BOF 10-K & 10-Q changes, risk factors and insider trading
BranchOut Food Inc. · Nasdaq · Food And Kindred Products · CIK 1962481 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Investing in our securities involves a high degree of risk. You should carefully consider the risks described below, together with the other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. If any of the risks described below occur, our business, financial condition, results of operations, cash flows, and prospects could be materially and adversely affected. The trading price of our common stock could decline, and you could lose all or part of your investment.”
New heading “Our financial statements include an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern.”
New heading “We may require additional capital to fund operations and growth, and financing may not be available on acceptable terms or at all.”
New heading “Our indebtedness may adversely affect our financial condition and limit our operational and financial flexibility.”
New heading “Failure to maintain compliance with Nasdaq listing requirements could adversely affect the liquidity and market price of our common stock.”
New heading “The market price of our common stock may be volatile and subject to significant fluctuations, which could result in losses for investors.”
New heading “Our ability to access the capital markets and the issuance of additional securities could dilute existing stockholders and adversely affect the market price of our common stock.”
New heading “Risks Related to Our Emerging Growth Company and Smaller Reporting Company Status”
New heading “Because we are an emerging growth company and a smaller reporting company, our disclosures may be less comprehensive than those of other public companies.”
New heading “Risks Related to Internal Controls and Financial Reporting”
New heading “If we fail to maintain effective internal control over financial reporting, our ability to produce accurate financial statements could be impaired.”
New heading “A substantial portion of our net sales is derived from a limited number of customers.”
New heading “We generally do not have long-term purchase commitments from customers, and demand forecasting is difficult.”
New heading “The consumer-packaged foods industry is highly competitive, and we may be unable to compete effectively.”
New heading “Changes in consumer preferences or retailer category strategies could reduce demand for our products.”
New heading “Risks Related to Manufacturing, Supply Chain, Agricultural Inputs, and Seasonality”
New heading “Our manufacturing operations are concentrated in a single facility in Peru, and any disruption could materially adversely affect our business, results of operations, and financial condition.”
New heading “We are exposed to risks associated with operating in Peru.”
New heading “Foreign currency fluctuations could adversely affect our results of operations.”
New heading “If we are unable to effectively manage growth and scale our systems and controls, our business and reporting could be adversely affected.”
New heading “Achieving efficient manufacturing utilization and throughput is important to our margins, and failure to do so could adversely affect profitability.”
New heading “Agricultural supply, environmental conditions, and commodity volatility could adversely affect our costs, production, and margins.”
New heading “Seasonality in harvest cycles and consumer demand may cause quarterly results to fluctuate and increase working capital requirements.”
New heading “Inventory management challenges, product shelf-life limitations, and potential obsolescence could adversely affect our margins, cash flows, and operating results.”
New heading “Our insurance coverage may be insufficient to cover all potential losses, which could materially adversely affect our business and financial condition.”
New heading “International logistics and customs processes could increase costs and disrupt service levels.”
New heading “Our reliance on a limited number of key suppliers and service providers exposes us to supply chain concentration risk that could disrupt operations and adversely affect our business.”
New heading “We rely on third-party service providers for key operational functions, and disruptions or failures by these providers could materially adversely affect our business and results of operations.”
New heading “Inflation and cost pressures could increase operating expenses and adversely affect our margins and profitability.”
New heading “Political, economic, and social conditions in Peru could adversely affect our operations, costs, and financial results.”
New heading “Changes in tax laws, cross-border tax matters, or adverse tax determinations in the United States or Peru could materially adversely affect our financial condition and results of operations.”
New heading “Risks Related to Food Safety, Product Liability, and Regulation”
New heading “We are subject to extensive food safety, labeling, and product regulations, and noncompliance or quality failures could result in recalls, import holds, enforcement actions, or reputational harm.”
New heading “We may be subject to product liability claims and recall.”
New heading “Our operations are subject to regulation in multiple jurisdictions, and regulatory changes or increased enforcement could increase costs or disrupt operations.”
New heading “Evolving environmental, labor, and sustainability regulations may increase compliance costs and operational complexity.”
New heading “Risks Related to Licensed Technology and Intellectual Property”
New heading “Our business depends on licensed dehydration technology, and limitations, disputes, or loss of exclusivity could materially harm our business.”
New heading “We may be unable to adequately protect our intellectual property and proprietary know-how.”
New heading “Risks Related to Information Systems and Cybersecurity”
New heading “Disruptions to our information technology systems or cybersecurity incidents could harm operations, financial reporting, and our business.”
New heading “Risks Related to Personnel and Business Continuity”
New heading “Our success depends on a limited number of key personnel, and we may have difficulty attracting and retaining qualified employees.”
New heading “Labor availability, wage inflation, or workplace safety incidents could increase costs and disrupt operations.”
New heading “Our governing documents designate Nevada courts as the exclusive forum for certain stockholder actions.”
New heading “Risks Related to Legal Proceedings and Compliance”
New heading “We may be subject to litigation, regulatory proceedings, and other legal matters that could materially adversely affect our business, financial condition, and results of operations.”
Removed heading “The following important factors, and the important factors described elsewhere in this report or in our other filings with the SEC, could affect (and in some cases have affected) our results and could cause our results to be materially different from estimates or expectations. Other risks and uncertainties may also affect our results or operations adversely. The following and these other risks could materially and adversely affect our business, operations, results or financial condition.”
Removed heading “Our audited financial statements for the years ended December 31, 2024 and 2023 included a statement from our independent registered public accounting firm that there is substantial doubt about our ability to continue as a going concern, and a continuation of negative financial trends could result in our inability to continue as a going concern.”
Removed heading “Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our securities.”
Removed heading “We may need to raise additional capital to fund our existing commercial operations and develop and commercialize new products and expand our operations.”
Removed heading “We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.”
Removed heading “Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.”
Removed heading “We are dependent on our management team, and the loss of any key member of this team may prevent us from implementing our business plan in a timely manner, or at all.”
Removed heading “Our business is reliant on the license we have been granted to utilize certain dry processing technology we use to manufacture our products in the agreed upon exclusive region.”
Removed heading “We rely on a small number of suppliers to provide our raw materials, and our supply chain may be interrupted and prevent us from obtaining the necessary materials we need to operate.”
Removed heading “Competition in the food retail industry is intense and presents an ongoing threat to the success of our business.”
Removed heading “Our products are new, and our industry is rapidly evolving.”
Removed heading “We cannot guarantee that we will succeed in achieving our goals, and our failure to do so would have a material adverse effect on our business, prospects, financial condition, and operating results.”
Removed heading “Our future results of operations may be adversely affected by volatile commodity costs.”
Removed heading “We are subject to the risks associated with sourcing and manufacturing products from, and conducting business operations outside of the United States, which could adversely affect our business.”
Removed heading “Our results may be negatively affected by changes in foreign currency exchange rates.”
Removed heading “We may be unable to adequately protect our brand and our other intellectual property rights.”
Removed heading “We may not be able to enforce our intellectual property rights throughout the world.”
Removed heading “Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.”
Removed heading “A food safety or quality issue that results in a product disruption such as a recall, health issue, or death of a consumer could harm our business.”
