lease commenced on May 9, 2023 and expires on May 31, 2028 , with monthly lease payments of $ 3,657 commencing June 1, 2023, and a pre-funding and acceptance fee of $ 18,079 , subject to the ASU 2016-02. As the Company’s lease does not provide implicit discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Peru Facility Lease On May 10, 2024, the Company 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 we may purchase the Peru Facility for $ 1,865,456 . In connection with the lease of the Peru Facility, the Company 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 $ 355,000 was paid during the year ended December 31, 2024. The remaining $ 912,000 is to be paid in monthly installments of $ 152,000 from January 24, 2025 to June 23, 2025, as presented in other current liabilities on the balance sheet. The unpaid balance accrues interest at 9 %. At December 31, 2024, a total of $ 33,215 of interest was accrued. The components of lease expense were as follows: Schedule of Components of Lease Expenses 2024 2023 For the Years Ended December 31, 2024 2023 Operating lease cost: Amortization of right-of-use asset $ 103,146 $ - Interest on lease liability 89,853 - Capitalized inventory costs ( 15,313 ) - Total operating lease cost 177,686 - Finance lease cost: Amortization of right-of-use asset $ 31,563 $ - Interest on lease liability 18,164 - Total finance lease cost 49,727 - Other short-term leases 12,800 - Total lease costs $ 240,213 $ - Supplemental balance sheet information related to leases was as follows: Schedule of Supplemental Information Related to Leases December 31, December 31, 2024 2023 Operating lease: Operating lease assets $ 1,444,036 $ - Current portion of operating lease liability $ - - Noncurrent operating lease liability 1,573,035 - Total operating lease liability $ 1,573,035 $ - Finance lease: Finance lease assets $ 131,461 $ 147,228 Current portion of finance lease liability $ 29,243 30,901 Noncurrent finance lease liability 92,761 101,029 Total finance lease liability $ 122,004 $ 131,930 Weighted average remaining lease term: Operating lease 9.86 years - Finance lease 3.13 years 3.35 years Weighted average discount rate: Operating lease 9 % - Finance lease 11 % 11 % F- 20 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Supplemental cash flow and other information related to finance leases was as follows: Schedule of Supplemental Cash and Other Information Related to finance Leases 2024 2023 For the Years Ended December 31, 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows provided by operating leases $ 25,853 $ - Finance cash flows used for finance leases $ 9,926 $ - - Leased assets obtained in exchange for lease liabilities: - Total operating lease liabilities $ 1,547,182 $ - Total finance lease liabilities $ 184,592 $ - The future minimum lease payments due under operating leases as of December 31, 2024 is as follows: Schedule of Future Minimum Operating Lease Payments Year Ending Minimum Lease December 31, Commitments 2025 $ 96,000 2026 192,000 2027 256,000 2028 280,000 Thereafter 1,596,000 Total minimum lease payments 2,420,000 Less effects of discounting 846,965 Lease liability recognized 1,573,035 Less current portion - Long-term operating lease liability $ 1,573,035 The future minimum lease payments due under finance leases as of December 31, 2024 is as follows: Schedule of Future Minimum Finance Lease Payments Year Ending Minimum Lease December 31, Commitments 2025 $ 40,229 2026 43,886 2027 43,886 2028 18,286 Total minimum lease payments 146,287 Less effects of discounting 24,283 Lease liability recognized 122,004 Less current portion 29,243 Long-term finance lease liability $ 92,761 F- 21 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 17 – Commitments and Contingencies Legal Matters From time to time, the Company may be a party to various legal matters, threatened claims, or proceedings in the normal course of business. Legal fees and other costs associated with such actions are expensed as incurred. The Company assesses, in conjunction with its legal counsel, the need to record a liability for litigation and contingencies. Legal accruals are recorded when and if it is determined that a loss related to a certain matter is both probable and reasonably estimable. There are currently no pending legal matters. Operating Lease On May 10, 2024, the Company entered into a ten-year lease for the 50,000 square-foot Peru Facility, which commenced operations in December of 2024. The lease 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 may purchase the Peru Facility for $ 1,865,456 . Finance Lease The Company leases equipment under a non-cancelable finance lease payable in monthly