UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to ________.

Commission File Number 001-41723

BRANCHOUT FOOD INC.

(Exact name of registrant as specified in its charter)

Nevada

81-3980472

(State or other jurisdiction

of incorporation or organization)

(IRS Employer

Identification No.)

205 SE Davis Avenue, Bend, Oregon 97702

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (844) 263-6637

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of exchange on which registered
Common Stock, $0.001 par value		BOF		Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.

Title or class		Shares outstanding as of May 14, 2025
Common Stock, $0.001 par value		9,584,769

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss	4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity	5

	Condensed Statements of Cash Flows	6

	Condensed Consolidated Notes to Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

PART II.	OTHER INFORMATION	30

Item 1.	Legal Proceedings	30

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	30

Item 3.	Defaults Upon Senior Securities	30

Item 4.	Mine Safety Disclosures	30

Item 5.	Other Information	30

Item 6.	Exhibits	31

SIGNATURES		33

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRANCHOUT FOOD INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2025			2024
	(Unaudited)
Assets
Current assets:
Cash	$	2,386,381		$	2,329,452
Accounts receivable, net		1,453,567			418,463
Advances on inventory purchases		233,093			123,792
Inventory		1,589,867			1,930,535
Other current assets		128,697			114,372
Total current assets		5,791,605			4,916,614

Property and equipment, net		4,281,227			4,056,299
Right-of-use assets		1,528,422			1,575,497
Other assets		2,149,947			1,947,483
Note receivable		359,982			359,982

Total Assets	$	14,111,183		$	12,855,875

Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable	$	1,137,566		$	1,194,079
Accrued expenses		626,683			333,614
Other current liabilities		456,714			912,000
Convertible notes payable, related parties, net of discounts		3,349,832			3,333,413
Notes payable, current portion		167,412			251,647
Notes payable, related parties		2,760,000			2,760,000
Notes payable, current portion		2,760,000			2,760,000
Finance lease liability, current portion		30,054			29,243
Total current liabilities		8,528,261			8,813,996

Notes payable, net of current portion		34,500			34,500
Operating lease liability, net of current portion		1,583,120			1,573,035
Finance lease liability, net of current portion		84,263			92,761

Total Liabilities		10,230,144			10,514,292

Stockholders’ Equity:
Preferred stock, $0.001 par value, 8,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock, $0.001 par value, 80,000,000 shares authorized; 9,584,769 and 8,424,600 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively		9,585			8,425
Additional paid-in capital		22,352,265			19,903,796
Accumulated other comprehensive loss		(372	)		(8,581	)
Accumulated deficit		(18,480,439	)		(17,562,057	)
Total Stockholders’ Equity		3,881,039			2,341,583

Total Liabilities and Stockholders’ Equity	$	14,111,183		$	12,855,875

See accompanying notes to financial statements.

BRANCHOUT FOOD INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)


	For the Three Months Ended
	March 31,
	2025			2024

Net revenue	$	3,193,522		$	1,467,016
Cost of goods sold		2,641,007			1,183,428
Gross profit		552,515			283,588

Operating expenses:
General and administrative		685,779			319,736
Salaries and wages		314,242			598,286
Professional fees		235,034			390,666
Total operating expenses		1,235,055			1,308,688

Operating loss		(682,540	)		(1,025,100	)

Other income (expense):
Interest income		5,136			2,877
Interest expense		(240,978	)		(28,744	)
Total other income (expense)		(235,842	)		(25,867	)

Net loss	$	(918,382	)	$	(1,050,967	)

Other comprehensive gain:
Gain on foreign currency translation	$	8,209		$	-

Net other comprehensive loss	$	(910,173	)	$	(1,050,967	)

Weighted average common shares outstanding - basic and diluted		8,745,747			4,109,467
Net loss per common share - basic and diluted	$	(0.11	)	$	(0.26	)

See accompanying notes to financial statements.