Removed heading “We may be subject to significant liability that is not covered by insurance.”
Removed heading “We rely on independent certification for a number of our products.”
Removed heading “Our future results of operations may be adversely affected by the availability of certifiable ingredients.”
Removed heading “Adverse weather conditions, natural disasters, crop disease, pests and other natural conditions can impose significant costs and losses on our business.”
Removed heading “Climate change may negatively affect our business and operations.”
Removed heading “Our production equipment may be damaged, adversely affecting our ability to meet consumer and wholesale demand.”
Removed heading “Damage to our brand’s reputation could have a material impact on our results of operations.”
Removed heading “We rely on big box retailers for a substantial portion of our sales, and our failure to maintain and further develop our sales channels could harm our business.”
Removed heading “We do not have long-term purchase agreements with our customers.”
Removed heading “We may not be able to successfully implement our growth strategy for our brand on a timely basis or at all.”
Removed heading “If we face labor shortages or increased labor costs, our results of operations and our growth could be adversely affected.”
Removed heading “Consumer preferences for natural and organic food products are difficult to predict and may change.”
Removed heading “Technology failures or security breaches could disrupt our operations and negatively impact our business.”
Removed heading “Economic downturns could limit consumer demand for our products and negatively affect our sales and profitability.”
Removed heading “Regulatory Risks”
Removed heading “Our products and operations are subject to government regulation and oversight both in the United States and abroad, and our failure to comply with applicable requirements could adversely affect our business and results of operations.”
Removed heading “Our reputation could suffer from real or perceived issues involving the labeling or marketing of our products.”
Removed heading “Litigation and regulatory enforcement concerning marketing and labeling of food products could adversely affect our business and reputation.”
Removed heading “We may face scrutiny from evolving state regulations concerning health, safety, our supply chain and marketing.”
Removed heading “Our indebtedness could adversely affect our ability to raise additional capital to fund operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our financial obligations and our creditors have broad remedies in the event of default.”
Removed heading “We are an emerging growth company and a smaller reporting company, and the reduced reporting requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.”
Largest changes
“The marketing and labeling of any food product in recent years has brought increased risk that consumers will bring class action lawsuits and that the FTC and/or state attorneys general will bring legal action concerning the truth and accuracy of the marketing and labeling of the product. Examples of causes of action that may be asserted in a consumer class action lawsuit include fraud, unfair trade practices and breach of state consumer protection statutes. …”see in full comparison
“Cybersecurity incidents could also result in theft, loss, or unauthorized disclosure of confidential business information, financial data, or personal information, which could expose us to litigation, regulatory investigations, penalties, and remediation costs. In addition, a significant cybersecurity incident could impair our ability to maintain effective internal control over financial reporting, delay required filings with the Securities and Exchange Commission, require public disclosure of material incidents, and harm investor confidence.”see in full comparison
“Even if a situation does not necessitate a recall or market withdrawal, product liability claims might be asserted against us. While we are subject to governmental inspection and regulations and believe our facilities and those of our co-packers and suppliers comply in all material respects with all applicable laws and regulations, if the consumption of any of our products causes, or is alleged to have caused, a health-related illness or death to a consumer, we may become subject to claims or lawsuits relating to such matters. …”see in full comparison
“Our products are subject to United States and foreign food safety and labeling requirements, including regulation by the U.S. Food and Drug Administration and the Food Safety Modernization Act as it applies to imported foods. Failure to comply with applicable requirements, actual or alleged contamination, labeling errors, or other product quality issues could result in product recalls, market withdrawals, import holds, fines, litigation, increased costs, and reputational harm, any of which could adversely affect our business and operating results.”see in full comparison
“Our audited financial statements for the years ended December 31, 2024 and 2023 included a statement from our independent registered public accounting firm that there is substantial doubt about our ability to continue as a going concern, and a continuation of negative financial trends could result in our inability to continue as a going concern.”see in full comparison
“Our indebtedness could adversely affect our ability to raise additional capital to fund operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our financial obligations and our creditors have broad remedies in the event of default.”see in full comparison
Full comparison: every changed paragraph (246)
Investing in our securities involves a high degree of risk. You should carefully consider the risks described below, together with the other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. If any of the risks described below occur, our business, financial condition, results of operations, cash flows, and prospects could be materially and adversely affected. The trading price of our common stock could decline, and you could lose all or part of your investment.
The
following important factors, and the important factors described elsewhere in this report or in our other filings with the SEC, could
affect (and in some cases have affected) our results and could cause our results to be materially different from estimates or expectations.
Other risks and uncertainties may also affect our results or operations adversely. The following and these other risks could materially
and adversely affect our business, operations, results or financial condition.
Risks
Related to Our Operating History, Financial PositionPosition, and Capital NeedsStructure
We
are an early-stage company and have incurred significantlosses lossesand negative cash flows since ourinception, inception.and We expect to incur losses for the foreseeable future
andwe may nevernot achieve or maintainsustain profitability.
We have incurred losses since inception. During the years ended December 31, 2025 and 2024, we incurred net losses of $6,124,672 and $4,751,516, respectively. There can be no assurance that we will not continue to incur net losses in the future. Our ability to achieve profitability depends on our ability to scale production, expand distribution, manage customer concentration, control input, labor, and logistics costs, improve manufacturing utilization and yields, and grow gross profit at a rate sufficient to cover operating expenses and public company costs. If we are unable to execute successfully on these objectives, we may continue to incur losses and negative cash flows, which could materially adversely affect our business, financial condition, and results of operations.
Our financial statements include an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern.
Our audited consolidated financial statements include an explanatory paragraph from our independent registered public accounting firm expressing substantial doubt about our ability to continue as a going concern. This condition may adversely affect our ability to raise capital, negotiate favorable terms with customers and suppliers, retain employees, and execute our growth strategy. If our operating performance does not improve or we are unable to obtain additional liquidity when needed, we may be required to delay or reduce investments, scale back operations, or pursue financing or strategic alternatives on unfavorable terms, which could materially adversely affect our business.
We may require additional capital to fund operations and growth, and financing may not be available on acceptable terms or at all.
Our operating model requires significant working capital to support raw material sourcing, inventory, international transit times, and customer program requirements. We may need to raise additional capital through equity, debt, or other financings to fund operations, expand manufacturing capacity, or support growth initiatives. Financing may not be available when needed, or may be available only on unfavorable terms, including dilution to existing stockholders, restrictive covenants, increased leverage, or security interests in our assets. Any inability to obtain sufficient financing could materially adversely affect our liquidity, operations, and growth prospects.
We
are an early-stage company. We were formed and commenced operations in November 2017. We face all the risks faced by newer companies,
including significant competition from existing and emerging competitors, many of which are established and have better access to capital.
In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays, and other known and unknown
factors. We will need to transition from an early-stage company to a company capable of supporting larger scale commercial activities.
If we are not successful in such a transition, our business, results, and financial condition will be harmed.