installments of $ 3,657 expiring on May 31, 2028 . Other Contractual Commitments On January 19, 2022, the Company entered into a contract manufacturing agreement with NXTDried Superfoods SAC to produce products for distribution by the Company. The Company agreed to pre-pay for inventory via an advance to enable the manufacturer to invest in necessary processing facilities that will be reimbursed to the Company on an agreed per kg basis over the period of 2022 to 2026. On May 7, 2021, the Company entered into a license agreement (“License Agreement”) with EnWave, pursuant to which EnWave licensed to the Company a collection of patents and intellectual property (the “EnWave Technology”) used to manufacture and operate vacuum microwave dehydration machines purchased by the Company from EnWave (the “EnWave Equipment”). The License Agreement was amended on October 26, 2022, September 27, 2023 and May 23, 2024, to, among other things, modify the exclusivity retention royalty payments required to be paid by the Company. The License Agreement entitles EnWave to a fixed royalty percentage on all of the Company’s revenue from the sale of products produced using the EnWave Technology, net of trade or volume discounts, refunds paid, settled claims for damaged goods, applicable excise, sales and withholding taxes imposed at the time of the sale, and provides the Company with certain exclusivity rights with respect to the production of avocado products. In order to maintain the exclusivity, the Company must make annual royalty minimum payments to EnWave of $ 250,000 per year, commencing in 2025 and continuing through each subsequent year in perpetuity, as long as the Company elects to maintain exclusivity. In addition to the initial EnWave Equipment we purchased, the Company agreed to purchase additional equipment from EnWave over time. The additional equipment purchase schedule, as amended, requires the Company to purchase a “Second EnWave Machine” and pay up-to four non-refundable deposits for the Second EnWave Machine in the amount of fifty thousand dollars ($ 50,000 ) each on September 30, 2023, December 31, 2023, March 31, 2024 and June 30, 2024 (the “Interim Deposits”). The Company paid the first three non-refundable deposits of $ 50,000 on September 27, 2023, December 31, 2023 and March 8, 2024, and completed the purchase on December 12, 2024. The Company is also required to execute an Equipment Purchase Agreement for a 120kW, or greater rated power, EnWave Equipment (the “Third EnWave Machine”) on or before December 31, 2025, and satisfy the payment obligations required with respect to the Third EnWave Machine by the License Agreement. The Company is also required to enter into an Equipment Purchase Agreement for a 120kW, or greater, rated power EnWave Equipment (the “Fourth EnWave Machine”) on, or before, December 31, 2026, and to satisfy the payment obligations required with respect to the Fourth EnWave Machine by the License Agreement. The License Agreement is effective as long as EnWave possesses its EnWave technology. 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. F- 22 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 18 – Stockholders’ Equity Preferred Stock The Company has authorized 8,000,000 shares of $ 0.001 par value preferred stock. As of December 31, 2024, none of the preferred stock has been designated or issued. Common Stock The Company has authorized 80,000,000 shares of $ 0.001 par value common stock. As of December 31, 2024, a total of 8,424,600 shares of common stock have been issued. Each holder of common stock is entitled to one vote for each share of common stock held . At-The-Money Offering On October 23, 2024, the Company entered into an At-The-Market Issuance Sales Agreement (the “ATM Agreement”) for the sale of shares of its common stock having an aggregate offering price of up to $ 3,000,000 . The shares were sold at prevailing market prices, and the offering was conducted through Alexander Capital, L.P. (“Alexander Capital”). Net proceeds from the offering of 1,317,307 shares of common stock under the ATM Agreement, after deducting applicable expenses, including a commission paid to Alexander Capital equal to 3 % of the gross proceeds from the sale of the shares, amounted to approximately $ 2,305,005 for the year ended December 31, 2024. As of December 31, 2024, the Company had 182,693 shares of common stock authorized but unissued, as held in a brokerage account with Alexander Capital, which were available for issuance under the ATM Agreement. These shares of common stock represent a part of the total authorized share capital. The issuance of shares has resulted in an increase in the outstanding