BRANCHOUT FOOD INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

	Shares		Amount		Shares		Amount		Capital		Payable		Income			Deficit			Equity
													Accumulated
									Additional				Other						Total
	Preferred Stock				Common Stock				Paid-In		Subscriptions		Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital		Payable		Loss			Deficit			Equity
Balance, December 31, 2024		-	$	-		8,424,600	$	8,425	$	19,903,796	$	-	$	(8,581	)	$	(17,562,057	)	$	2,341,583

Common stock issued pursuant to ATM program		-		-		1,120,422		1,120		2,406,328		-		-			-			2,407,448

Exercise of underwriters’ warrants		-		-		39,747		40		38,117		-		-			-			38,157

Stock options issued for services		-		-		-		-		4,024		-		-			-			4,024

Gain on foreign currency translation		-		-		-		-		-		-		8,209			-			8,209

Net loss		-		-		-		-		-		-		-			(918,382	)		(918,382	)

Balance, March 31, 2025		-	$	-		9,584,769	$	9,585	$	22,352,265	$	-	$	(372	)	$	(18,480,439	)	$	3,881,039

	Shares		Amount		Shares		Amount		Capital		Payable		Income		Deficit			Equity
													Accumulated
									Additional				Other					Total
	Preferred Stock				Common Stock				Paid-In		Subscriptions		Comprehensive		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Capital		Payable		Loss		Deficit			Equity
Balance, December 31, 2023		-	$	-		4,044,252	$	4,044	$	15,016,973	$	-	$	-	$	(12,810,541	)	$	2,210,476
Balance		-	$	-		4,044,252	$	4,044	$	15,016,973	$	-	$	-	$	(12,810,541	)	$	2,210,476

Common stock issued for services		-		-		77,094		77		113,498		36,019		-		-			149,594

Stock options issued for services		-		-		-		-		376,384		-		-		-			376,384

Common stock warrants granted to note holders pursuant to debt financing		-		-		-		-		8,861		-		-		-			8,861

Net loss		-		-		-		-		-		-		-		(1,050,967	)		(1,050,967	)

Balance, March 31, 2024		-	$	-		4,121,346	$	4,121	$	15,515,716	$	36,019	$	-	$	(13,861,508	)	$	1,694,348
Balance		-	$	-		4,121,346	$	4,121	$	15,515,716	$	36,019	$	-	$	(13,861,508	)	$	1,694,348

See accompanying notes to financial statements.

BRANCHOUT FOOD INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	2025			2024
	For the Three Months Ended
	March 31,
	2025			2024
Cash flows from operating activities
Net loss	$	(918,382	)	$	(1,050,967	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense		152,355			56,336
Loss on disposal of property and equipment		558			-
Amortization of debt discounts		16,419			14,666
Common stock issued for services		-			149,594
Options and warrants issued for services		4,024			376,384
Decrease (increase) in assets:
Accounts receivable		(1,035,104	)		135,573
Advances on inventory purchases		(109,301	)		(319,974	)
Inventory		340,668			218,740
Other current assets		(14,325	)		(31,437	)
Right-of-use asset		47,075			8,454
Other assets		(202,464	)		-
Increase (decrease) in liabilities:
Accounts payable		(56,513	)		14,194
Accounts payable, related parties		-			12,000
Accrued expenses		(162,217	)		(87,141	)
Operating lease liability		10,085			-
Net cash used in operating activities		(1,927,122	)		(503,578	)

Cash flows from investing activities
Purchase of property and equipment		(377,841	)		(50,000	)
Payments received on notes receivable		-			9,900
Net cash used in investing activities		(377,841	)		(40,100	)

Cash flows from financing activities
Payment of deferred offering costs		(15,610	)		-
Repayment of notes payable		(84,235	)		(200,000	)
Proceeds received on notes payable, related parties		-			345,000
Principal payments on finance lease		(7,687	)		(7,411	)
Proceeds from sale of common stock pursuant to ATM program		2,423,058			-
Proceeds from exercise of underwriters’ warrants		38,157			-
Net cash provided by financing activities		2,353,683			137,589

Effect of exchange rate changes on cash		8,209			-

Net increase (decrease) in cash		56,929			(406,089	)
Cash - beginning of period		2,329,452			657,789
Cash - ending of period	$	2,386,381		$	251,700

Supplemental disclosures:
Interest paid	$	63,621		$	14,617
Income taxes paid	$	-		$	-

Non-cash investing and financing transactions:
Relative fair value of warrants issued as a debt discount	$	-		$	8,861

See accompanying notes to financial statements.

