What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-13 compared with 2025-05-15 · 198 added, 131 removed, 105 unchanged (76% of the section changed)

7 unchanged sentences

materially from those discussed in the forward-looking statements.

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

LLC, an Oregon limited liability company.

On November 19, 2021, we converted from an Oregon limited liability company into BranchOut

Food Inc., a Nevada corporation.

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

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

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

run in the first quarter of 2023.

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

licensed by us from a third party.

Our customers are primarily located throughout the United States.

In 2024, we decided to initiate

our own production facility in Peru to become vertically integrated.

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

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

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

sample purposes.

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

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

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

current consumer trends.

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

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

As a result, certain

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

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

and powdered products.

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

vegetables when compared to conventional drying and dehydration technologies.

We license technology, consisting of a portfolio of patents,

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

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

In addition, BranchOut has the nonexclusive

rights to use the licensed technology platform for other products.

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

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

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

in Pisco, Peru (the “Peru Facility”).

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

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

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

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

texture, color, and nutrients.

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

times more natural flavor compounds,

to 22 times more aromatic compounds, and

to 95% of original vitamins and antioxidants.

Additionally,

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

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

technology is protected by more than 17 patents.

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

Our current product line includes:

BranchOut Snacks:

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

Crisps and Bell Pepper Crisps.

Private Label:

Carrots, Brussel Sprouts and Raisins sold to major retailers.

BranchOut Industrial Ingredients:

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

Crisps, Strawberry Crisps and Bell Pepper Crisps.

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

Industrial Ingredients:

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

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Concern Uncertainty

of March 31, 2025, we had a cash balance of $2,386,381, a working capital deficit of $2,736,656 and had incurred recurring losses from

of June 30, 2025, we had a cash balance of $641,129, a positive working capital of $662,217, and had incurred recurring losses from

operations resulting in an accumulated deficit of $20,083,595.

Although we anticipate that our results of operations will improve substantially

as a result of the recent launch of our new facility in Peru, there can be no assurance in that regard.

If we continue to generate substantial

operating losses, we will not have sufficient funds to sustain our operations for the next twelve months and we will need to raise additional

cash to fund our operations.

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

Although we anticipate that our results of operations will improve

substantially as a result of the recent launch of our new facility in Peru, there can be no assurance in that regard.

If we continue

to generate substantial operating losses, we will not have sufficient funds to sustain our operations for the next twelve months and

we will need to raise additional cash to fund our operations.

These factors raise substantial doubt about our ability to continue as

a going concern.

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

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Facility Lease

April 26, 2024, we formed BranchOut Food Sucursal Peru for the purpose of developing a production facility to produce our products

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

“Peru Facility”).

The lease of the Peru Facility requires us to make monthly lease payments of $8,000 in the first two

years of the lease, $20,000 in the third year of the lease, $22,000 in the fourth year of the lease, $24,000 in the fourth year of

the lease, and $25,000 thereafter.

The lease also has a 10-year renewal option, and a buy-out option under which we may purchase the

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

The lease of the Peru Facility requires monthly lease payments of $8,000 in the first two years of the lease, $20,000 in the third year

of the lease, $22,000 in the fourth year of the lease, $24,000 in the fourth year of the lease, and $25,000 thereafter.

The lease also

has a 10-year renewal option, and a buy-out option under which the Company plans to exercise the buy-out option and purchase the Peru

Facility for $1,865,456.

We began manufacturing products at the Peru Facility in December of 2024, and produced approximately

$1,450,000 of products during the first quarter of 2025.

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

$456,000 during the first quarter of 2025 as part of the purchase of a first position mortgage receivable in the amount of $1,267,000,

which is secured by the Peru Facility and was owed by the landlord of the Peru Facility to its former tenant.

The remaining $456,000

is due and payable in monthly installments of $152,000 through June 23, 2025, at which time an additional $55,604 of interest is due,

based on a 9% financing rate.

of Operations for the Three Months Ended March 31, 2025 and 2024

following table summarizes selected items from the statement of operations for the three months ended March 31, 2025 and 2024, respectively.

connection with the lease of the Peru Facility, we purchased a first position mortgage receivable in the amount of $1,267,000, which

is secured by the Peru Facility and was owed by the landlord of the Peru Facility to its former tenant, for a purchase price of $1,267,000,

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

June 30, 2025.