We
have not been profitable to date, and we expect operating losses for the near future. During the years ended December 31, 2024 and 2023,
we had net revenue of approximately $6,516,337 and $2,825,855, respectively, and incurred net losses of approximately $4,751,516 and
$3,925,710, respectively. There can be no assurance that we will not continue to incur net losses in the future. We may not succeed in
expanding our customer base and product offerings and even if we do, may never generate revenue that is significant enough to achieve
profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual
basis. Furthermore, we may not be able to control overhead expenses even where our operations successfully expand. Our failure to become
and remain profitable would depress our value and could impair our ability to raise capital, expand our business, diversify our product
offerings, or even continue our operations.
Our
audited financial statements for the years ended December 31, 2024 and 2023 included a statement from our independent registered public
accounting firm that there is substantial doubt about our ability to continue as a going concern, and a continuation of negative financial
trends could result in our inability to continue as a going concern.
There
is substantial doubt about our ability to continue as a going concern over the next twelve months and our independent registered public
accounting firm has included a “going concern” explanatory paragraph in their report in our financial statements as of and
for the years ended December 31, 2024 and 2023. If our operating results fail to improve, our financial condition will deteriorate which
could render us unable to continue as a going concern.
Our
failure to meet the continued listing requirements of Nasdaq could result in a delisting of our securities.
On
April 11, 2024, we received a letter from Nasdaq stating that we were not in compliance with Nasdaq Listing Rule 5550(b)(1) (the “Rule”)
because our stockholders’ equity of $2,210,476 as of December 31, 2023 was below the minimum requirement of $2,500,000. Pursuant
to Nasdaq’s Listing Rules, on May 28, 2024, we submitted to Nasdaq a plan to regain compliance with the Rule, which was accepted
by Nasdaq and provided us with an extension of 180 calendar days from April 11, 2024 (until October 8, 2024) to regain compliance with
the Rule. On October 10, 2024, Nasdaq notified us that we did not meet the terms of the extension to regain compliance with the Rule,
and as a result, unless we requested an appeal, trading of our common stock would be suspended. On October 11, 2024, we submitted a request
for a hearing with Nasdaq’s Hearings Panel to appeal Nasdaq’s delisting determination, which stayed the suspension of trading
of our common stock.
As
of November 14, 2024, as a result of the sale of 928,602 Shares under the ATM Agreement for aggregate gross offering proceeds
of approximately $1,795,000, we regained compliance with the Rule, and the hearing before the Hearing Panel was cancelled. However, Nasdaq
informed us that it will continue to monitor the Company’s ongoing compliance with the stockholders’ equity requirement and,
if we fail to evidence compliance with the Rule upon the filing of its Annual Report on Form 10-K for the year ended December 31, 2024,
we may be subject to delisting.
As
of December 31, 2024, we were again not in compliance with the Rule, with stockholders’ equity of $2,341,583 as reported in this
Annual Report on Form 10-K. However, as a result of the sale of 1,303,115 additional shares of
our common stock under the ATM Agreement following December 31, 2024 for net proceeds of approximately $2.4 million, as of the date of
filing this Annual Report on Form 10-K, the Company believes it has regained compliance with the Rule. However, Nasdaq will continue
to monitor the Company’s ongoing compliance with the stockholders’ equity requirement and, if at the time of its next periodic
report the Company does not evidence compliance, it may be subject to delisting. A delisting would likely have a negative effect on the
price of our common stock and may impair the ability of our stockholders to sell our stock.
We
may need to raise additional capital to fund our existing commercial operations and develop and commercialize new products and expand
our operations.
If
our available cash balances, net proceeds from financing activities, and anticipated cash flow from operations are insufficient to satisfy
our liquidity requirements, we may seek to sell common stock or other securities, and/or seek additional debt financing.
We
may consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing
opportunities or for other reasons, including to:
Our
present and future funding requirements will depend on many factors, including:
The
various ways we could raise additional capital carry potential risks. If we raise funds by issuing equity securities, dilution to our
stockholders could result. Any equity securities issued also could provide for rights, preferences, or privileges senior to those of
holders of shares of our common stock. If we raise funds by issuing debt securities, those debt securities would have rights, preferences,
and privileges senior to those of holders of shares of our common stock. The terms of any debt securities issued or borrowings made pursuant
to a credit agreement could impose significant restrictions on our operations. If we raise additional funds through collaborations and
licensing arrangements, we might be required to relinquish significant rights or grant licenses on terms that are not favorable to us.
We
expect that, in the future,that as our revenue increases, our revenue growth rate will decline. We also believe that growth of our revenue
depends on several
factors, including our ability to:
Our indebtedness may adversely affect our financial condition and limit our operational and financial flexibility.
Our indebtedness and related security interests may limit our ability to incur additional debt, fund working capital needs, or pursue strategic opportunities. If we are unable to generate sufficient cash flow to service our obligations, we may be required to refinance, raise additional capital, or pursue other alternatives, which may not be available on favorable terms or at all.
Failure to maintain compliance with Nasdaq listing requirements could adversely affect the liquidity and market price of our common stock.
We have previously been subject to Nasdaq compliance matters, including monitoring related to stockholders’ equity and other continued listing requirements. If we fail to maintain compliance with applicable listing standards, we could be subject to delisting, which could reduce liquidity, limit access to capital markets, increase stock price volatility, and materially adversely affect the market price of our common stock.
The market price of our common stock may be volatile and subject to significant fluctuations, which could result in losses for investors.
The trading price of our common stock may fluctuate significantly due to factors including operating results, customer concentration, liquidity constraints, financing activities, market conditions, and investor perceptions of growth-stage companies. These fluctuations may be unrelated to our actual operating performance and could result in losses for investors.
Our ability to access the capital markets and the issuance of additional securities could dilute existing stockholders and adversely affect the market price of our common stock.
We may continue to rely on the capital markets to fund operations, support growth initiatives, and strengthen our balance sheet. To raise capital, we may issue additional shares of common stock, preferred stock, warrants, options, convertible securities, or other equity-linked instruments. The issuance of additional securities, or the potential for such issuances, could result in substantial dilution to existing stockholders and could adversely affect the market price of our common stock.
Our capital structure includes outstanding warrants, stock options, and convertible notes. The exercise or conversion of these securities could further dilute stockholders and increase the supply of shares available for sale in the public market, which could put downward pressure on our stock price. In addition, the perception that we may issue additional equity securities in the future could adversely affect the trading price of our common stock.
Access to capital markets may be limited by market conditions, our operating performance, liquidity, stock price volatility, and compliance with applicable listing requirements. If we are unable to raise capital on acceptable terms when needed, we may be required to delay or reduce investments, curtail operations, or pursue alternative financing arrangements that may be more costly or restrictive.
Because our common stock may have limited trading volume and analyst coverage, issuances of additional securities or significant sales of shares by existing stockholders could result in increased price volatility and adversely affect investor confidence. If we are unable to effectively manage our capital structure or access the capital markets on favorable terms, our business, financial condition, and growth prospects could be materially adversely affected.
Risks Related to Our Emerging Growth Company and Smaller Reporting Company Status
Because we are an emerging growth company and a smaller reporting company, our disclosures may be less comprehensive than those of other public companies.
We are an emerging growth company (“EGC”) and a smaller reporting company (“SRC”) and take advantage of certain reduced reporting, disclosure, and governance requirements, including exemptions from auditor attestation of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, reduced executive compensation disclosure, and extended transition periods for new accounting standards. As a result, investors may find our common stock less attractive, which could result in reduced trading activity and increased stock price volatility.
Risks Related to Internal Controls and Financial Reporting
If we fail to maintain effective internal control over financial reporting, our ability to produce accurate financial statements could be impaired.
As a public company, we are required to maintain effective internal control over financial reporting. Our operations involve complex manufacturing, inventory, cost accounting, and cross-border transactions. As we scale our business, our systems, processes, and personnel may not keep pace with growth. We may identify control deficiencies or material weaknesses, which could result in errors in our financial statements, restatements, delayed reporting, or loss of investor confidence, any of which could materially adversely affect our business and stock price.
We
may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.
Our
growth has placed, and may continue to place, significant demands on our organizational, administrative, and operational infrastructure,
including manufacturing operations, quality control, technical support and customer service, sales force management and general and financial
administration. As we continue to grow, we will need to make significant investments in multiple divisions of our company, including
in sales, marketing, product development, information technology, equipment, facilities, and human resources. We will also need to improve
our operational, financial and management controls as well as our reporting systems and procedures.
If
we are unable to manage our growth effectively, we may be unable to execute our business plan, which could have a material adverse effect
on our business and our results of operations. Managing our planned growth effectively will require us to:
The
expansion of our products and customer base may result in increases in our overhead and selling expenses. Any increase in expenditures
in anticipation of future sales that do not materialize would adversely affect our profitability. In addition, if we are unable to effectively
manage the growth of our business, the quality of our products may suffer and we may be unable to address competitive challenges, which
would adversely affect our overall business, operations, and financial condition.
Our
disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
Upon
the completion of the IPO, we became subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and implemented disclosure controls and procedures to reasonably assure that information we must disclose
in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized
and reported within the time periods specified in the rules and forms of the SEC. However, we believe that any disclosure controls and
procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making
can be faulty, and that breakdowns can occur because of simple error or mistake. For example, our directors or executive officers could
inadvertently fail to disclose a new relationship or arrangement causing us to fail to make a required related party transaction disclosure.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized
override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud
may occur and not be detected.
Risks
Related to OurCustomers, BusinessDistribution, and Market Demand
A substantial portion of our net sales is derived from a limited number of customers.
A significant portion of our net sales and accounts receivable is derived from a limited number of large retail customers. As a result, our operating results, cash flows, and working capital depend on the purchasing decisions, financial condition, and payment practices of these customers. Reductions in purchase volumes, changes in pricing or promotional terms, increased chargebacks, payment delays, or the loss of a significant customer could materially adversely affect our net sales, margins, liquidity, and manufacturing utilization.
We generally do not have long-term purchase commitments from customers, and demand forecasting is difficult.
Customer purchases are typically made through purchase orders and program-based arrangements rather than long-term volume commitments. Customers may reduce, delay, or cancel orders with limited notice, contributing to revenue volatility and increasing the difficulty of forecasting demand, planning production, and managing inventory.
The consumer-packaged foods industry is highly competitive, and we may be unable to compete effectively.
We compete with large, branded food companies, emerging snack brands, and private-label manufacturers that have significantly greater financial, marketing, and distribution resources. Competitive pricing, promotional activity, and shifts in retailer category strategies could pressure our margins and limit our ability to grow.
Changes in consumer preferences or retailer category strategies could reduce demand for our products.
Consumer tastes and retailer merchandising priorities can shift rapidly. If demand for clean-label, fruit- and vegetable-based snacks declines, if retailers reduce shelf space, or if competing products gain preference, our net sales and operating results could be adversely affected.
Risks Related to Manufacturing, Supply Chain, Agricultural Inputs, and Seasonality
Our manufacturing operations are concentrated in a single facility in Peru, and any disruption could materially adversely affect our business, results of operations, and financial condition.
All of our production is conducted at our manufacturing facility in Pisco, Peru, which commenced operations in December 2024. As a result, our ability to meet customer demand, maintain service levels, and generate revenue depends substantially on the continued operation of this facility. Any disruption—including equipment failure, utilities interruptions, labor disruptions, facility damage, supply interruptions, natural disasters, public health events, or regulatory or governmental actions—could impair production, delay shipments, increase costs, and harm customer relationships.
Because we do not currently have redundant manufacturing capacity, any prolonged disruption could require us to reduce or suspend production. Replacing, repairing, or relocating production on a timely or cost-effective basis may not be feasible and could require significant capital investment, management attention, and time. In addition, disruptions could result in inventory shortages, lost sales, penalties or chargebacks, increased logistics costs, and reduced manufacturing utilization, which could materially adversely affect margins, cash flows, and working capital.
We are exposed to risks associated with operating in Peru.
Management's Discussion & Analysis (MD&A)
New heading “Key Considerations Going Forward”
New heading “Strategic Focus”
New heading “2025 Compared to 2024”
New heading “Adjusted Gross Margin (Non-GAAP)”
New heading “Operating Model and Margin Considerations”
New heading “Financial Position and Operating Scale”
New heading “Shipping and Handling”
New heading “Advertising and Promotions”
New heading “Satisfaction of Cash Obligations for the Next 12 Months”
New heading “Subsequent Financing Activities”
New heading “Trends, Events, and Uncertainties”
New heading “Scaling Production and Margin Progression”
New heading “Revenue Growth and Demand Variability”
New heading “Consumer Demand for Clean-Label and Better-for-You Snacks”
New heading “Product Innovation and Manufacturing Capability Expansion”
New heading “Working Capital and Cash Flow Dynamics”
New heading “Supply Chain and Input Costs”
New heading “Critical Accounting Estimates”
New heading “Inventory Valuation”
New heading “Long-Lived Assets and Manufacturing Equipment”
New heading “Going Concern and Liquidity”
New heading “Foreign Currency Translation”
New heading “Recently Issued Accounting Pronouncements”
Removed heading “Except for historical information, the matters discussed in this section are forward looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond the Company’s control. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report.”
Removed heading “Going Concern Uncertainty”
Removed heading “NXTDried Superfoods”
Removed heading “Peru Facility Lease”
Removed heading “Critical Accounting Policies”
Removed heading “Comparison of the Year Ended December 31, 2024 and the Year Ended December 31, 2023”
Removed heading “Equity Investments”
Removed heading “Satisfaction of our Cash Obligations for the Next 12 Months”
Removed heading “Emerging Growth Company”
Removed heading “EnWave Contract”
Largest changes
“Management evaluates the Company’s ability to continue as a going concern based on its current financial condition, operating results, cash flows, and access to capital. This assessment requires judgment regarding future revenue, operating performance, working capital needs, and the availability of financing. If actual results differ from management’s assumptions, the Company’s liquidity and financial condition could be adversely affected.”see in full comparison
“We are pursuing initiatives to increase revenues and is seeking additional sources of capital to fund operations. While these actions may improve our liquidity position, there can be no assurance that they will be sufficient to alleviate the substantial doubt regarding the our ability to continue as a going concern.”see in full comparison
“As of December 31, 2025 and 2024, the Company did not have any off-balance sheet arrangements, as defined in Item 303 of Regulation S-K, that have or are reasonably likely to have a material effect on its financial condition, results of operations, liquidity, capital expenditures, or capital resources.”see in full comparison
“This section contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Except for statements of historical fact, all statements regarding the Company’s expected future financial position, results of operations, cash flows, liquidity, business strategy, and plans and objectives of management are forward-looking statements. …”see in full comparison
“Except for historical information, the matters discussed in this section are forward looking statements that involve risks and uncertainties and are based upon judgments concerning various factors that are beyond the Company’s control. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report.”see in full comparison
Full comparison: every changed paragraph (209)
This
discussion summarizes the significant factors affecting the operatingCompany’s results,results of operations, financial condition, liquidityliquidity, and
cash flows of the Company
for the fiscal years ended December 31, 20242025 and 2023.2024. The following discussion and analysis that follows should be read togetherin conjunction
with the section
entitled “Forward LookingForward-Looking Statements” and ourthe Company’s consolidated financial statements and the related
notes to the financial statements included elsewhere
in this annualAnnual reportReport on Form 10-K.
This section contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Except for statements of historical fact, all statements regarding the Company’s expected future financial position, results of operations, cash flows, liquidity, business strategy, and plans and objectives of management are forward-looking statements. These statements are based on current expectations and assumptions that are subject to risks, uncertainties, and other factors, many of which are beyond the Company’s control, that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Readers are urged to carefully review and consider the disclosures set forth in this Annual Report on Form 10-K, including the risk factors and other cautionary statements, when evaluating these forward-looking statements.
Except
for historical information, the matters discussed in this section are forward looking statements that involve risks and uncertainties
and are based upon judgments concerning various factors that are beyond the Company’s control. Consequently, and because forward-looking
statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results
and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made
by us in this report.
Business Overview
BranchOut Food Inc. (collectively with its subsidiary, “BranchOut,” the “Company,” “we,” “us” or “our”), is a growth-stage consumer packaged foods company focused on developing, manufacturing, marketing, and distributing clean-label, plant-based dried fruit and vegetable snacks for retail and foodservice markets through BranchOut-branded products, private-label offerings, and ingredient sales. The Company operates a 50,000 square foot manufacturing facility in Pisco, Peru, (“Peru Facility”) where it produces finished goods using proprietary GentleDry™ technology licensed from EnWave Corporation. Our operating model is manufacturing-led and dependent on agricultural sourcing, production scale, and retail distribution.
Company Realignment
Beginning in April 2024, we initiated an organizational realignment to expand our manufacturing capabilities through the development and operation of the Peru Facility. This initiative represents a transition from reliance on third-party manufacturers to in-house production.
From April 2024 through December 31, 2025, we incurred aggregate costs of approximately $6.7 million related to this initiative, consisting of (i) approximately $5.1 million of facility start-up costs, including equipment purchases, facility build-out, and initial supplies, (ii) approximately $1.2 million of idle capacity costs associated with underutilization during the ramp-up period, and (iii) approximately $0.4 million of professional fees, legal fees, and travel costs. As of December 31, 2025, the Company has substantially completed the organizational realignment. We continue to expand distribution with large national retail customers while increasing production at our Peru Facility. Operations during the year reflected continued scale-up of manufacturing and commercial activities, with production operating below normalized utilization levels.
We
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.
We
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.
Using
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
products. 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.
Our
Products
We
plan to continue to grow revenues strategically by penetrating the multi-billion dollar grocery, industrial ingredient and online markets.
Our current product line includes:
We
are currently developing many additional products for all sales channels.
Going
Concern Uncertainty
As
of December 31, 2024, we had a cash balance of $2,329,452, a working capital deficit of $3,897,382 and had incurred recurring losses
from operations resulting in an accumulated deficit of $17,562,057. Subsequent to December 31, 2024, we received gross proceeds of approximately
$2.4 million from sales of our common stock in an “At-the-Market” registered offering. Although we anticipate that our results
of operations will improve substantially as a result of the recent launch of our new facility in Peru, there can be no assurance in that
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.
The
report of our independent registered public accounting firm that accompanies our audited financial statements in this Annual Report on
Form 10-K contains an explanatory paragraph regarding the substantial doubt about our ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty.
NXTDried
Superfoods
During
the fourth quarter of 2023, NXTDried Superfoods, one of our former contract manufacturers located in Peru, became involved in a legal
dispute with its landlord and another third party, which resulted in that manufacturer suspending operations. As a result of such dispute,
we had to fulfill orders by shifting fulfillment to other manufacturing sources until we commenced operations at our own fully integrated
production facility in Peru in the fourth quarter of 2024. During 2023, we recognized $761,085
of impairment expense, consisting of $485,265, $243,305 and $32,515 on the collectability of a note receivable, VAT taxes receivable
and prepaid inventory, respectively, owed to us by NXTDried Superfoods.
Peru
Facility Lease
Given
the situation with NXTDried Superfoods, we were required to shift fulfillment of orders to alternative manufacturing sources. On May
10, 2024 we entered into a ten-year lease for our 50,000 square-foot food processing plant located in Peru. The lease of the Peru Facility
requires us to make monthly lease payments of $8,000 in the first two years of the lease, $20,000 in the third year of the lease, $22,000
in the fourth year of the lease, $24,000 in the fourth year of the lease, and $25,000 thereafter. The lease also has a 10-year renewal
option, and a buy-out option under which we may purchase the facility for $1,865,456.
In
connection with our lease of the Peru Facility, we paid $275,000 on May 10, 2024 and another $80,000 during the fourth quarter of 2024,
as part of the purchase of a first position mortgage receivable in the amount of $1,267,000, which is secured by the Peru Facility and
was owed by the landlord of the Peru Facility to its former tenant. The remaining $912,000 is due and payable in monthly installments
of $152,000 through June 23, 2025, at which time an additional $55,604 of interest is due, based on a 9% financing rate.
Critical
Accounting Policies
The
establishment and consistent application of accounting policies is a vital component of accurately and fairly presenting our financial
statements in accordance with generally accepted accounting principles in the United States (“GAAP”), as well as ensuring
compliance with applicable laws and regulations governing financial reporting. While there are rarely alternative methods or rules from
which to select in establishing accounting and financial reporting policies, proper application often involves significant judgment regarding
a given set of facts and circumstances and a complex series of decisions.
Initial
Public Offering
In
June 2023, we completed our IPO in which we sold 1,190,000 shares of common stock at a price of $6.00 per share pursuant to an Underwriting
Agreement with 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, we also issued 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 IPO in June 2023.
Reverse
Stock Split
On
June 15, 2023, we effected a 2.5-for-1 reverse stock split of our outstanding shares of capital stock. 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.
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.
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:
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:
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.
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:
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.