common stock of the Company, as the proceeds will be used for general corporate purposes or specific use of proceeds, if applicable. No equity impact was recorded for these shares during the year ended December 31, 2024. Initial Public Offering In June 2023, the Company completed its initial public offering IPO in which it issued and sold 1,190,000 shares of its common stock at a price of $ 6.00 per share pursuant to an Underwriting Agreement between the Company and Alexander Capital, L.P. (the “Underwriter”) . The Company received net proceeds of $ 6,226,000 , after deducting underwriters’ discounts and commissions and before consideration of other issuance costs. Pursuant to the Underwriting Agreement, the Company also issued to the Underwriter a Common Stock Purchase Warrant to purchase up to 82,110 shares of Common Stock at an exercise price of $ 7.20 , which may be exercised for a five-year period beginning December 18, 2023. Prior to the IPO, all deferred offering costs were capitalized in other noncurrent assets on the balance sheets. Deferred offering costs of $ 1,283,954 , primarily consisting of accounting, legal, and other fees related to the Company’s IPO, were offset against the IPO proceeds upon the closing of the Company’s IPO in June 2023. Unit Offering Sale of Common Stock and Warrants, Related Parties for the Year Ended December 31, 2024 On July 15, 2024, the Company entered into Subscription Agreements (the “Subscription Agreements”) with three related parties, consisting of Eric Healy, the Company’s Chief Executive Officer; Eagle Vision; 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, an affiliate of Mr. Dalfonsi, the Company’s CFO, resulting in the issuance of an aggregate of 692,429 shares of common stock and warrants to purchase 865,536 shares of common stock. F- 23 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Follow-on Offering of Common Stock On June 26, 2024, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) with Alexander Capital, L.P. as the Representative of the underwriters named therein (the “Representative” and such other Underwriters, the “Underwriters”), relating to the issuance and sale by the Company to the Underwriters (the “Public Offering”) of 1,750,000 Shares (the “Shares”) of common stock at a price to the public of $ 0.80 per share, less underwriting discounts and commissions. Pursuant to the Underwriting Agreement, the Representative was granted an option (the “Over-Allotment Option”), for a period of 45 days, to purchase from the Company up to 262,500 additional shares of common stock, at the same price per share, to cover over-allotments, if any. Pursuant to the Underwriting Agreement, the Company agreed to an 8.0 % underwriting discount on the gross proceeds received by the Company for the Shares, in addition to reimbursement of certain expenses, made customary representations, warranties and covenants concerning the Company, and also agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. The Offering closed on June 28, 2024. The Company received net proceeds from the Offering of $ 1,000,925 after deducting the underwriting discounts and commissions and offering expenses. On July 19, 2024, the Underwriters exercised their Over-Allotment Option to purchase 222,500 shares of common stock at a price of $ 0.80 per share. The Company received net proceeds $ 163,760 , after deducting $ 14,240 of underwriting commissions. Common Stock Issued for Services for the Year Ended December 31, 2024 On June 1, 2024, the Company issued 6,383 shares of the Company’s common stock under the 2022 Omnibus Equity Incentive Plan (the “2022 Equity Plan”) to PCG Advisory, Inc. (“PCG”) as payment for services in lieu of cash. The fair value of the shares was $ 9,819 , based on the closing traded price of the common stock on the date of grant . On May 1, 2024, the Company issued 4,766 shares of the Company’s common stock under the 2022 Equity Plan to PCG as payment for services in lieu of cash. The fair value of the shares was $ 11,438 , based on the closing traded price of the common stock on the date of grant . On April 22, 2024, the Company issued 99,688 shares under the 2022 Equity Plan to its securities counsel for services performed. The fair value of the shares was $ 109,657 , based on the closing traded price of the common stock on the date of grant . On April 1, 2024, the Company issued 4,988 shares of the Company’s common stock under the 2022 Equity Plan to PCG as payment for services in lieu of cash. The fair value of the shares was $ 9,577 , based on the closing traded price of the common stock on the date of grant . On February 19, 2024, the Company issued 16,836 shares under the Company’s 2022 Equity Plan to its securities counsel for services performed. The fair value of the shares was $ 44,278 , based on the closing traded price of the common stock on the date of grant . On January 26, 2024, the Company issued 60,258 shares under the 2022 Equity Plan, to its securities counsel for services performed. The fair value of the shares was $ 69,297 , based on the closing traded price of the common stock on the date of grant . On January 5, 2024, the Company retained PCG to provide strategic advisory and investor relations services pursuant to an Advisory Agreement under which the Company agreed to issue PCG an aggregate 22,500 shares of the Company’s common stock as payment for services in lieu of cash for the months of January, February, and March 2024. The aggregate fair value of the shares was $ 36,019 , based on the closing traded price of the common stock on the dates of grant . The shares were subsequently issued on April 15, 2024 under the 2022 Equity Plan. Common Stock Issued for Services for the Year Ended December 31, 2023 On November 1, 2023, the Company issued 24,478 shares under the 2022 Equity Plan to its securities counsel for services performed. The aggregate fair value of the shares was $ 40,389 , based on the closing traded price of the common stock on the date of grant . On October 26, 2023, the Company issued 12,500 shares under the 2022 Equity Plan to a consultant, who later became a Company director, for services performed. The aggregate fair value of the shares was $ 19,000 , based on the closing traded price of the common stock on the date of grant . F- 24 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On August 17, 2023, the Company issued 44,334 shares under the 2022 Equity Plan, to its securities counsel for services performed. The aggregate fair value of the shares was $ 99,751 , based on the closing traded price of the common stock on the date of grant . Debt Conversions In connection with the IPO in June 2023, 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. The notes were converted in accordance with the conversion terms; therefore, no gain or loss had been recognized. Note 19 – Common Stock Options Stock Incentive Plan Our board of directors and shareholders adopted our 2022 Omnibus Equity Incentive Plan on January 1, 2022 (the “2022 Plan”). Our 2022 Plan allows for the grant of a variety of equity vehicles to provide flexibility in implementing equity awards, including nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, incentive bonus awards, other cash-based awards and other stock-based awards. The number of shares reserved for issuance under the 2022 Equity Plan was initially an aggregate of 600,000 shares, as adjusted on June 15, 2023 in connection with the Company’s reverse stock split, subject to annual increases under the plan, resulting in 1,009,000 reserved shares as of December 31, 2024. There were 593,470 options with a weighted average exercise price of $ 2.39 per share outstanding as of December 31, 2024. Common Stock Options Issued for Services On May 1, 2024, the Company granted options to purchase 30,000 shares of the Company’s common stock, having an exercise price of $ 2.40 per share, exercisable over a 10 -year term, to a new employee. The options will vest monthly over three years from the date of grant. The aggregate estimated value using the plain vanilla Black-Scholes Pricing Model, based on a volatility rate of 41 % and a call option value of $ 1.1806 , and an expected term of 6.5 years, was $ 35,419 . The options are being expensed over the vesting period, resulting in $ 7,872 of stock-based compensation expense during the year ended December 31, 2024. As of December 31, 2024, a total of $ 27,547 of unamortized expenses are expected to be expensed over the vesting period. On February 22, 2024, the Company granted options to purchase an aggregate 315,000 shares of the Company’s common stock, having an exercise price of $ 1.92 per share, exercisable over a 10 -year term, to a total of six employees, including options to purchase 140,000 and 75,000 shares issued to the Company’s CEO and CFO, respectively. The options vested immediately. The aggregate estimated value using the plain vanilla Black-Scholes Pricing Model, based on a volatility rate of 41 % and a call option value of $ 0.8581 , and an expected term of 5.5 years, was $ 270,296 . On February 22, 2024, the Company also granted options to purchase an aggregate 79,166 shares of the Company’s common stock, having an exercise price of $ 1.92 per share, exercisable over a 10 -year term, to a total of three of the Company’s directors. The options vested immediately. The aggregate estimated value using the plain vanilla Black-Scholes Pricing Model, based on a volatility rate of 41 % and a call option value of $ 1.1407 , and an expected term of 5.5 years, was $ 90,306 . On October 24, 2023, the Company granted options to purchase an aggregate 42,500 shares of the Company’s common stock, having an exercise price of $ 1.60 per share, exercisable over a 10 -year term, to a total of four employees. The options will vest one-year from the date of grant. The estimated value using the plain vanilla Black-Scholes Pricing Model, based on a volatility rate of 93 % and a call option value of $ 0.7118 , and an expected term of 5.5 years, was $ 30,253 . The options were expensed over the vesting period, resulting in $ 24,581 and $ 5,672 of stock-based compensation expense during the years ended December 31, 2024 and 2023, respectively. On August 8, 2023, the Company granted options to purchase an aggregate 30,000 shares of the Company’s common stock under the 2022 Plan, having an exercise price of $ 6.00 per share, exercisable over a 10 -year term, to the chairman of the audit committee. The options will vest monthly over a one-year period. The estimated value using the plain vanilla Black-Scholes Pricing Model, based on a volatility rate of 39 % and a call option value of $ 0.1644 , and an expected term of 3 years, was $ 4,932 . The options were expensed over the vesting period, resulting in $ 2,980 and $ 1,952 of stock-based compensation expense during the years ended December 31, 2024 and 2023, respectively. On August 8, 2023, the Company granted options to purchase an aggregate 30,000 shares of the Company’s common stock under the 2022 Plan, having an exercise price of $ 2.51 per share, exercisable over a 10 -year term, to one of its directors. The options will vest monthly over a one-year period. The estimated value using the plain vanilla Black-Scholes Pricing Model, based on a volatility rate of 39 % and a call option value of $ 0.7885 , and an expected term of 3 years, was $ 23,655 . The options were expensed over the vesting period, resulting in $ 14,291 and $ 9,364 of stock-based compensation expense during the years ended December 31, 2024 and 2023, respectively. F- 25 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On February 28, 2023, the Company awarded fully vested options to purchase 16,000 shares of common stock under the 2022 Plan at an exercise price equal to $ 4.125 per share, exercisable over a 10 ten-year period to an employee. The estimated value using the plain vanilla Black-Scholes Pricing Model, based on a volatility rate of 50 % and a call option value of $ 2.0249 , and an expected term of 5 years, was $ 32,399 . The options were expensed as stock-based compensation expense during the year ended December 31, 2023. The following is a summary of information about the Stock Options outstanding at December 31, 2024. Schedule of Underlying Stock Options Outstanding Shares Underlying Shares Underlying Options Outstanding Options Exercisable Weighted Shares Average Weighted Shares Weighted Underlying Remaining Average Underlying Average Range of Options Contractual Exercise Options Exercise Exercise Prices Outstanding Life Price Exercisable Price $ 1.60 – 6.00 593,470 8.4 years $ 2.39 564,935 $ 2.58 The following is a summary of activity of outstanding stock options: Schedule of Activity of Outstanding Stock Options Weighted Average Number Exercise of Shares Prices Balance, December 31, 2022 108,404 $ 4.125 Options granted 118,500 3.194 Options canceled ( 57,600 ) ( 4.125 ) Balance, December 31, 2023 169,304 3.639 Options granted 424,166 1.95 Balance, December 31, 2024 593,470 $ 2.39 Exercisable, December 31, 2024 564,935 $ 2.58 Note 20 – Common Stock Warrants Warrants to purchase a total of 3,462,162 shares of common stock at a weighted average exercise price of $ 1.88 per share, with a weighted average remaining life of 5.11 years, were outstanding as of December 31, 2024. Warrants Issued Pursuant to Convertible Note Financing As discussed in further detail in Note 4, on July 24, 2024, the Company issued to Kaufman Kapital, in a private placement (i) a 12 % Senior Secured Convertible Promissory Note in the principal amount of up to $ 3,400,000 , (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. The proceeds received were allocated between the debt and warrants on a relative fair value basis. The relative aggregate estimated value of the $ 1.00 Warrants using the Black-Scholes Pricing Model, based on a weighted average volatility rate of 39 % and a weighted average call option value of $ 0.2138 , was $ 20,303 , of which $ 6,214 was recognized as finance expense during the year ended December 31, 2024. As of December 31, 2024, there was $ 14,089 of unamortized expenses expected to be expensed over the remaining life of the outstanding debt. The relative aggregate estimated value of the $ 1.50 Warrants using the Black-Scholes Pricing Model, based on a weighted average volatility rate of 39 % and a weighted average call option value of $ 0.0768 , was $ 655 , of which $ 201 was recognized as finance expense during the year ended December 31, 2024. As of December 31, 2024, there was $ 454 of unamortized expenses expected to be expensed over the remaining life of the outstanding debt. F- 26 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Warrants Issued Pursuant to Unit Offering to Related Parties On 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; 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. Warrants Issued Pursuant to Underwriting Agreement On June 28, 2024, pursuant to the Underwriting Agreement, the Company executed and delivered to the Representative a common stock Purchase Warrant (the “Representative’s Warrant”) to purchase up to 100,625 shares of Common Stock, which may be exercised beginning on December 23, 2024 (the date that is 180 days following the commencement of sales of common stock in connection with the Offering (the “Commencement Date”)) until June 26, 2029. The initial exercise price of the Representative’s Warrant is $ 0.96 per share, which is equal to 120% of the public offering price for the Shares . Warrants Issued Pursuant to Debt Offering On various dates from January 9, 2024 through May 22, 2024 , the Company issued Warrants to purchase an aggregate total of 518,750 shares of common stock at an exercise price of $ 2.00 per share in connection with the sale of Senior Notes to a group of Investors led by Eagle Vision, in the aggregate principal amount of $ 1,675,000 . The proceeds received were allocated between the debt and warrants on a relative fair value basis. The relative aggregate estimated value of the warrants using the Black-Scholes Pricing Model, based on a weighted average volatility rate of 40 % and a weighted average call option value of $ 0.1560 , was $ 80,908 , which was recognized as finance expense during the year ended December 31, 2024. Amendment of Senior Notes and Warrants In connection with the sale of the Purchased Securities to Kaufman Kapital under the SPA, the Company entered into an Omnibus Amendment to Note Documents with substantially all of the Holders of the Company’s Senior Notes and Warrants issued under that certain Subscription Agreement dated as of January 10, 2024, as amended, pursuant to which, among other things, (i) the exercise price of the Warrants issued to the Holders was reduced from $ 2.00 to $ 1.00 , (ii) the outside maturity date of the Senior Notes held by the Holders was extended from December 31, 2024 to December 31, 2025 (subject to further extension in the event the maturity date of the Convertible Note is extended), (iii) the Company’s obligation to make payments of principal under the Senior Notes held by the Holders beginning July 1, 2024 has been eliminated, and instead all obligations of the Company under such Senior Notes will be due in one lump sum on the maturity date of the Senior Notes, and (iv) the Company’s obligations under the Convertible Note and liens granted to the holder thereof, will be pari passu with the Company’s obligations under the Senior Notes held by the Holders and liens granted to the holders thereof. The amendment warrants resulted in $ 89,949 of additional interest expense. Warrants Issued Pursuant to Debt Offering On July 1, 2023 , the Company issued warrants to purchase an aggregate total of 30,000 shares of common stock at an exercise price of $ 6.00 per share to note holders in connection with the sale of senior secured promissory notes in the aggregate principal amount of $ 170,000 to four accredited investors. The proceeds received were allocated between the debt and warrants on a relative fair value basis. The aggregate estimated value of the warrants using the Black-Scholes Pricing Model, based on a weighted average volatility rate of 54 % and a weighted average call option value of $ 3.8171 , was $ 114,513 , of which $ 46,090 was recognized as finance expense during the year ended December 31, 2023. As of December 31, 2023, there were no unamortized expenses expected to be expensed over the remaining life of the outstanding debt, as the debt was repaid in full on June 16, 2023. Underwriters’ Warrants Issued Pursuant to IPO In June 21, 2023, the Company issued warrants to purchase 82,110 shares at $ 7.20 per share, exercisable between December 18, 2023 and December 18, 2028, pursuant to the underwriters’ agreement. The aggregate estimated value of the warrants using the Black-Scholes Pricing Model, based on a weighted average volatility rate of 54 % and a weighted average call option value of $ 1.7981 , was $ 147,639 . F- 27 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following is a summary of information about our warrants to purchase common stock outstanding at December 31, 2024. Schedule of Warrants to Purchase Common Stock Outstanding Shares Underlying Shares Underlying Warrants Outstanding Warrants Exercisable Weighted Shares Average Weighted Shares Weighted Range of Underlying Remaining Average Underlying Average Exercise Warrants Contractual Exercise Warrants Exercise Prices Outstanding Life Price Exercisable Price $ 0.96 -$ 7.50 3,462,162 5.11 years $ 1.88 3,462,162 $ 1.88 The fair value of each warrant grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants under the fixed option plan: Schedule of Weighted-Average Assumptions Used for Grants Under Fixed Option Plan December 31, December 31, 2024 2023 Average risk-free interest rates 3.56 % 4.04 % Average expected life (in years) 5.56 6.34 Volatility 39.15 % 54.40 % The weighted average fair value of warrants granted with exercise prices at the current fair value of the underlying stock was approximately $ 1.09 and $ 6.88 per warrant for the years ended December 31, 2024 and 2023, respectively. The following is a summary of activity of outstanding common stock warrants, as retrospectively presented pursuant to the amendment on March 7, 2022: Schedule of Outstanding Common Stock Warrants Weighted Average Number Exercise of Shares Prices Balance, December 31, 2022 365,141 $ 6.81 Warrants granted 112,110 6.88 Balance, December 31, 2023 477,251 6.83 Warrants granted 2,984,911 1.09 Balance, December 31, 2024 3,462,162 $ 1.88 Exercisable, December 31, 2024 3,462,162 $ 1.88 Note 21 – Income Taxes The Company incurred a net operating loss for the period from November 19, 2021 (the effective date of the conversion from a limited liability company to a corporation) through December 31, 2024 and, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. At December 31, 2024, the Company had approximately $ 9,512,000 of federal net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2041 . The provision (benefit) for income taxes for the period from November 19, 2021 (the effective date of the conversion from a limited liability company to a corporation) through December 31, 2024 were assuming a 21 % effective tax rate. F- 28 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The components of the Company’s deferred tax asset are as follows: Schedule of Deferred Tax Asset December 31, December 31, 2024 2023 Deferred tax assets: Net operating loss carry forwards $ 1,997,520 $ 1,680,000 Net deferred tax assets before valuation allowance $ 1,997,520 $ 1,680,000 Less: Valuation allowance ( 1,997,520 ) ( 1,680,000 ) Net deferred tax assets $ - $ - The Company has incurred cumulative losses which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation allowance against its net deferred tax assets at December 31, 2024. In accordance with ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions. Note 22 – Segment Reporting The Company is engaged in the development, marketing, sale, and distribution of plant-based, dehydrated fruit and vegetable snacks and powders. The Company’s products are currently manufactured at its new production facility that commenced production in Pisco Peru in December 2024, and is supported by contract manufacturers in Peru, as necessary. The Company’s customers are located throughout the United States. The Company’s sales operations, which represent 100% of the Company’s consolidated sales, are one of its two reportable segments. The sales operations’ segment revenues are predominately earned as consumer products are sold to big box retail customers throughout the United States and via the Company’s online platform. The Company aggregates its operating divisions into two reportable segments due to the operating divisions having similar economic characteristics with similar long-term financial performance, but different geographic locations. The Company’s sales occur entirely from, and within, the United States, while all of the Company’s production processes are conducted in Latin America, which represent its other operating segment. In addition, the Company’s operating divisions offer customers the same products, operate in similar regulatory environments, purchase the majority of the merchandise for retail sale from similar (and in many cases identical) vendors on a coordinated basis from a centralized location, serve