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

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

Three Months Ended

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Salaries and benefits

Shipping and handling

Advertising and promotions

Professional services

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$ (1,603,156 )

net revenue for the three months ended March 31, 2025 was $3,193,522, compared to $1,467,016 for the three months ended March 31, 2024,

net revenue for the three months ended June 30, 2025, was $3,299,738, compared to $1,362,986 for the three months ended June 30, 2024,

an increase of $1,936,752, or 142%.

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

the three months ended March 31, 2025.

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

months ended June 30, 2025.

of Goods Sold and Gross Profit

cost of goods sold for the three months ended March 31, 2025 was $2,641,007, compared to $1,183,428 for the three months ended March

cost of goods sold for the three months ended June 30, 2025, was $2,693,279, compared to $1,214,227 for the three months ended June 30,

2024, an increase of $1,479,052, or 122%.

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

ended March 31, 2025.

As a result of the foregoing, we had gross profit of $552,515, representing gross margins of 17%, for the

three months ended March 31, 2025 as compared to a gross profit of $283,588, or gross margins of 19%, for the three months ended

March 31, 2024.

Our gross profit margin decreased slightly due primarily to costs incurred transitioning the production of our products to the Peru

We anticipate that our margins will increase as we ramp up production and utilize more of the

facility’s capacity.

Cost of goods sold included depreciation expense for the three months ended March 31, 2025 of $152,262,

compared to $55,823 for the three months ended March 31, 2024, an increase of $96,439, or 173%.

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

June 30, 2025.

We had gross profit of $606,459, representing gross margins of 18.4%, for the three months ended June 30, 2025, as compared

to a gross profit of $148,759, or 10.9%, for the three months ended June 30, 2024.

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

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

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

As production continues

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

new products to market more quickly.

and Administrative

general and administrative expense for the three months ended March 31, 2025 was $685,779, compared to $319,736 for the three months

ended March 31, 2024, an increase of $366,043, or 114%.

The largest components of our general and administrative expenses are advertising

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

Three Months Ended March 31,

Advertising and marketing

Storage, shipping and handling

and marketing expenses increased for the three months ended March 31, 2025, compared to the corresponding period in 2024, as we increased our marketing efforts in the current period, given greater available resources.

Our rent increased primarily due to leases entered into in the latter half of the

prior year, as we began to develop our operating facility in Peru, which resulted in increased travel expenses for the same reason.

commissions decreased as we focused most of our resources on servicing our largest customer.

We expect commissions to increase as we

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

that was driven by our increased sales.

and wages for the three months ended March 31, 2025 was $314,242, compared to $598,286 for the three months ended March 31, 2024, a decrease

general and administrative expense for the three months ended June 30, 2025, was $784,872, compared to $175,758 for the three months

ended June 30, 2024, an increase of $609,114, or 347%.

The largest components of our general and administrative expenses are plant idle

capacity, rent, travel, and commissions, as shown below.

Three Months Ended June 30,

Idle Capacity

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

In December 2024 operations commenced at the

As our factory scales, idle capacity will decrease.

Commissions increased due to increased sales.

and wages for the three months ended June 30, 2025, was $436,163, compared to $349,597 for the three months ended June 30, 2024, an increase

of $86,566, or 25%.

This decrease was primarily attributable to $376,384 of non-cash, stock-based compensation related to stock options

awarded during the prior period, compared to $4,024 of non-cash, stock-based compensation related to stock options awarded during the

current period.

fees for the three months ended March 31, 2025 was $235,034, compared to $390,666 for the three months ended March 31, 2024, a decrease

This increase was primarily attributable to $28,494 of amortization of stock options issued to employees for services

fees for the three months ended June 30, 2025, was $323,062, compared to $304,376 for the three months ended June 30, 2024, an increase

of $18,686, or 6%.

This decrease was primarily attributable to $149,594 of non-cash, stock-based compensation for the three months

ended March 31, 2024 that were not incurred during the current period.

The modest increase primarily reflects normal fluctuations in legal, consulting, and accounting expenses and does

not represent a significant change in the level of professional services utilized.

and handling for the three months ended June 30, 2025, was $157,807, compared to $88,384 for the three months ended June 30, 2024, an

increase of $69,423 or 79%.

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

and promotions

and promotions for the three months ended June 30, 2025, was $250,576, compared to $57,059 for the three months ended June 30, 2024,

an increase of $193,517, or 339%.