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 none during the year ended December 31, 2023. Any future minimum royalty
payments or equipment purchases under this license agreement are an unrecognized commitment as they relate to retaining exclusivity of
the avocado products going forward and the Company can elect not to pay as disclosed in Note 17 to the financial statements included
in this 10-K.
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.
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.
What changed in the latest 10-Q
Risk Factors
The Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “Results of Operations for the Six Months Ended June 30, 2026, and 2025”
New heading “Cost of Goods Sold and Gross Profit”
New heading “General and Administrative Expense”
New heading “Salaries and Wages”
New heading “Professional Fees”
New heading “Shipping and Handling”
New heading “Advertising and Promotions”
New heading “Other Income (Expense)”
Removed heading “Subsequent Financing Activities”
Largest changes
“Results of Operations for the Six Months Ended June 30, 2026, and 2025”see in full comparison
“For the six months ended June 30, 2026, other expense was $327,878, consisting of $359,454 of interest expense, partially offset by $1,808 of interest income and $29,768 of other income. Other income is the recognition of tariff reimbursements received related to previously paid U.S. import duties. The Company received a portion of these reimbursements during the period and recognized the related income in accordance with U.S. GAAP. For the six months ended June 30, 2025, other expense was $567,723, consisting of $579,459 of interest expense, partially offset by $11,736 of interest income. …”see in full comparison
Full comparison: every changed paragraph (66)
Gross margin performance may be affected by sales mix, throughput levels, manufacturing efficiencies, uptime, yields, availability or shortages of agricultural raw materials, packaging, labor and freight costs, as well as sourcing timing and spot market purchases when necessary.
Gross margin performance continues to reflectDespite
underlying improvements in production volumes, throughput and manufacturing efficiencies, including gains in uptime, yields and production flow,
flow. However, on a quarter-over-quarter basis, gross marginmargins declinedhave decreased in both the first and second quarters of 2026, due to (i) increased downtime at the plant, and lower production
levels levels
during January and February, and(ii) an unfavorable sales mix driven by a higher proportion of lower-margin bulk ingredient sales.sales,
(iii) a shortened procurement timeline for a bulk strawberry ingredient product as discussed below, and (iv) the launch of a new mixed
variety pack to Sam’s Club.
Gross
margin is also influenced by sales mix across
our branded, private-label and ingredient channels, as well as variability in agricultural raw
materials, packaging, labor and freight
costs. The timing of raw material sourcing and reliance on spot market purchases, when necessary,
may also affect margins.
As the Company scales production to support new customer programs, initial production runs are often completed on a compressed procurement timeline to meet customer delivery requirements. As a result, raw materials may be purchased at prevailing market prices rather than through advance procurement, resulting in higher input costs and gross margins below the Company’s long-term target margins for recurring products. In certain cases, initial production runs may generate minimal or negative gross margins. Management believes these initial production runs are an important part of securing long-term customer relationships and recurring production volumes, which are expected to have more favorable procurement economics.
Management intentionally prioritizes establishing new customer relationships and securing product placements with large retailers, recognizing that the economics of initial production runs may differ from those of recurring production. As customer demand becomes recurring, the Company expects to procure raw materials further in advance, negotiate more favorable pricing, and improve manufacturing efficiencies, resulting in improved gross margins. The Company has already secured future strawberry raw material supply under executed procurement contracts at prices significantly lower than the raw material costs incurred for strawberry production during the first half of 2026. While the Company currently manufactures primarily to customer order, management believes that recently launched products, including the variety pack and strawberry product offerings, will transition to recurring production, enabling the Company to procure raw materials further in advance and, over time, improve manufacturing economics.
Our operating results for the current period continue
to reflect the ongoing scale-up of internal manufacturing operations. Production
levels have remained below normalized capacity during the scale-up phase. As a result, a portion of fixed manufacturing costs has not
been fully absorbed into inventory and has been recognized as idle capacity expense within operating expenses. As production volumes
and utilization increase, we expect improved fixed-cost absorption and greater operating leverage.
Operating
expenses primarily reflect costs associated with supporting
our Peru Facility, growth initiatives,initiatives to establish new customer relationships,
distribution expansion and public company requirements. We continue to operate at a net loss and
with negative working capital. Future
operating performance will depend on revenue growth, production scale, cost management, availability of raw materials, product mix, working
capital efficiency and continued access to capital.
In
addition to gross margin calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), we use adjusted
gross margin, a non-GAAP supplemental measure to evaluate underlying manufacturing performance. Non-GAAP adjusted gross margin excludes
depreciation included in cost of goods sold and certain air freight costs incurred during the three and six months ended MarchJune 31,30, 2026 and 2025.
As of March 31, 2026 gross profit (GAAP) was $0.40 million versus adjusted gross profit (non-GAAP) of $0.54 million, and gross margin
was 15.4% compared to adjusted gross margin of 20.8%. As of March 31, 2025 gross profit (GAAP) was $0.53 million versus adjusted gross
profit (non-GAAP) of $0.84 million, and gross margin was 16.7% compared to adjusted gross margin of 26.7%.
For the three months ended June 30, 2026, gross profit (GAAP) was $96,825 versus adjusted gross profit (non-GAAP) of $0.37 million, and gross margin was 2.2% compared to adjusted gross margin of 8.3%. For the three months ended June 30, 2025 gross profit (GAAP) was $0.58 million versus adjusted gross profit (non-GAAP) of $0.8 million, and gross margin was 17.8% compared to adjusted gross margin of 24.3%.
For the six months ended June 30, 2026, gross profit (GAAP) was $0.5 million versus adjusted gross profit (non-GAAP) of $0.91 million, and gross margin was 7.0% compared to adjusted gross margin of 12.9%. For the six months ended June 30, 2025 gross profit (GAAP) was $1.1 million versus adjusted gross profit (non-GAAP) of $1.6 million, and gross margin was 17.2% compared to adjusted gross margin of 25.5%.
Gross margin and adjusted gross margin for the three-month period ended June 30, 2026 were also negatively impacted by the production of a bulk strawberry ingredient product and the delivery of a new product launched at Sam’s Club. The products incurred higher raw material costs due to a shortened procurement timeline, resulting in margins significantly below management’s long-term target margins for recurring products. Management expects margins to improve as repeat customer orders provide longer procurement lead times, enabling more efficient raw material sourcing and production planning and resulting in margins more consistent with the Company’s consumer packaged goods business.
We believe adjusted gross margin provides additional visibility into the underlying manufacturing economics of our operations by excluding certain non-cash depreciation and unusual air freight costs. As production continues to scale and customer orders transition from initial product launches to recurring production, we expect reported gross margin to improve through higher manufacturing throughput, greater operating efficiencies, and improved raw material procurement.
We
believe adjusted gross margin provides additional visibility into the underlying unit economics of our manufacturing model during this
scale-up phase. As the plant gains operating experience and throughput increases, we expect reported gross margin to improve as additional
products achieve manufacturing efficiency. Currently, a limited number of products are produced at or near optimal manufacturing efficiency,
while other products remain in earlier stages of production and optimization. New product introductions also begin at lower efficiency
levels as they transition from development into scaled production and improve over time.
A
reconciliation of gross profit (GAAP) to adjusted gross profit (non-GAAP),
and the related gross margin measures, for the threesix months
ended MarchJune 31,30, 2026 and 2025, is presented below:
Results
of Operations for the Three Months Ended MarchJune 31,30, 2026, and 2025
The
following table summarizes selected items from the statement of operations for the three months ended MarchJune 31,30, 2026, and 2025, respectively.
Our net revenue for the three months ended June 30, 2026 was $4.5 million, compared to $3.3 million for the three months ended June 30, 2025, an increase of $1.2 million, or 36%. Net revenue increased primarily due to sales of bulk strawberry ingredient and the launch of a new branded product variety at Sam’s Club. While the bulk ingredient product contributed meaningfully to revenue growth, it generated lower gross margins than the Company’s targeted recurring product margins.
Our net revenue for the three months ended March
31, 2026 was $2.6 million, compared to $3.2 million for the three months ended March 31, 2025, a decrease of $0.56 million, or 18%. The
decrease in revenue was primarily due to planned maintenance at the Peru Facility and the timing of a major customer order scheduled for
delivery in the second quarter. Production levels recovered by the end of the quarter, resulting in the highest monthly kilogram output
to date for the month of March 2026. Inventory increased from $2.4 million at December 31, 2025 to $4.0 million at March 31, 2026, or
69%, reflecting production in advance of the scheduled second quarter shipment.
Our
results may fluctuate period to period due
to the timing and size of customer orders, asproduct wellmix, asand the seasonal nature of raw material
harvest cycles.cycles, among other factors.
Cost of goods sold for the three months ended June 30, 2026 was $4.4 million, compared to $2.7 million for the three months ended June 30, 2025, an increase of $1.7 million, or 62%. Gross profit for the three months ended June 30, 2026 was $96,825, or 2.2% of net revenue, compared to $581,667, or 17.8% of net revenue. The increase in cost of goods sold relative to net revenue was primarily attributable to product mix, including the manufacture of a bulk strawberry ingredient product. Due to a compressed procurement timeline, the Company incurred significantly higher raw material costs for this product, resulting in gross margins below the Company’s long-term target margins for recurring products.
Cost of goods sold for the three months ended
March 31, 2026 was $2.2 million, compared to $2.6 million for the three months ended March 31, 2025, a decrease of $0.4 million, or 16%.
The decrease in cost of goods sold was primarily due to lower sales volumes during the period.
Gross profit for the three months ended March
31, 2026 was $0.4 million, or 15.4% of net revenue, compared to $0.5 million, or 16.7% of net revenue, for the three months ended March
31, 2025. The decrease in gross profit and gross margin was primarily due to lower sales volumes and a less favorable product mix, including
a higher proportion of lower-margin bulk ingredient sales, compared to the prior year period. Current margins continue to reflect early-stage
production inefficiencies.
General
and administrative expense for the three months ended March
31,June 30, 2026 was $0.86$1.2 million, compared to $0.39$0.85 million for the three months
June March 31,30, 2025, an increase of $0.47$0.35 million, or 123%.38%. The
increase was primarily related to idlecosts capacityassociated expense increased duringwith the threesettlement monthsof endedan
employment-related Marchlegal 31,matter 2026 due to unallocated fixed
overhead resulting from operatinginvolving the PeruCompany’s Facilityformer belowChief normalFinancial utilization levels. The facility began operations in December 2024, and
idle capacity was not measured as of March 31, 2025. As production volumes increase, a greater portion of these fixed costs are expected
to be absorbed into inventory.Officer.
The
largest components of our general and administrative expenses are
were plant idle capacity, employment-related legal settlement, research
and development, travel, sales commissions, and royalties as shown below.
Research
and development expense increased due
to continued product development activities. Sales commissions decreased consistentlydue withto lowerchanges in
customer sales volumes.Travelmix. Travel expense remained
relatively consistent, reflecting ongoing travel between the United States and Peru to
support operations.
Salaries
and wages for the three months ended MarchJune 31,30, 2026 were $0.66
$0.68 million, compared to $0.31$0.44 million for the prior year period, an increase
of $0.35$0.24 million, or 112%.55%. The increase was primarily dueattributable to
$0.24 millionincreases ofin stock-based compensation expense, astogether wellwith ashigher
payroll annualcosts wageassociated increases.with additional personnel to support the Company’s continued growth.
Professional
fees for the three months ended MarchJune 31,30, 2026 were $0.26$0.31 million, compared to $0.24$0.32 million for the three months ended MarchJune 31,30, 2025,
ana increasedecrease of $0.02$0.01 million, or 11%. The increase was primarily attributable to higher compensation for the Chief Financial Officer
under a consulting agreement.3%.
Shipping
and handling expense for the three months ended MarchJune 31,30, 2026 was $0.15$0.22 million, compared to $0.11$0.16 million for the three months ended
MarchJune 31,30, 2025, an increase of $0.04$0.06 million, or 46%.40%. The increase was primarily due to highermore shipping rates forcustomer deliveries toand customers.increased shipping
costs during the period.
Advertising
and promotions expense for the three
months ended MarchJune 31,30, 2026 was $0.08$0.28 million, compared to $0.13 million for the three months ended
June March 31,30, 2025, aan decreaseincrease of $0.05
$0.15 million, or 42%.124%. The decreaseincrease was primarily due to the timing of product demonstration programs
and inpromotional linecosts associated with lowerthe lunch of a new branded product sales
duringat theSam’s quarter.Club.
For
the three months ended MarchJune 31,30, 2026, other expense was $173,154,
$154,724, consisting of $174,903$184,551 of interest expense, partially offset by $1,749$29,768
of other income and $59 of interest income. Other income is the recognition of tariff reimbursements received related to previously paid
U.S. import duties. The Company received a portion of these reimbursements during the period and recognized the related income in accordance
with U.S. GAAP. For the three months ended MarchJune 31,30, 2025,
other expense was $273,211,$294,512, consisting of $278,347$301,112 of interest expense, partially
offset by $5,136$6,600 of interest income. Other expense decreased
by $100,057,$139,788, or 37%,47%, primarily due to lower interest expense following the
repayment of certain debt financing during 2025.
Net
loss for the three months ended MarchJune 31,
30, 2026 was $1.8$2.7 million, compared to $0.9$1.6 million for the three months ended MarchJune 31,30, 2025, an
increase of $0.9$1.1 million, or 95%.70%. The increase
in net loss was primarily dueattributable to lower sales and reduced gross marginprofit, inas discussed above, one-time
settlement of an employment-related legal matter involving the currentCompany’s quarter,former reflectingChief lowerFinancial production in JanuaryOfficer, and
February due to planned facility maintenance and an unfavorable sales mix. In addition, the Company incurred higher idle capacity costs
as it continued the build-out and ramp-up of the Peru Facility, with production remaining below normalized levels. Operating expenses
increased due to higher personnel costs
associated with increased headcount at the Peru Facility and higher stock-based compensation expense.
Operating results remain sensitivecontinue to be influenced by production volumes, capacity
utilization, utilizationproduct mix, and salesraw mix.material procurement.
Results of Operations for the Six Months Ended June 30, 2026, and 2025
The following table summarizes selected items from the statement of operations for the six months ended June 30, 2025, and 2024, respectively.
Net Revenue
Our net revenue for the six months ended June 30, 2026 was $7.1 million, compared to $6.5 million for the six months ended June 30, 2025, an increase of $0.6 million, or 10%. The increase in revenue was primarily due to sales of a bulk strawberry ingredient product and the launch of a new branded product variety at Sam’s Club. While the bulk ingredient product contributed meaningfully to revenue growth, it generated lower gross margins than the Company’s long-term target margins for recurring products.
Our results may fluctuate period to period due to the timing and size of customer orders, product mix, and the seasonal nature of raw material harvest cycles, among other factors.
Cost of Goods Sold and Gross Profit
Cost of goods sold for the six months ended June 30, 2026 was $6.6 million, compared to $5.3 million for the six months ended June 30, 2025, an increase of $1.3 million, or 23%. Gross profit for the six months ended June 30, 2026 was $0.5 million, or 7.0% of net revenue, compared to $1.1 million, or 17.2% of net revenue, for the six months ended June 30, 2025. The increase in cost of goods sold relative to net revenue was primarily attributable to product mix, including the manufacture of a bulk strawberry ingredient product. Due to a compressed procurement timeline, the Company incurred significantly higher raw material costs for this product, resulting in gross margins substantially below the Company’s long-term target margins for recurring products.
General and Administrative Expense
General and administrative expense for the six months ended June 30, 2026 was $2.0 million, compared to $1.2 million for the six months June 30, 2025, an increase of $0.8 million, or 64%. The increase was primarily related to an increase in idle capacity expense during the six months ended June 30, 2026 due to unallocated fixed overhead resulting from operating the Peru Facility below normal utilization levels. The facility began operations in December 2024, and idle capacity was not measured through March 31, 2025. Additionally, the Company incurred costs related to a settlement of an employment-related legal matter involving its former Chief Financial Officer.
The largest components of our general and administrative expenses were plant idle capacity, employment-related legal settlement, research and development, travel, sales commissions, and royalties as shown below.
Research and development expense increased due to continued product development activities. Sales commissions decreased due to changes in customer sales mix. Travel expense increased reflecting ongoing travel between the United States and Peru to support operations.
Royalties increased primarily due to higher production volumes on EnWave equipment.
Salaries and Wages
Salaries and wages for the six months ended June 30, 2026 were $1.3 million, compared to $0.75 million for the six months ended June 30, 2025, an increase of $0.55 million, or 79%. The increase was primarily attributable to increases in stock-based compensation expense, together with higher payroll costs associated with additional personnel to support the Company’s continued growth.
Professional Fees
Professional fees for the six months ended June 30, 2026 were $0.57 million, compared to $0.56 million for the six months ended June 30, 2025, an increase of $0.01 million, or 3%.
Shipping and Handling
Shipping and handling expense for the six months ended June 30, 2026 was $0.38 million, compared to $0.26 million for the six months ended June 30, 2025, an increase of $0.12 million, or 42%. The increase was primarily due to more customer deliveries and increased shipping costs during the period.
Advertising and Promotions
Advertising and promotions expense for the six months ended June 30, 2026 was $0.36 million, compared to $0.26 million for the six months ended June 30, 2025, an increase of $0.1 million, or 39%. The increase was primarily due to the timing of product demonstration programs and promotional costs associated with the lunch of a new branded product at Sam’s Club.
Other Income (Expense)
For the six months ended June 30, 2026, other expense was $327,878, consisting of $359,454 of interest expense, partially offset by $1,808 of interest income and $29,768 of other income. Other income is the recognition of tariff reimbursements received related to previously paid U.S. import duties. The Company received a portion of these reimbursements during the period and recognized the related income in accordance with U.S. GAAP. For the six months ended June 30, 2025, other expense was $567,723, consisting of $579,459 of interest expense, partially offset by $11,736 of interest income. Other expense decreased by $239,845, or 42%, primarily due to lower interest expense following the repayment of certain debt financing during 2025.
Net loss
Net loss for the six months ended June 30, 2026 was $4.5 million, compared to $2.5 million for the six months ended June 30, 2025, an increase of $2.0 million, or 79%. The increase in net loss was primarily attributable to lower gross profit, as discussed above, higher idle capacity costs, higher personnel costs associated with increased stock-based compensation expense, and costs related to the settlement of an employment-related legal matter involving the Company’s former Chief Financial Officer. Operating results continue to be influenced by production volumes, capacity utilization, product mix, and raw material procurement.
The
following table summarizes our total current assets, liabilities and working capital as of MarchJune 31,30, 2026 and December 31, 2025.
As
of MarchJune 31,30, 2026, we had negativeworking working
capital of $1.1$.24 million, compared to negative working capital of $0.6 million as of December 31, 2025.
The decrease inCompany’s working capital
was position at June 30, 2026 primarily drivenreflects bythe financing of rapid revenue growth. Higher sales
volumes increased inventory levels for anticipated second quarter deliveries, continued investmentinvestments in accounts receivable and inventory, while these working capital requirements were funded through increased
accounts payable and borrowings under the PeruCompany’s Facility
andpromissory ournote netwith loss.Kaufman Kapital.
To
date, our primary sources of capital have been
cash generated from the sales of our products, common stock sales, and debt and equity
financings. As of MarchJune 31,30, 2026, we had cash of
$0.9 $0.21 million, total liabilities of $11.2$12.8 million, and an accumulated deficit of $25.5 $28.2
million, compared to cash of $0.6 million, total
liabilities of $8.9 million, and an accumulated deficit of $23.7 million as of March December
31, 2025.
Subsequent
Financing Activities
Subsequent
to March 31, 2026, we borrowed $750,000 from Kaufman Kapital LLC (“Kaufman Kapital”) pursuant to a senior secured promissory
note that matures on January 28, 2027 and bears interest at 8% per annum. The obligations under the note are secured by a lien on substantially
all of our assets under an existing security agreement.
BOF insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 1 Form 4 filing (1 insider, 1 trade date, 45 shares, about $152) and open-market sales in 3 filings (2 insiders, 3 trade dates, 1,659,457 shares, about $5.2M). Net open-market shares: -1,659,412 (purchases minus sales); net value about -$5.2M.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-06-16 | Jones Byron Riche |
Open-market purchase | 45 | $3.38 | $152 |
| 2026-06-02 | Kaufman Daniel Louis |
Open-market sale | 1,189,676 | $3.06 | $3.6M |
| 2026-05-12 | Kaufman Kapital Llc |
Open-market sale | 213,830 | $3.26 | $697.1K |
| 2026-05-07 | Kaufman Daniel Louis |
Option exercise | 500,000 | $1.50 | $750.0K |
| 2026-05-05 | Kaufman Daniel Louis |
Open-market sale | 255,951 | $3.29 | $842.1K |
Well-known investors holding BOF (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 111,400 | $512.4K | 0.0% | Added 39% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 109,559 | $504.0K | 0.0% | Added 650% |