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Nature of Business and Significant Accounting Policies

Nature of Business

BranchOut Food Inc. (“BranchOut,” the “Company,” “we,” “our” or “us”) was incorporated as Avochips Inc. in Oregon on February 21, 2017, and converted into AvoLov, LLC, an Oregon limited liability company, on November 2, 2017. On November 19, 2021, the Company converted from an Oregon limited liability company into BranchOut Food Inc., a Nevada corporation. The Company is engaged in the development, marketing, sale, and distribution of plant-based, dehydrated fruit and vegetable snacks and powders. The Company’s products are currently manufactured at its new production facility that commenced production in Pisco Peru in December 2024, and is supported by contract manufacturers, as necessary. The Company’s products are manufactured using a new proprietary dehydration technology licensed by the Company. The Company’s customers are primarily located throughout the United States.

Basis of Accounting

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and as required by pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of items of a normal and recurring nature) necessary to present fairly the financial position as of March 31, 2025, the results of operations for the three months ended March 31, 2025 and 2024, and cash flows for the three months ended March 31, 2025 and 2024. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the full year. The balance sheet as of December 31, 2024 was derived from our audited financial statements. The accompanying condensed consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements for the year ended December 31, 2024, which were included in our Annual Report on Form 10-K. The Company follows the same accounting policies in the preparation of interim reports.

When preparing financial statements in conformity with GAAP, we must make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the following entities, all of which were under common control and ownership at March 31, 2025:

Name of Entity	Jurisdiction	Relationship
BranchOut Food Inc.⁽¹⁾	Nevada, U.S.	Parent
BranchOut Food Sucursal Peru⁽²⁾	Peru	Subsidiary

⁽¹⁾	Holding company in the form of a corporation.
⁽²⁾	Peruvian wholly-owned subsidiary of BranchOut Food Inc. established on April 26, 2024 in the form of a branch.

The consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. The Company’s headquarters are located in Bend, Oregon.

Going Concern

As shown in the accompanying condensed consolidated financial statements, as of March 31, 2025, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $18,480,439, with negative working capital of $2,736,656, which may not be sufficient to sustain operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management is actively pursuing new customers to increase revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. Management believes these factors will contribute to achieving profitability. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. These condensed consolidated financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities, that might be necessary should the Company be unable to continue as a going concern.

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

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

The Company discloses the fair value of certain assets and liabilities in accordance with ASC 820 – Fair Value Measurement and Disclosures (ASC 820). Under ASC 820-10-05, the FASB establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts receivable, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate fair value primarily due to the short-term nature of the instruments.

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 March 31, 2025 or December 31, 2024.

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 $1,628,846 and $1,555,223 in excess of FDIC insured limits on March 31, 2025 and December 31, 2024, 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 March 31, 2025 and December 31, 2024.

Inventory

The Company’s products consist of pre-packaged and bulk-dried fruit and vegetable-based snacks, powders and ingredients developed at its production facility in Peru, and purchased products from contract-manufacturers in Chile and/or Peru. Raw materials consist of purchased fruits and vegetables and 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, work in progress and finished goods are stated at the lower of cost or net realizable value using the average cost valuation method, and consisted of the following as of March 31, 2025 and December 31, 2024:

Schedule of Inventory

	March 31,		December 31,
	2025		2024
Raw materials	$	223,385	$	464,681
Work in progress		683,264		-
Finished goods		683,218		1,465,854
Total inventory		1,589,867		1,930,535

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

The Company had prepaid inventory advances on product in the amounts of $233,093 and $123,792 as of March 31, 2025 and December 31, 2024, respectively. Advances of 70% of estimated finished product costs are made to enable manufacturers to purchase raw materials necessary to produce finished products. The remaining 30% of finished product costs are 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:

Schedule of Estimated Useful Lives

Office equipment			3 years
Furniture and fixtures			5 years
Equipment and machinery			5-10 years

Repairs and maintenance expenditures are charged to operations as incurred. Major improvements and replacements, which extend the useful life of an asset, are capitalized, and depreciated over the remaining estimated useful life of the asset. When assets are retired or sold, the cost and related accumulated depreciation are eliminated, and any resulting gain or loss is reflected in operations.

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 $40,585 of royalty payments made during the three months ended March 31, 2025, and none during the three months ended March 31, 2024. 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 See Note 14, below.

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.

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customer. Under ASC 606, the Company recognizes revenue from the sale of its plant-based snack products in accordance with a five-step model in which the Company evaluates the transfer of promised goods or services and recognizes revenue when customers obtain control of promised goods or services in an amount that reflects the consideration which the Company expects to be entitled to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The Company has elected, as a practical expedient, to account for the shipping and handling as fulfillment costs, rather than as separate performance obligations, and the related costs are recorded as selling expenses in general and administrative expenses in the statement of operations. Revenue is reported net of applicable provisions for discounts, returns and allowances. Methodologies for determining these provisions are dependent on customer pricing and promotional practices. The Company records reductions to revenue for estimated product returns and pricing adjustments in the same period that the related revenue is recorded. These estimates are based on industry-based historical data, historical sales returns, if any, analysis of credit memo data, and other factors known at the time.

The Company’s sales are predominantly generated from the sale of finished products to retailers, and to a lesser extent, direct to consumers through third party website platforms. These sales contain a single performance obligation, and revenue is recognized at a single point in time when ownership, risks and rewards transfer. Typically, this occurs when the goods are received by the retailer or customer, or when the title of goods is exchanged. Revenues are recognized in an amount that reflects the net consideration the Company expects to receive in exchange for the goods.

The Company promotes its products with advertising, consumer incentives and trade promotions. These programs include discounts, slotting fees, coupons, rebates, in-store display incentives and volume-based incentives. Customer trade promotion and consumer incentive activities are recorded as a reduction to the transaction price based on amounts estimated as being due to customers and consumers at the end of a period. The Company derives these estimates based principally on historical utilization and redemption rates. The Company does not receive a distinct service in relation to the advertising, consumer incentives and trade promotions. Payment terms in the Company’s invoices are based on the billing schedule established in contracts and purchase orders with customers.

Expenses such as slotting fees, sales discounts, and allowances are accounted for as a direct reduction of revenues as follows for the three months ended March 31, 2025 and 2024:

Schedule of Revenue


	For the Three Months Ended
	March 31,
	2025		2024

Revenue	$	3,232,291	$	1,470,836
Less: slotting, discounts, and allowances		38,769		3,820
Net revenue	$	3,193,522	$	1,467,016

Cost of Goods Sold

Cost of goods sold represents costs directly related to the purchase, production and manufacturing of the Company’s products. Costs include purchase costs, product development, freight-in, packaging, and print production costs.

Advertising Costs

The Company expenses the cost of advertising and promotions as incurred. Advertising and promotions expense was $156,226 and $57,059 for the three months ended March 31, 2025 and 2024, respectively.

Stock-Based Compensation

The Company accounts for equity instruments issued to employees and non-employees in accordance with the provisions of ASC 718 Stock Compensation (“ASC 718”). All transactions in which the consideration provided in exchange for the purchase of goods or services consists of the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

The Company incurred stock-based compensation of $4,024 and $525,978 for the three months ended March 31, 2025 and 2024, respectively.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.

Recently Adopted Accounting Standards

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure.” The ASU updated reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance. The Company adopted ASU No. 2023-07 during the year ended December 31, 2024. See Note 19 “Segment Reporting” in the accompanying Notes to the Consolidated Financial Statements for additional information.

Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments in this ASU add specific requirements for income tax disclosures to improve transparency and decision usefulness. The guidance in ASU 2023-09 requires that public business entities disclose specific categories in the income tax rate reconciliation and provide additional qualitative information for reconciling items that meet a quantitative threshold. In addition, the amendments in ASU 2023-09 require that all entities disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes and disaggregated by individual jurisdictions. The ASU also includes other disclosure amendments related to the disaggregation of income tax expense between federal, state and foreign taxes. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis and retrospective application is permitted. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosures.

In November 2024, the FASB issued Accounting Standards Update (“ASU”) 2024-03 and in January 2025, the FASB issued ASU 2025-01, “Income Statement - Reporting Comprehensive Income -Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” The guidance requires disclosures about specific expense categories, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization and selling expenses. The ASU is effective in the first annual reporting period beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently assessing the effect that adoption of this guidance will have on its Consolidated Financial Statements.

Note 2 – Related Party Transactions

Kaufman Convertible Note

On July 15, 2024, the Company entered into a Securities Purchase Agreement (as amended, the “SPA”) with Daniel L. Kaufman, pursuant to which Mr. Kaufman agreed to purchase from the Company, in a private placement (i) a 12% Senior Secured Convertible Promissory Note in the principal amount of up to $3,400,000 (the “Convertible Note”), convertible into shares of the Company’s common stock at a fixed price of $0.7582 per share of common stock, a (ii) a warrant to purchase 1,000,000 shares of common stock at an exercise price of $1.00 per share (the “$1.00 Warrant”), and (iii) a warrant to purchase 500,000 shares of common stock at an exercise price of $1.50 per share (the “$1.50 Warrant” and, together with the $1.00 Warrant, the “Warrants” and together with the Convertible Note, the “Purchased Securities”), in consideration of an initial loan in the principal amount of $2,000,000 (the “Initial Loan”) made to the Company under the Convertible Note, subject to the terms and conditions thereof. On July 19, 2024, the Company, Mr. Kaufman and Kaufman Kapital LLC (“Kaufman Kapital”) entered into an amendment to the SPA, which among other things, replaced Mr. Kaufman with Kaufman Kapital as the “Investor” under the SPA.

On July 24, 2024, the Company issued the Purchased Securities to Kaufman Kapital in consideration of making the Initial Loan to the Company. On December 9, 2024, Kaufman Kapital made an additional loan to the Company under the Convertible Note in the amount of $1,400,000.

The Convertible Note matures on the earlier of (i) December 31, 2025, (ii) the sale by the Company of $5,000,000 of equity or debt securities in a single transaction or series of related transactions (excluding certain specified transactions), or (iii) the closing of a change of control transaction as provided in the Convertible Note. Loans outstanding under the Convertible Note bear interest at an initial rate of 12% per annum, and together with accrued principal are convertible into common stock.

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

The Company’s obligations under the Convertible Note are secured by a lien granted to Kaufman Kapital on substantially all of the Company’s assets pursuant to a Security Agreement entered between the Company and Kaufman Kapital (the “Security Agreement”). In addition, the Convertible Note includes affirmative and negative covenants, events of defaults and other terms and conditions, customary in transactions of this nature.

Kaufman Promissory Note

On August 30, 2024, the Company borrowed $1,200,000 from Kaufman Kapital pursuant to a Senior Secured Promissory Note in the principal amount of $1,200,000 (the “Note”) issued by the Company to Kaufman Kapital. The Note matures on June 30, 2025, as amended. The loan under the Note bears interest at a rate of 15% per annum. The Company’s obligations under the Note are secured by a lien on substantially all of the Company’s assets pursuant to the Security Agreement. In addition, the Note includes affirmative and negative covenants, events of defaults and other terms and conditions, customary in transactions of this nature.

Eagle Vision Promissory Notes

In connection with the sale of the Purchased Securities to Kaufman Kapital LLC under the SPA, the Company entered into an Omnibus Amendment to Note Documents with substantially all of the holders (the “Holders”) of the Company’s Senior Notes and Warrants issued under that certain Subscription Agreement dated as of January 10, 2024, as amended, pursuant to which, among other things, (i) the exercise price of the Warrants issued to the Holders was reduced from $2.00 to $1.00, (ii) the outside maturity date of the Senior Notes held by the Holders was extended from December 31, 2024 to December 31, 2025 (subject to further extension in the event the maturity date of the Convertible Note is extended), (iii) the Company’s obligation to make payments of principal under the Senior Notes held by the Holders beginning July 1, 2024 has been eliminated, and instead all obligations of the Company under such Senior Notes will be due in one lump sum on the maturity date of the Senior Notes, and (iv) the Company’s obligations under the Convertible Note and liens granted to the holder thereof, will be pari passu with the Company’s obligations under the Senior Notes held by the Holders and liens granted to the holders thereof. The amendment warrants resulted in $89,949 of additional interest expense.

On various dates from January 9, 2024 through May 22, 2024, the Company completed the sale of an aggregate $1,675,000 of Senior Secured Promissory Notes (“Senior Notes”) and Warrants (“Warrants”) to purchase an aggregate of 518,750 shares of the Company’s common stock, to a group of Investors (“Investors”) led by Eagle Vision Fund LP (“Eagle Vision”), an affiliate of John Dalfonsi, CFO of the Company, pursuant to a subscription agreement between the Company and the Investors.

Pursuant to the subscription agreements, Eagle Vision was paid aggregate cash fees in the amount of $177,500 upon the closing of the transactions for due diligence fees in consideration of services rendered and to be rendered by Eagle Vision to the Company and the investors, including conducting due diligence with respect to the Company, monitoring the performance by the Company of its obligations under the senior secured notes, servicing the interest and principal payments for purchasers, engaging in ongoing discussions with the Company’s management regarding the Company’s operations and financial condition, acting as collateral agent, and evaluating financial and non-financial information related to the Company, which services are to be provided by Eagle Vision until the senior secured notes have been paid in full, and an aggregate $35,000 of legal fees was paid to Investors’ counsel.

The Notes mature on the earlier of December 31, 2025, or the occurrence of a Qualified Subsequent Financing or Change of Control (as such terms are defined in the Subscription Agreement) and bear interest at a rate of 15% per annum. In addition, the Notes are subject to covenants, events of defaults and other terms and conditions set forth in the Subscription Agreement. The Company’s obligations under the Notes are secured by liens on substantially all of the Company’s assets pursuant to the terms of a Security Agreement between the Company and the Investors.

Each Warrant is exercisable for a 10-year period at an exercise price of $1.00 per share.

Note 3 – Fair Value of Financial Instruments

Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

The Company has cash, notes receivable, derivative liabilities and debts that must be measured under the fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of March 31, 2025 and December 31, 2024:

	Level 1		Level 2			Level 3
	Fair Value Measurements at March 31, 2025
	Level 1		Level 2			Level 3
Assets
Cash	$	2,386,381	$	-		$	-
Right-of-use-asset		-		-			1,528,422
Notes receivable		-		359,982			-
Total assets		2,386,381		359,982			1,528,422
Liabilities
Convertible notes payable, related parties net of $50,168 of discounts		-		-			3,349,832
Notes payable		-		201,912			-
Notes payable, related parties		-		2,760,000			-
Lease liabilities		-		-			1,697,437
Total liabilities		-		2,961,912			5,047,269
Total assets and liabilities	$	2,386,381	$	(2,601,930	)	$	(3,518,847	)

Fair Value Measurements at December 31, 2024

Level 1

Level 2

Level 3

Assets

SEC Form 10-Q filed by BranchOut Food Inc.