Advertising and promotions expenses increased for the three months ended June 30, 2025, mostly due

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

Income (Expense)

the three months ended March 31, 2025, other expense was $235,842 on a net basis, consisting of $240,978 of interest expense, as partially

the three months ended June 30, 2025, other expense was $257,135 on a net basis, consisting of $263,735 of interest expense, as partially

offset by $6,600 of interest income.

For the three months ended March 31, 2024, other expense was $25,867 on a net basis, consisting

For the three months ended June 30, 2024, other expense was $116,139 on a net basis, consisting

of $118,957 of interest expense, as partially offset by $2,818 of interest income.

Other expense increased by $140,996, or 121%, primarily

due to interest on increased outstanding debt as we funded our expansion into Peru during 2024.

loss for the three months ended March 31, 2025 was $918,382, compared to $1,050,967 for the three months ended March 31, 2024, a decrease

due to the increase of interest on the Kaufman Convertible Note and Notes Payable with related parties.

loss for the three months ended June 30, 2025, was $1,603,156, compared to $942,554 for the three months ended June 30, 2024, an increase

of $660,602, or 70%.

The decreased net loss was primarily due to increased gross profits and a $521,954 decrease in stock-based compensation,

as partially offset by $366,043 of increased general and administrative expenses.

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

Our objective is

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

gross margin benefits as production volumes grow.

of Operations for the Six Months Ended June 30, 2025, and 2024

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

Six Months Ended

Cost of goods sold

Operating expenses:

General and administrative

Salaries and benefits

Professional services

Storage, shipping and handling

Advertising and promotions

Total operating expenses

Operating loss

Other income (expense):

Interest income

Interest expense

Total other income (expense)

$ (2,521,538 )

$ (1,993,521 )

net revenue for the six months ended June 30, 2025, was $6,493,260, compared to $2,830,002 for the six months ended June 30, 2024, an

increase of $3,663,258, or 129%.

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

six months ended June 30, 2025.

of Goods Sold and Gross Profit

cost of goods sold for the six months ended June 30, 2025, was $5,334,286, compared to $2,397,655 for the six months ended June 30, 2024,

an increase of $2,936,631, or 122%.

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

As a result of the foregoing, we had gross profit of $1,158,974, representing gross margins of 17.8%, for the six months ended

June 30, 2025, as compared to a gross margin of $432,347, of 15.3%, for the six months ended June 30, 2024.

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

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

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

As production continues

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

new products to market more quickly.

and Administrative

general and administrative expense for the six months ended June 30, 2025, was $1,307,047, compared to $349,912 for the six months ended

June 30, 2024, an increase of $957,135, or 274%.

The largest components of our general and administrative expenses are plant idle capacity,

rent, travel, and commissions, as shown below.

Six Months Ended June 30,

Idle Capacity

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

In December 2024 operations commenced at the

As our factory scales, idle capacity will decrease.

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

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

Commissions increased due

to increased sales.

and wages for the six months ended June 30, 2025, was $750,405, compared to $947,883 for the six months ended June 30, 2024, a decrease

of $197,478, or 21%.

This decrease was primarily attributable to $394,135 of non-cash, stock-based compensation for the six months ended

June 30, 2024, compared to $81,097 of non-cash, stock-based compensation related to stock options awarded during the current period.

fees for the six months ended June 30, 2025, was $558,096, compared to $695,042 for the six months ended June 30, 2024, a decrease of

$136,946, or 20%.

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

June 30, 2024.

and handling for the six months ended June 30, 2025, was $264,352, compared to $192,821 for the six months ended June 30, 2024, an increase

of $71,531 or 37%.

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

and promotions

and promotions for the six months ended June 30, 2025, was $307,635, compared to $98,204 for the six months ended June 30, 2024, an increase

of $209,431, or 213%.

Advertising and promotions expenses increased for the six months ended June 30, 2025, compared to the corresponding

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

Income (Expense)

the six months ended June 30, 2025, other expense was $492,977 on a net basis, consisting of $504,713 of interest expense, as partially

offset by $11,736 of interest income.

For the six months ended June 30, 2024, other expense was $142,006 on a net basis, consisting of

$147,701 of interest expense, as partially offset by $5,695 of interest income.

Other expense increased by $350,971, or 247%, primarily

due to interest on the Kaufman Convertible Note and Notes Payable with related parties.

loss for the six months ended June 30, 2025, was $2,521,538, compared to $1,993,521 for the six months ended June 30, 2024, an increase

of $528,017, or 26%.