of the same customers, and are allocated capital from a centralized location. Operating divisions are organized primarily on a geographical basis so the operating division management team can be responsive to local needs of the operating division and can execute company strategic plans and initiatives throughout the locations in their operating division. This geographical separation is the primary differentiation between these operating divisions. The geographical basis of organization reflects how the business is managed and how the Company’s Chief Executive Officer, who acts as the Company’s chief operating decision maker (“CODM”), assesses performance internally. The accounting policies of the retail operations segment are the same as those described in the summary of significant accounting policies in Note 3 to the Consolidated Financial Statements. The Company’s CODM assesses performance and allocates resources for the retail operations segment using segment earnings before net interest expense, income tax expense and depreciation and amortization (“EBITDA”). The Company defines EBITDA as earnings before interest taxes and depreciation. The Company’s CODM also uses segment EBITDA to measure the operational effectiveness of the Company’s financial model, compare the performance of core operating results between periods, against budget and against competitors and evaluate whether to invest capital in the retail operations segment or in other parts of the Company, such as for share repurchases, debt repayments or capital expenditures. The Company’s CODM is not provided asset information by reportable segment as asset information is provided to the CODM on a consolidated basis. The Company’s capital expenditures are predominately used in the Company’s production operations, rather than its retail operations. F- 29 BRANCHOUT FOOD INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the Company’s retail operations segment revenue, measure of segment profit or loss, significant segment expenses and reconciliation of the U.S. and Latin America operations segments’ EBITDA to consolidated net earnings before income tax expense for the years ended December 31, 2024 and 2023: Schedule of Segment Reporting 2024 2023 For the Years Ended December 31, 2024 2023 U.S. operations segment sales $ 6,516,337 $ 2,825,855 Latin American operations segment cost of goods sold $ 5,480,874 $ 2,698,229 U.S. operations segment expenses: General and administrative 1,367,039 1,581,474 Rent 52,727 - Salaries and wages 1,390,260 1,129,858 Professional fees 1,090,648 694,596 Total U.S. operating expenses $ 3,900,674 $ 3,405,928 U.S. operations segment EBITDA $ 2,615,663 $ ( 580,073 ) Latin American operations segment cost of goods sold $ 5,480,874 $ 2,698,229 Latin American operations segment expenses: General and administrative 263,438 - Rent 187,486 - Salaries and wages 213,940 - Professional fees 200,493 - Total Latin American operating expenses 865,357 - Operating expenses 865,357 - Latin American operations segment EBITDA $ ( 6,346,231 ) $ ( 2,698,229 ) Consolidated EBITDA $ ( 3,730,568 ) $ ( 3,278,302 ) Reconciliation of net earnings before income tax expense: Consolidated EBITDA $ ( 3,730,568 ) $ ( 3,278,302 ) EBITDA $ ( 3,730,568 ) $ ( 3,278,302 ) Depreciation ( 171,873 ) ( 223,856 ) Interest income 14,156 11,719 Interest expense ( 863,231 ) ( 435,271 ) Consolidated net loss before income tax expense $ ( 4,751,516 ) $ ( 3,925,710 ) Note 23 – Subsequent Events The Company evaluates events that have occurred after the balance sheet date through the date hereof, which these financial statements were issued. No events occurred of a material nature that would have required adjustments to or disclosure in these financial statements except as follows: ATM Offering On February 18, 2025, the Company entered into entered into a First Amendment to the ATM Agreement to increase the aggregate offering price of the Shares that the Company may sell under the ATM Agreement to up to $ 5,000,000 . Subsequent to December 31, 2024, the Company sold a total of 1,303,115 shares of common stock, including 182,693 shares authorized, but unissued at December 31, 2024, at prevailing market prices under the ATM Agreement for aggregate net proceeds of $ 2,407,448 , after deducting applicable expenses, including a commission paid to Alexander Capital equal to 3 % of the gross proceeds from the sale of the shares. Exercise of Warrants On February 14, 2025, the Company received aggregate proceeds of $ 38,157 on the exercise of Representative’s Warrants to purchase an aggregate of 39,747 shares of common stock. F- 30 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None