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

Our objective is

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

gross margin benefits as production volumes grow.

and Capital Resources

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

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

Current Assets

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$ (3,897,382 )

of March 31, 2025, we had negative working capital of $2,736,656.

We have incurred net losses since our inception and we anticipate net

losses and negative operating cash flows for the near future, and we may not be profitable or realize growth in the value of our assets.

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

As of March 31, 2025, we had cash of $2,386,381, total liabilities of $10,230,144, and an accumulated deficit of $18,480,439.

As of December 31, 2024, we had cash of $2,329,452, total liabilities of $10,514,292, and an accumulated deficit of $17,562,057.

of the Three Months Ended March 31, 2025 and the Three Months Ended March 31, 2024

of June 30, 2025, we had working capital of $662,217.

We have incurred net losses since our inception and we anticipate net losses and

negative operating cash flows for the near future, and we may not be profitable or realize growth in the value of our assets.

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

As of June 30, 2025, we had cash of $641,129, total liabilities of $9,608,777, and an accumulated deficit of $20,083,595.

As of December

31, 2024, we had cash of $2,329,452, total liabilities of $10,514,292, and an accumulated deficit of $17,562,057.

of the Six Months Ended June 30, 2025, and the Six Months Ended June 30, 2024

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

Three Months Ended

Six Months Ended

Net cash used in operating activities

$ (3,942,856 )

$ (1,357,463 )

Net cash used in investing activities

2 unchanged sentences

Net change in cash

$ (1,688,323 )

Cash Used in Operating Activities

cash used in operating activities was $1,927,122 for the three months ended March 31, 2025, compared to $503,578 for the three months

ended March 31, 2024, an increase of $1,423,544, or 283%.

The increase was primarily due to our increased accounts receivable as of March 31, 2025.

cash used in operating activities was $3,942,856 for the six months ended June 30, 2025, compared to $1,357,463 for the six months ended

June 30, 2024, an increase of $2,610,442, or 190%.

The increase was primarily due to a $1,440,275 increase in accounts receivable due

to increased sales volumes and a $548,367 increase in prepaid inventory to secure raw materials.

Cash Used in Investing Activities

cash used in investing activities was $377,841 for the three months ended March 31, 2025, compared to $40,100 for the three months ended

March 31, 2024, an increase of $337,741, or 842%.

This increase was primarily attributable to $377,841 of property and equipment purchases,

compared to $50,000 of property and equipment purchases, as partially offset by $9,900 of advances received on notes receivable, in the

comparative period.

cash used in investing activities was $491,332 for the six months ended June 30, 2025, compared to $566,431 for the six months ended

June 30, 2024, a decrease of $75,099, or 13%.

This decrease was primarily attributable to $491,332 of equipment purchases, compared to

$576,331 of equipment purchases, as partially offset by $9,900 of advances received on notes receivable, in the comparative period.

Cash Provided by Financing Activities

cash provided by financing activities was $2,353,683 for the three months ended March 31, 2025, compared to $137,589 for the three months

ended March 31, 2024, an increase of $2,216,094, or 1,611%.

cash provided by financing activities was $2,717,102 for the six months ended June 30, 2025, compared to $2,202,108 for the six months

ended June 30, 2024, an increase of $514,994, or 23%.

Our increased cash provided by financing activities was primarily from $2,423,058

of increased net proceeds received on the sale of common stock, net of $15,610 of offering costs, and $115,765 of decreased debt repayments,

as partially offset by $345,000 of decreased proceeds received from related party debt financing and $276 of increased principal payments

on finance leases.

proceeds from the sale of common stock and $1,173,157 from the exercise of warrants, offset by $847,917 of principal repayments on notes

of Exchange Rate Changes on Cash

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

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

During the period, the sol experienced modest

depreciation against the U.S.

dollar, resulting in a gain on foreign currency translation of $28,763 compared to $58 in the comparative

ACCOUNTING POLICIES AND ESTIMATES

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

In the three-month period ended March

31, 2025 there were no changes to the application of critical accounting policies disclosed in our Annual Report on Form 10-K for the

year ended December 31, 2024.

As of April 1, 2025, we changed our

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

product mix and invest in research and development.

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

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

NOTICE REGARDING FORWARD-LOOKING STATEMENTS

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis