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 June 30, 2024

 

OR

 

☐	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 August 14, 2024
Common Stock, $0.001 par value		6,792,709

 

 

 

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 Income	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	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II.	OTHER INFORMATION	28
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
SIGNATURES		30

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

BRANCHOUT FOOD INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		June 30,				December 31,
		2024				2023
			(Unaudited)
Assets
Current assets:
Cash		$	936,061			$	657,789
Accounts receivable			389,493				635,549
Advances on inventory purchases			866,244				-
Inventory			273,983				336,805
Other current assets			120,126				48,100
Total current assets			2,585,907				1,678,243
Property and equipment, net			1,378,659				914,999
Right-of-use asset			2,041,084				147,228
Other asset			275,000				-
Note receivable			374,728				384,628
Total Assets		$	6,655,378			$	3,125,098
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	1,078,046			$	382,948
Accrued expenses			73,910				165,244
Notes payable, current portion			-				200,000
Notes payable, related parties, net of discounts			86,778				-
Notes payable, current portion			86,778				-
Operating lease liability, current portion			11,547				-
Finance lease liability, current portion			32,640				30,901
Total current liabilities			1,282,921				779,093
Notes payable, net of current portion			34,500				34,500
Notes payable, related parties, net of discounts, net of current portion			1,340,692				-
Notes payable, net of current portion			1,340,692				-
Operating lease liability, net of current portion			1,929,936				-
Finance lease liability, net of current portion			84,263				101,029
Total Liabilities			4,672,312				914,622
Stockholders’ Equity:
Preferred stock, $0.001 par value, 8,000,000 shares authorized; no shares issued and outstanding			-				-
Common stock, $0.001 par value, 80,000,000 shares authorized; 6,009,671 and 4,044,252 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively			6,010				4,044
Additional paid-in capital			16,781,060				15,016,973
Accumulated other comprehensive income			58				-
Accumulated deficit			(14,804,062	)			(12,810,541	)
Total Stockholders’ Equity			1,983,066				2,210,476
Total Liabilities and Stockholders’ Equity		$	6,655,378			$	3,125,098

 

See accompanying notes to financial statements.

 

 

BRANCHOUT FOOD INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2024				2023				2024				2023
Net revenue		$	1,362,986			$	343,065			$	2,830,002			$	440,405
Cost of goods sold			1,214,227				361,461				2,397,655				488,443
Gross profit (loss)			148,759				(18,396	)			432,347				(48,038	)
Operating expenses:
General and administrative			321,201				141,031				640,937				321,931
Salaries and wages			349,597				436,238				947,883				688,048
Professional fees			304,376				158,205				695,042				302,346
Total operating expenses			975,174				735,474				2,283,862				1,312,325
Operating loss			(826,415	)			(753,870	)			(1,851,515	)			(1,360,363	)
Other income (expense):
Interest income			2,818				2,911				5,695				5,756
Interest expense			(118,957	)			(222,551	)			(147,701	)			(395,996	)
Total other income (expense)			(116,139	)			(219,640	)			(142,006	)			(390,240	)
Net loss		$	(942,554	)		$	(973,510	)		$	(1,993,521	)		$	(1,750,603	)
Other comprehensive income:
Gain on foreign currency translation		$	58			$	-			$	58			$	-
Net other comprehensive income		$	(942,496	)		$	(973,510	)		$	(1,993,463	)		$	(1,750,603	)
Weighted average common shares outstanding - basic and diluted			4,268,183				1,642,995				4,188,825				1,423,103
Net loss per common share - basic and diluted		$	(0.22	)		$	(0.59	)		$	(0.48	)		$	(1.23	)

 

See accompanying notes to financial statements.

 

 

BRANCHOUT FOOD INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

		For the Three Months Ended June 30, 2024
																										Accumulated
		Preferred Stock								Common Stock								Additional Paid-In				Subscriptions				Other Comprehensive				Accumulated				Total Stockholders’
		Shares				Amount				Shares				Amount				Capital				Payable				Income				Deficit				Equity
Balance, March 31, 2024			-			$	-				4,121,346			$	4,121			$	15,515,716			$	36,019			$	-			$	(13,861,508	)		$	1,694,348
Common stock issued pursuant to secondary public offering			-				-				1,750,000				1,750				999,175				-				-				-				1,000,925
Common stock issued for services			-				-				138,325				139				176,371				(36,019	)			-				-				140,491
Stock options issued for services			-				-				-				-				17,751				-				-				-				17,751
Common stock warrants granted to note holders pursuant to debt financing			-				-				-				-				72,047				-				-				-				72,047
Gain on foreign currency translation			-				-				-				-				-				-				58				-				58
Net loss			-				-				-				-				-				-				-				(942,554	)			(942,554	)
Balance, June 30, 2024			-			$	-				6,009,671			$	6,010			$	16,781,060			$	-			$	58			$	(14,804,062	)		$	1,983,066

 

		For the Three Months Ended June 30, 2023
																										Accumulated
																		Additional								Other								Total
		Preferred Stock								Common Stock								Paid-In				Subscriptions				Comprehensive				Accumulated				Stockholders’
		Shares				Amount				Shares				Amount				Capital				Payable				Income				Deficit				Equity
Balance, March 31, 2023			-			$	-				1,200,769			$	1,201			$	3,794,348			$	-			$	-			$	(9,661,924	)		$	(5,866,375	)
Common stock issued pursuant to initial public offering			-				-				1,190,000				1,190				4,940,856				-				-				-				4,942,046
Stock options issued for services			-				-				-				-				18,046				-				-				-				18,046
Common stock issued for debt conversions			-				-				1,572,171				1,572				6,027,632				-				-				-				6,029,204
Common stock warrants granted to note holders pursuant to debt financing			-				-				-				-				46,090				-				-				-				46,090
Net loss			-				-				-				-				-				-				-				(973,510	)			(973,510	)
Balance, June 30, 2023			-			$	-				3,962,940			$	3,963			$	14,826,972			$	-			$	-			$	(10,635,434	)		$	4,195,501

 

		For the Six Months Ended June 30, 2024
																										Accumulated
																		Additional								Other								Total
		Preferred Stock								Common Stock								Paid-In				Subscriptions				Comprehensive				Accumulated				Stockholders’
		Shares				Amount				Shares				Amount				Capital				Payable				Income				Deficit				Equity
Balance, December 31, 2023			-			$	-				4,044,252			$	4,044			$	15,016,973			$	-			$	-			$	(12,810,541	)		$	2,210,476
Common stock issued pursuant to secondary public offering			-				-				1,750,000				1,750				999,175				-				-				-				1,000,925
Common stock issued for services			-				-				215,419				216				289,869				-				-				-				290,085
Stock options issued for services			-				-				-				-				394,135				-				-				-				394,135
Common stock warrants granted to note holders pursuant to debt financing			-				-				-				-				80,908				-				-				-				80,908
Gain on foreign currency translation			-				-				-				-				-				-				58				-				58
Net loss			-				-				-				-				-				-				-				(1,993,521	)			(1,993,521	)
Balance, June 30, 2024			-			$	-				6,009,671			$	6,010			$	16,781,060			$	-			$	58			$	(14,804,062	)		$	1,983,066

 

		For the Six Months Ended June 30, 2023
																										Accumulated
																		Additional								Other								Total
		Preferred Stock								Common Stock								Paid-In				Subscriptions				Comprehensive				Accumulated				Stockholders’
		Shares				Amount				Shares				Amount				Capital				Payable				Income				Deficit				Equity
Balance, December 31, 2022			-			$	-				1,200,769			$	1,201			$	3,743,902			$	-			$	-			$	(8,884,831	)		$	(5,139,728	)
Balance			-			$	-				1,200,769			$	1,201			$	3,743,902			$	-			$	-			$	(8,884,831	)		$	(5,139,728	)
Common stock issued pursuant to initial public offering			-				-				1,190,000				1,190				4,940,856				-				-				-				4,942,046
Stock options issued for services			-				-				-				-				68,492				-				-				-				68,492
Common stock issued for debt conversions			-				-				1,572,171				1,572				6,027,632				-				-				-				6,029,204
Common stock warrants granted to note holders pursuant to debt financing			-				-				-				-				46,090				-				-				-				46,090
Net loss			-				-				-				-				-				-				-				(1,750,603	)			(1,750,603	)
Balance, June 30, 2023			-			$	-				3,962,940			$	3,963			$	14,826,972			$	-			$	-			$	(10,635,434	)		$	4,195,501
Balance			-			$	-				3,962,940			$	3,963			$	14,826,972			$	-			$	-			$	(10,635,434	)		$	4,195,501

 

See accompanying notes to financial statements.

 

 

BRANCHOUT FOOD INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		For the Six Months Ended
		June 30,
		2024				2023
Cash flows from operating activities
Net loss		$	(1,993,521	)		$	(1,750,603	)
Adjustments to reconcile net loss to
net cash used in operating activities:
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense			112,671				111,581
Amortization of debt discounts			92,168				46,090
Common stock issued for services			290,085				-
Options and warrants issued for services			394,135				68,492
Decrease (increase) in assets:
Accounts receivable			246,056				(156,488	)
Advances on inventory purchases			(866,244	)			(821,753	)
Inventory			62,822				37,921
Other current assets			(72,026	)			(218,123	)
Right-of-use asset			49,502				4,943
Other assets			(275,000	)			-
Increase (decrease) in liabilities:
Accounts payable			695,098				(56,558	)
Accounts payable, related parties			-				15,750
Accrued expenses			(91,334	)			(80,976	)
Operating lease liability			(1,875	)			-
Net cash used in operating activities			(1,357,463	)			(2,799,724	)
Cash flows from investing activities
Purchase of property and equipment			(576,331	)			(10,100	)
Payments received on notes receivable			9,900				-
Net cash used in investing activities			(566,431	)			(10,100	)
Cash flows from financing activities
Payment of deferred offering costs			(399,075	)			(740,290	)
Proceeds received on convertible notes payable, related parties			-				25,000
Proceeds received on convertible notes payable, unrelated parties			-				442,500
Proceeds received on notes payable			-				370,000
Repayment of notes payable			(200,000	)			(2,420,000	)
Proceeds received on notes payable, related parties			1,416,210				-
Repayments on revolving line of credit			-				(48,791	)
Principal payments on finance lease			(15,027	)			(4,248	)
Proceeds from sale of common stock			1,400,000				6,226,000
Net cash provided by financing activities			2,202,108				3,850,171
Effect of exchange rate changes on cash			58				-
Net increase in cash			278,272				1,040,347
Cash and restricted cash - beginning of period			657,789				548,447
Cash - ending of period		$	936,061			$	1,588,794
Supplemental disclosures:
Interest paid		$	56,010			$	397,059
Income taxes paid		$	-			$	-
Non-cash investing and financing transactions:
Relative fair value of warrants issued as a debt discount		$	80,908			$	46,090
Relative fair value of shares issued on debt conversions		$	-			$	6,029,204
Initial recognition of right-of-use assets and lease liabilities		$	1,943,358			$	168,320

 

See accompanying notes to financial statements.

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED CONSOLIDATED 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 for it by contract manufacturers based in South America and North America that produce dehydrated fruit and vegetable products for us using a new proprietary dehydration technology that the Company licenses from a third party. 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 June 30, 2024, the results of operations for the three and six months ended June 30, 2024 and 2023, and cash flows for the six months ended June 30, 2024 and 2023. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full year. The balance sheet as of December 31, 2023 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, 2023, 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 June 30, 2024:

 

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. 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.

 

Reclassifications

 

Certain reclassifications have been made to the prior years’ financial statements to conform to current year presentation. These reclassifications had no effect on previously reported results of operations or retained earnings.

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Going Concern

 

As shown in the accompanying condensed consolidated financial statements, as of June 30, 2024, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $14,804,062, with working capital of $1,302,986, 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.

 

Nasdaq Delisting Notice

 

On April 11, 2024, we received a letter from The Nasdaq Stock Market 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 (the “Compliance Plan”) to regain compliance with the Rule, which was accepted by Nasdaq on June 7, 2024, and provides us with an extension of 180 calendar days from April 11, 2024 to regain compliance with the Rule. Although our stockholders’ equity increased as a result of our recent public and private equity offerings, we will not regain compliance with the Rule unless we effect additional sales of our equity securities (including by the conversion or exercise, as applicable, of our outstanding convertible securities).

 

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

 

ASC 280, Segment Reporting, requires annual and interim reporting for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and expenses, and about which separate financial information is regularly evaluated by the chief operating decision maker in deciding how to allocate resources. The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.

 

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 June 30, 2024 or December 31, 2023.

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

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 $686,055 and $407,789 in excess of FDIC insured limits on June 30, 2024 and December 31, 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 no allowance for doubtful accounts on June 30, 2024 or 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, and consisted of the following as of June 30, 2024 and December 31, 2023:

 Schedule of Inventory

		June 30,				December 31,
		2024				2023
Raw materials		$	23,436			$	13,734
Finished goods			250,547				323,071
Total inventory			273,983				336,805

 

The Company had prepaid inventory advances on product in the amount of $866,244 as of June 30, 2024. 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 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.

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

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 to avocado 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 have been no royalty payments to date, and any future minimum royalty payments or equipment purchases under this license agreement are an unrecognized commitment as they relate to retaining exclusivity of the avocado products going forward. See Note 14, below.

 

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 and six months ended June 2024 and 2023:

 Schedule of Revenue

		For the Three Months Ended								For the Six Months Ended
		June 30,								June 30,
		2024				2023				2024				2023
Revenue		$	1,451,828			$	341,414			$	2,922,664			$	451,993
Less: slotting, discounts, and allowances			88,842				(1,651	)			92,662				11,588
Net revenue		$	1,362,986			$	343,065			$	2,830,002			$	440,405

 

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.

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Advertising Costs

 

The Company expenses the cost of advertising and promotions as incurred. Advertising and promotions expense was $98,204 and $62,360 for the six months ended June 30, 2024 and 2023, respectively.

 

Stock-Based Compensation

 

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

 

The Company issued stock-based compensation in the amount of $684,220 and $68,492 for the six months ended June 30, 2024 and 2023, 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.

 

In July 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-03 to amend various SEC paragraphs in the Accounting Standards Codification to primarily reflect the issuance of SEC Staff Accounting Bulletin No. 120. ASU No. 2023-03, “Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X: Income or Loss Applicable to Common Stock.” ASU 2023-03 amends the ASC for SEC updates pursuant to SEC Staff Accounting Bulletin No. 120; SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force (“EITF”) Meeting; and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. These updates were immediately effective and did not have a significant impact on our financial statements.

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Note 2 – Related Party Transactions

 

Debt Financing

 

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 (after giving effect to the amendment discussed in Note 15), 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 ten-year period at an exercise price of $1.00 per share (after giving effect to the amendment discussed in Note 15).

 

Common Stock Options Issued for Services

 

On February 22, 2024, the Company granted options to purchase 140,000 shares of the Company’s common stock, having an exercise price of $1.92 per share, exercisable over a 10-year term, to the Company’s CEO. The options vested immediately.

 

On February 22, 2024, the Company granted options to purchase 75,000 shares of the Company’s common stock, having an exercise price of $1.92 per share, exercisable over a 10-year term, to the Company’s CFO. The options vested immediately.

 

On February 22, 2024, the Company also granted options to purchase an aggregate 79,166 shares of the Company’s common stock, having an exercise price of $1.92 per share, exercisable over a 10-year term, to a total of three of the Company’s directors. The options vested immediately.

 

Note 3 – Formation of Subsidiary

 

On April 26, 2024, the Company formed a wholly-owned subsidiary in Peru, under the form of a legal entity called a Branch, for the purpose of establishing a production facility. On May 10, 2024, the Company entered into a ten-year lease for a 50,000 square-foot food processing plant located in the province of Pisca, Peru. The Company has started to purchase equipment and intends to develop this facility into a production plant, which is expected to be operational in October of 2024.

 

Note 4 – Fair Value of Financial Instruments

 

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

 

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

 

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

 

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

 

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

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balances sheet as of June 30, 2024 and December 31, 2023:

 Schedule of Valuation of Financial Instruments at Fair Value on a Recurring Basis

		Fair Value Measurements at June 30, 2024
		Level 1				Level 2				Level 3
Assets
Cash		$	936,061			$	-			$	-
Right-of-use-asset			-				-				2,041,084
Notes receivable			-				374,728				-
Total assets			936,061				374,728				2,041,084
Liabilities
Notes payable			-				34,500				-
Notes payable, related parties, net of $247,530 of discounts			-				1,427,470				-
Lease liabilities			-				-				2,058,386
Total liabilities			-				1,957,030				2,058,386
Total assets and liabilities			936,061				(1,582,302	)			(17,302	)

 

		Fair Value Measurements at December 31, 2023
		Level 1				Level 2				Level 3
Assets
Cash		$	657,789			$	-			$	-
Right-of-use-asset			-				-				147,228
Notes receivable			-				384,628				-
Total assets			657,789				384,628				147,228
Liabilities
Notes payable			-				235,000				-
Lease liability			-				-				131,930
Total liabilities			-				235,000				131,930
Total assets and liabilities			657,789				149,628				15,298

 

There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the six months ended June 30, 2024, or the year ended December 31, 2023.

 

Note 5 – Major Customers and Accounts Receivable

 

The Company had certain customers whose revenue individually represented 10% or more of the Company’s total net revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, as follows:

 

For the six months ended June 30, 2024, one customer accounted for 99% of net revenue and 91% of accounts receivable at the end of the period, and for the six months ended June 30, 2023, two customers accounted for 78% of net revenue and 74% of accounts receivable at the end of the period.

 

Note 6 – Other Current Assets

 

Other current assets consisted of the following as of June 30, 2024 and December 31, 2023:

 Schedule of Other Current Assets

		June 30,				December 31,
		2024				2023
Prepaid insurance costs		$	1,143			$	2,403
Prepaid advertising and trade show fees			58,231				20,106
Prepaid professional fees & license fees			35,563				6,056
Interest receivable			25,189				19,535
Total other current assets		$	120,126			$	48,100

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Note 7 – Property and Equipment

 

Property and equipment as of June 30, 2024 and December 31, 2023 consisted of the following:

 Schedule of Property and Equipment

		June 30,				December 31,
		2024				2023
Equipment and machinery		$	1,809,665			$	1,233,334
Less: Accumulated depreciation			(431,006	)			(318,335	)
Total property and equipment, net		$	1,378,659			$	914,999

 

Depreciation of property and equipment was $112,671 and $111,581 for the six months ended June 30, 2024 and 2023, respectively.

 

Note 8 – Other Asset

 

On May 10, 2024, in connection with the lease of the Company’s Peru Facility, the Company paid $275,000 toward 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, for a purchase price of $1,267,000. The remaining $992,000 was due and payable on August 10, 2024, subject to certain requirements which haven’t yet been met, therefore the Company has deferred payment until a later date, to be determined.

 

Note 9 – Notes Receivable

 

Nanuva Note Receivable

 

On February 4, 2021, the Company entered into a Manufacturing and Distributorship Agreement (“MDA”) with Natural Nutrition SpA, a Chilean company (“Nanuva”), in which the Company loaned $500,000 to Nanuva (“Advance Payment”) to help finance the capital investment needed for Nanuva to purchase two industrial fruit drying machines to be used in servicing the Company’s manufacturing needs. Pursuant to the MDA, the Company is entitled to recover the Advance Payment in full no later than May 31, 2027, which prior to repayment, will bear interest at 3% per annum. The Advance Payment is to be repaid pursuant to a two-dollar ($2/kg) deduction in the price of any product exported by Nanuva to the Company with certain mandatory minimum annual payments. Repayments commence on the earlier of a) the first invoice issued by Nanuva after installation of the drying equipment, or b) June 30, 2021. The MDA expires on May 31, 2027, with automatic annual renewals thereafter, unless it is terminated in accordance with the terms of the MDA. The Company deferred collection of the minimum annual payment requirement for 2023 until 2024 when several large orders were placed. As of June 30, 2024, a total of $131,594 of the Advance Payment had been repaid as a reduction of inventory costs, consisting of $115,372 of principal and $16,222 of interest. All payments consisted of reductions in inventory costs, other than a payment of $15,000 in cash on March 24, 2021. As of June 30, 2024, a total of $399,917 was outstanding from Nanuva, consisting of $374,728 of principal and $25,189 of unpaid interest. As of December 31, 2023, a total of $404,163 was outstanding from Nanuva, consisting of $384,628 of principal and $19,535 of unpaid interest. The Advance Payment is collateralized by a second lien in the equipment. Pursuant to the MDA, the Company has been appointed as Nanuva’s exclusive distributor in the following territories:

 Summary of  Nanuva’s Exclusive Distributor in Territories

		Exclusivity		Minimum Volume
Product		Territories		(Kg/month)(“MOQ”)
Avocado Powder		Worldwide (except Chile)		1,000
Banana Chips		Worldwide (except Chile)		1,000
Avocado Snacks		North America (Canada and USA)		1,000
Avocado Chips		Worldwide		1,000
Other Powders		No Exclusivity		-0-

 

Note 10 – Accrued Expenses

 

Accrued expenses consisted of the following as of June 30, 2024 and December 31, 2023, respectively:

 Schedule of Accrued Expenses

		June 30,				December 31,
		2024				2023
Accrued payroll and taxes		$	44,843			$	43,376
Accrued interest			2,100				2,577
Accrued chargebacks			26,967				119,291
Total accrued expenses		$	73,910			$	165,244

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Note 11 – Notes Payable

 

On March 15, 2023, the Company completed the sale of a $200,000 Promissory Note to The John & Kristen Hinman Trust Dated February 23, 2016 (the “Hinman Note”), pursuant to the Loan Agreement between the Company and the Hinman Trust. The Hinman Note bears interest at 18% per annum, based on a 360-day year, and carried a monthly default rate of 1.5% of all outstanding principal, interest, fees and penalties. The Hinman Note matured on January 10, 2024, as amended, and was secured by the Company’s accounts receivable from Walmart before being repaid on January 2, 2024.

 

On May 17, 2020, the Company entered into a loan agreement with the United States Small Business Administration (the “SBA”), as lender, pursuant to the SBA’s Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business (the “EIDL Loan Agreement”) encompassing a $34,500 Promissory Note issued to the SBA (the “EIDL Note”) (together with the EIDL Loan Agreement, the “EIDL Loan”), bearing interest at 3.75% per annum. In connection with entering into the EIDL Loan, the Company also executed a security agreement, dated May 17, 2020, between the SBA and the Company pursuant to which the EIDL Loan is secured by a security interest on all of the Company’s assets. Under the EIDL Note, the Company is required to pay principal and interest payments of $169 every month beginning May 17, 2021; however, the SBA extended the repayment date to November 17, 2022. All remaining principal and accrued interest is due and payable on May 17, 2050. The EIDL Note may be repaid at any time without penalty. The principal balance of the EIDL Loan was $34,500 as of June 30, 2024 and December 31, 2023.

 

Notes payable consists of the following as of June 30, 2024 and December 31, 2023:

 Schedule of Notes Payable

		June 30,				December 31,
		2024				2023
Total notes payable		$	34,500			$	234,500
Less: current maturities			-				200,000
Notes payable, less current maturities		$	34,500			$	34,500

 

The Company recognized $903 and $195,620 of interest expense on notes payable for the six months ended June 30, 2024 and 2023, respectively.

 

Note 12 – Notes Payable, Related Parties

 

During the period of May 14, 2024 through May 22, 2024, the Company completed the sale of an aggregate of $1,050,000 of Senior Notes, and Warrants to purchase an aggregate of 262,500 shares of the Company’s common stock, to a group of Investors led by Eagle Vision, an affiliate of John Dalfonsi, a director of the Company and its Chief Financial Officer. The sales were effected pursuant to a Subscription Agreement, dated January 10, 2024, between the Company and the investors in the Senior Notes, as amended by an amendment (“First Amendment”) to the Subscription Agreement dated as of April 16, 2024 (as so amended, the “Subscription Agreement”).

 

The Senior Notes mature on the earlier of December 31, 2024, or the occurrence of a Qualified Subsequent Financing or Change of Control (as such terms are defined in the Subscription Agreement) and bear interest at a rate of 15% per annum. In addition, the Senior Notes are subject to covenants, events of defaults and other terms and conditions set forth in the Subscription Agreement. The Company’s obligations under the Notes are secured by liens on substantially all of the Company’s assets pursuant to the terms of the Security Agreement entered into by the Company on January 10, 2024 in favor of holders of the Senior Notes (the “Security Agreement”). Each Warrant is exercisable for a ten-year period at an exercise price of $2.00 per share.

 

On April 16, 2024, the Company completed the sale of $225,000 of Senior Notes, and Warrants to purchase an aggregate of 56,250 shares of the Company’s common stock, to a group of seven Investors, pursuant to a First Amendment to the Subscription Agreement between the Company and the Investors dated as of April 16, 2024. The First Amendment incorporates and amends certain provisions of the Subscription Agreement, dated January 10, 2024, previously entered into by the Company and investors that purchased Notes and Warrants from the Company on January 10, 2024 (the “January Investors”).

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

The First Amendment also (i) increased the aggregate principal amount of the Senior Notes available to be sold from time to time under the Subscription Agreement from $400,000 to $2,000,000, (ii) increased the number of shares of common stock of the Company available to be issued under Warrants sold from time to time under the Subscription Agreement from 100,000 to 600,000, (iii) provides for an aggregate one-time payment in the amount of $46,290 to the January Investors and the issuance to them of Warrants to purchase 100,000 shares of common stock, in consideration of their agreement to enter into the First Amendment, and (iv) provided for the payment of up to $80,000 to Eagle Vision Fund with the proceeds of Senior Notes to be issued by the Company at subsequent closings of sales of Senior Notes and Warrants, in consideration of services rendered and to be rendered by Eagle Vision to holders of the Notes while the Notes are outstanding, including acting as collateral agent and due diligence and collateral monitoring services.

 

On January 9, 2024, the Company completed the sale of $400,000 of Senior Notes and Warrants to purchase an aggregate of 100,000 shares of the Company’s common stock, to a group of six Investors led by Eagle Vision, pursuant to a Subscription Agreement between the Company and the Investors.

 

In accordance with ASC 470, the Company recorded total discounts of $339,698, including $80,908 on the relative fair value of the Warrants, incurred as of June 30, 2024. The discounts are being amortized to interest expense over the term of the debentures using the effective interest method. The Company recorded an aggregate $92,168 of interest expense pursuant to the amortization of note discounts for the six months ended June 30, 2024. As of June 30, 2024, there were $247,530 of unamortized expenses expected to be expensed over the remaining life of the outstanding debt.

 

Eagle Vision has been paid aggregate cash fees in the amount of $177,500 from the sales of the Senior Notes in consideration of services rendered and to be rendered by Eagle Vision to the Company and the holders of the Senior Notes, including for conducting due diligence with respect to the Company, monitoring the performance by the Company of its obligations under the Senior Notes, servicing the interest and principal payments for holders of the Senior Notes, engaging in ongoing discussions with the Company’s management regarding the Company’s operations and financial condition, acting as collateral agent, and evaluating financial and non-financial information related to the Company. The Company has also paid an aggregate of $35,000 of the investors’ legal fees from sales of the Senior Notes.

 

To date, in a series of closings pursuant to the Subscription Agreement, including the most recent sales described above, the Company has issued an aggregate $1,675,000 of principal pursuant to the Senior Notes, and Warrants to purchase an aggregate 518,750 shares of common stock.

 

The Company recognized $146,798 of interest expense on notes payable, related parties for the six months ended June 30, 2024, consisting of $54,630 of stated interest expense, $71,718 of amortized debt discounts and $20,450 of amortized debt discounts due to warrants.

 

The Company recognized aggregate interest expense for the six months ended June 30, 2024 and 2023 respectively, as follows:

 Schedule of Recognized Interest Expense

		June 30,				June 30,
		2024				2023
Interest on convertible notes payable, related parties		$	-			$	3,696
Interest on convertible notes payable			-				138,316
Interest on notes payable			903				195,620
Interest on notes payable, related parties			54,630				-
Interest on notes payable			54,630				-
Amortization of debt discounts on related party notes			71,718				-
Amortization of debt discounts on related party notes, warrants			20,450				46,090
Amortization of debt discounts			20,450				46,090
Interest on revolving line of credit			-				7,786
Finance charge on letter of credit			-				2,082
Interest on credit cards			-				2,406
Total interest expense		$	147,701			$	395,996

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Note 13 – Leases

 

Equipment Lease

 

The Company has financed production equipment with an acquisition cost of approximately $168,141 under a finance lease with a five-year term and a bargain purchase price of $1.00 at the end of the lease term. The finance lease commenced on May 9, 2023 and expires on August 31, 2027, with monthly lease payments of $3,657 commencing June 1, 2023, subject to the ASU 2016-02. As the Company’s lease does not provide implicit discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

 

Peru Facility Lease

 

On May 10, 2024, the Company entered into a ten-year lease for a 50,000 square-foot food processing plant located in Peru (the “Peru Facility”). The Company intends to develop the Peru Facility into a production plant, which is expected to be operational in October of 2024. The lease of the Peru Facility requires monthly lease payments of $8,000 in the first two years of the lease, $20,000 in the third year of the lease, $22,000 in the fourth year of the lease, $24,000 in the fourth year of the lease, and $25,000 thereafter. The lease also has a 10-year renewal option, and a buy-out option under which we may purchase the Peru Facility for $1,865,456.

 

In connection with the lease of the Peru Facility, the Company entered into a first position mortgage receivable in the amount of $1,267,000, which is secured by the Peru Facility and was owed by the landlord of the Peru Facility to its former tenant, for a purchase price of $1,267,000, of which $275,000 was paid by us on May 10, 2024. The remaining $992,000 was due and payable on August 10, 2024, subject to certain requirements which haven’t yet been met, therefore the Company has deferred payment until a later date, to be determined.

 

The components of lease expense were as follows:

 Schedule of Components of Lease Expenses

		2024				2023
		For the Six Months Ended
		June 30,
		2024				2023
Operating lease cost:
Amortization of right-of-use asset		$	32,389			$	-
Interest on lease liability			14,124				-
Total operating lease cost			46,513				-
Finance lease cost:
Amortization of right-of-use asset		$	17,114			$	-
Interest on lease liability			6,915				-
Total finance lease cost			24,029				-
Total finance lease cost		$	70,542			$	-

 

Supplemental balance sheet information related to leases was as follows:

 Schedule of Supplemental Information Related to Leases

		June 30,				December 31,
		2024				2023
Operating lease:
Operating lease assets		$	1,910,969			$	-
Current portion of operating lease liability		$	11,547				-
Noncurrent operating lease liability			1,929,936				-
Total operating lease liability		$	1,941,483			$	-
Finance lease:
Finance lease assets		$	130,115			$	147,228
Current portion of finance lease liability		$	32,640				30,901
Noncurrent finance lease liability			84,263				101,029
Total finance lease liability		$	116,903			$	131,930
Weighted average remaining lease term:
Operating lease			9.83 years				-
Finance lease			2.89 years				3.35 years
Weighted average discount rate:
Operating lease			4.45	%			-
Finance lease			11.00	%			11.00	%

 

Supplemental cash flow and other information related to finance leases was as follows:

 Schedule of Supplemental Cash and Other Information Related to Finance Leases

		2024				2023
		For the Six Months Ended
		June 30,
		2024				2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases		$	1,875			$	-
Finance cash flows used for finance leases		$	15,027			$	-
							-
Leased assets obtained in exchange for lease liabilities:							-
Total operating lease liabilities		$	1,943,358			$	-
Total finance lease liabilities		$	168,320			$	-

 

The future minimum lease payments due under operating leases as of June 30, 2024 is as follows:

 Schedule of Future Minimum Operating Lease Payments

Year Ending		Minimum Lease
December 31,		Commitments
2024 (for the six months remaining)		$	48,000
2025			96,000
2026			192,000
2027			256,000
2028			280,000
Thereafter			1,596,000
Total minimum lease payments			2,468,000
Less effects of discounting			526,517
Lease liability recognized			1,941,483
Less current portion			11,547
Long-term operating lease liability		$	1,929,936

 

The future minimum lease payments due under finance leases as of June 30, 2024 is as follows:

 Schedule of Future Minimum Lease Payments

Year Ending		Minimum Lease
December 31,		Commitments
2024 (for the six months remaining)		$	21,943
2025			43,886
2026			43,886
2027			29,258
Total minimum lease payments			138,973
Less effects of discounting			22,070
Lease liability recognized			116,903
Less current portion			32,640
Long-term finance lease liability		$	84,263

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Note 14 – Commitments and Contingencies

 

Legal Matters

 

From time to time, the Company may be a party to various legal matters, threatened claims, or proceedings in the normal course of business. Legal fees and other costs associated with such actions are expensed as incurred. The Company assesses, in conjunction with its legal counsel, the need to record a liability for litigation and contingencies. Legal accruals are recorded when and if it is determined that a loss related to a certain matter is both probable and reasonably estimable. There are currently no pending legal matters.

 

Operating Lease

 

The Company leases a 50,000 square-foot food processing plant located in Peru, within the province of Pisco. The lease of this facility requires monthly lease payments of $8,000 in the first two years of the lease, $20,000 in the third year of the lease, $22,000 in the fourth year of the lease, $24,000 in the fourth year of the lease, and $25,000 thereafter. The lease carries a 10-year term, with a 10-year renewal option, and a buy-out option under which the Company may purchase the facility for $1,865,456.

 

Finance Lease

 

The Company leases equipment under a non-cancelable finance lease payable in monthly installments of $3,657 expiring on August 31, 2027.

 

Other Contractual Commitments

 

On January 19, 2022, the Company entered into a contract manufacturing agreement with NXTDried Superfoods SAC to produce products for distribution by the Company. The Company agreed to pre-pay for inventory via an advance to enable the manufacturer to invest in necessary processing facilities that will be reimbursed to the Company on an agreed per kg basis over the period of 2022 to 2026.

 

On May 7, 2021, the Company entered into a license agreement (“License Agreement”) with EnWave, pursuant to which EnWave licensed to the Company a collection of patents and intellectual property (the “EnWave Technology”) used to manufacture and operate vacuum microwave dehydration machines purchased by the Company from EnWave (the “EnWave Equipment”). The License Agreement was amended on October 26, 2022, September 27, 2023 and May 23, 2024, to, among other things, modify the exclusivity retention royalty payments required to be paid by the Company. The License Agreement entitles EnWave to a fixed royalty percentage on all of the Company’s revenue from the sale of products produced using the EnWave Technology, net of trade or volume discounts, refunds paid, settled claims for damaged goods, applicable excise, sales and withholding taxes imposed at the time of the sale, and provides the Company with certain exclusivity rights with respect to the production of avocado products. In order to maintain the exclusivity, the Company must make annual royalty minimum payments to EnWave of $250,000 per year, commencing in 2025 and continuing through each subsequent year in perpetuity, as long as the Company elects to maintain exclusivity.

 

In addition to the initial EnWave Equipment we purchased, the Company agreed to purchase additional equipment from EnWave over time. The additional equipment purchase schedule, as amended, requires the Company to purchase a “Second EnWave Machine” and pay up-to four non-refundable deposits for the Second EnWave Machine in the amount of fifty thousand dollars ($50,000) each on September 30, 2023, December 31, 2023, March 31, 2024 and June 30, 2024 (the “Interim Deposits”). The Company paid the first three non-refundable deposits of $50,000 on September 27, 2023, December 31, 2023 and March 8, 2024. The Company is also required to execute an Equipment Purchase Agreement for a 120kW, or greater rated power, EnWave Equipment (the “Third EnWave Machine”) on or before December 31, 2025, and satisfy the payment obligations required with respect to the Third EnWave Machine by the License Agreement. The Company is also required to enter into an Equipment Purchase Agreement for a 120kW, or greater, rated power EnWave Equipment (the “Fourth EnWave Machine”) on, or before, December 31, 2026, and to satisfy the payment obligations required with respect to the Fourth EnWave Machine by the License Agreement. The License Agreement is effective as long as EnWave possesses its EnWave technology. There have been no royalty payments to date, and any future minimum royalty payments or equipment purchases under this license agreement are an unrecognized commitment, as they relate to retaining exclusivity of the avocado products going forward and the Company can elect not to pay.

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Note 15 – Changes in Stockholders’ Equity

 

Preferred Stock

 

The Company has authorized 8,000,000 shares of $0.001 par value preferred stock. As of June 30, 2024, none of the preferred stock had been designated or issued.

 

Common Stock

 

The Company has authorized 80,000,000 shares of $0.001 par value common stock. As of June 30, 2024, a total of 6,009,671 shares of common stock had been issued. Each holder of common stock is entitled to one vote for each share of common stock held.

 

Common Stock Sale

 

On June 26, 2024, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) with Alexander Capital, L.P. as the Representative of the underwriters named therein (the “Representative” and such other Underwriters, the “Underwriters”), relating to the issuance and sale by the Company to the Underwriters (the “Public Offering”) of 1,750,000 Shares (the “Shares”) of common stock at a price to the public of $0.80 per share, less underwriting discounts and commissions. Pursuant to the Underwriting Agreement, the Representative was granted an option (the “Over-Allotment Option”), for a period of 45 days, to purchase from the Company up to 262,500 additional shares of Common Stock, at the same price per share, to cover over-allotments, if any.

 

Pursuant to the Underwriting Agreement, the Company agreed to an 8.0% underwriting discount on the gross proceeds received by the Company for the Shares, in addition to reimbursement of certain expenses, made customary representations, warranties and covenants concerning the Company, and also agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. In addition, the officers and directors of the Company have agreed not to offer, sell, transfer or otherwise dispose of any shares of Common Stock, the Company’s common stock, or securities convertible into, or exercisable or exchangeable for, shares of Common Stock, during the six-month period following the date of the Prospectus, and the Company agreed that it will not issue or announce the issuance or proposed issuance of any shares of Common Stock or common stock equivalents for a period of six months following the date of the Prospectus, other than certain exempt issuances.

 

The Offering closed on June 28, 2024. The Company received net proceeds from the Offering of $1,000,925 after deducting the underwriting discounts and commissions and offering expenses.

 

Common Stock Issued for Services

 

On June 1, 2024, the Company issued 6,383 shares of the Company’s common stock under the 2022 Omnibus Equity Incentive Plan (the “2022 Equity Plan”) to PCG Advisory, Inc. (“PCG”) as payment for services in lieu of cash. The fair value of the shares was $9,819, based on the closing traded price of the common stock on the date of grant.

 

On May 1, 2024, the Company issued 4,766 shares of the Company’s common stock under the 2022 Equity Plan to PCG as payment for services in lieu of cash. The fair value of the shares was $11,438, based on the closing traded price of the common stock on the date of grant.

 

On April 22, 2024, the Company issued 99,688 shares under the 2022 Equity Plan to its securities counsel for services performed. The fair value of the shares was $109,657, based on the closing traded price of the common stock on the date of grant.

 

On April 1, 2024, the Company issued 4,988 shares of the Company’s common stock under the 2022 Equity Plan to PCG as payment for services in lieu of cash. The fair value of the shares was $9,577, based on the closing traded price of the common stock on the date of grant.

 

On February 19, 2024, the Company issued 16,836 shares under the Company’s 2022 Equity Plan to its securities counsel for services performed. The fair value of the shares was $44,278, based on the closing traded price of the common stock on the date of grant.

 

On January 26, 2024, the Company issued 60,258 shares under the 2022 Equity Plan, to its securities counsel for services performed. The fair value of the shares was $69,297, based on the closing traded price of the common stock on the date of grant.

 

On January 5, 2024, the Company retained PCG to provide strategic advisory and investor relations services pursuant to an Advisory Agreement under which the Company agreed to issue PCG an aggregate 22,500 shares of the Company’s common stock as payment for services in lieu of cash for the months of January, February, and March 2024. The aggregate fair value of the shares was $36,019, based on the closing traded price of the common stock on the dates of grant. The shares were subsequently issued on April 15, 2024 under the 2022 Equity Plan.

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Note 16 – Common Stock Options

 

Stock Incentive Plan

 

Our board of directors and shareholders adopted the 2022 Equity Plan on January 1, 2022. The 2022 Equity Plan allows for the grant of a variety of equity vehicles to provide flexibility in implementing equity awards, including nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, incentive bonus awards, other cash-based awards and other stock-based awards. The number of shares reserved for issuance under the 2022 Equity Plan was initially an aggregate of 600,000 shares, as adjusted on June 15, 2023 in connection with the Company’s reverse stock split, subject to annual increases under the plan, resulting in 1,009,000 reserved shares as of June 30, 2024. There were 593,470 options with a weighted average exercise price of $2.39 per share, and a weighted average remaining life of approximately 9 years, outstanding as of June 30, 2024.

 

Common Stock Options Issued for Services

 

On May 1, 2024, the Company granted options to purchase 30,000 shares of the Company’s common stock, having an exercise price of $2.40 per share, exercisable over a 10-year term, to a new employee. The options will vest monthly over three years from the date of grant. The aggregate estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 41% and a call option value of $1.1806, was $35,419. The options are being expensed over the vesting period, resulting in $1,968 of stock-based compensation expense during the six months ended June 30, 2024. As of June 30, 2024, a total of $33,451 of unamortized expenses are expected to be expensed over the vesting period.

 

On February 22, 2024, the Company granted options to purchase an aggregate 315,000 shares of the Company’s common stock, having an exercise price of $1.92 per share, exercisable over a 10-year term, to a total of six employees, including options to purchase 140,000 and 75,000 shares issued to the Company’s CEO and CFO, respectively. The options vested immediately. The aggregate estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 41% and a call option value of $0.8581, was $270,296.

 

On February 22, 2024, the Company also granted options to purchase an aggregate 79,166 shares of the Company’s common stock, having an exercise price of $1.92 per share, exercisable over a 10-year term, to a total of three of the Company’s directors. The options vested immediately. The aggregate estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 41% and a call option value of $1.1407, was $90,306.

 

Note 17 – Common Stock Warrants

 

Warrants to purchase a total of 1,096,626 shares of common stock at a weighted average exercise price of $4.01 per share, with a weighted average remaining life of approximately 7.75 years, were outstanding as of June 30, 2024.

 

On June 28, 2024, pursuant to the Underwriting Agreement, the Company executed and delivered to the Representative a Common Stock Purchase Warrant (the “Representative’s Warrant”) to purchase up to 100,625 shares of Common Stock, which may be exercised beginning on December 23, 2024 (the date that is 180 days following the commencement of sales of Common Stock in connection with the Offering (the “Commencement Date”)) until June 26, 2029. The initial exercise price of the Representative’s Warrant is $0.96 per share, which is equal to 120% of the public offering price for the Shares, and the Representative may not effect the disposition of such warrant for a period of one hundred eighty (180) days following the Commencement Date. In addition, the Representative’s Warrant contains “piggy-back” registration rights with respect to the shares underlying such warrant, and limits the number of shares issuable upon its exercise to 4.99% / 9.99% of the outstanding shares of Common Stock, as applicable.

 

Warrants Issued Pursuant to Debt Offering

 

On various dates from January 9, 2024 through May 22, 2024, the Company issued Warrants to purchase an aggregate total of 518,750 shares of common stock at an exercise price of $2.00 per share in connection with the sale of Senior Notes to a group of Investors led by Eagle Vision, in the aggregate principal amount of $1,675,000. The proceeds received were allocated between the debt and warrants on a relative fair value basis. The relative aggregate estimated value of the warrants using the Black-Scholes Pricing Model, based on a weighted average volatility rate of 40% and a weighted average call option value of $0.1560, was $80,908, of which $20,450 was recognized as finance expense during the six months ended June 30, 2024. As of June 30, 2024, there was $60,458 of unamortized expenses expected to be expensed over the remaining life of the outstanding debt.

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Note 18 - Income Taxes

 

The Company incurred a net operating loss for the six months ended June 30, 2024, accordingly, no provision for income taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. On June 30, 2024, the Company had approximately $9.2 million of federal net operating losses. The net operating loss carry forwards, if not utilized, will begin to expire in 2041.

 

The effective income tax rate for the six months ended June 30, 2024 and 2023, was 21%.

 

The Company has incurred cumulative losses which make realization of a deferred tax asset difficult to support in accordance with ASC 740. Based on the available objective evidence, including the Company’s history of its loss, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, a valuation allowance has been recorded against the Federal and state deferred tax assets as of June 30, 2024 and December 31, 2023.

 

Additionally, in accordance with ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.

 

Note 19 – Subsequent Events

 

The Company evaluates events that have occurred after the balance sheet date through the date these financial statements were issued, noting no reportable event, except as follows:

 

Common Stock Sales

 

On July 19, 2024, the Underwriters exercised their Over-Allotment Option to purchase 222,500 shares of common stock at a price of $0.80 per share. The Company received net proceeds $163,760, after deducting $14,240 of underwriting commissions.

 

Unit Offering Sale of Common Stock and Warrants

 

On July 15, 2024, the Company entered into Subscription Agreements (the “Subscription Agreements”) with three related parties, consisting of Eric Healy, the Company’s Chief Executive Officer; an affiliate of John Dalfonsi, the Company’s Chief Financial Officer; and the Company’s President, pursuant to which such investors agreed to purchase $525,000 of “Units” from the Company, each Unit consisting of (i) 100 shares of Common Stock, and (ii) a warrant to purchase 125 shares of Common Stock over the following ten years at an exercise price of $1.00 per share, at a purchase price per Unit equal to $75.82. The Company completed the sale of the Units to Eric Healy and the Company’s President on July 23, 2024, resulting in the issuance of an aggregate of 560,538 shares of Common Stock and warrants to purchase 700,672 shares of Common Stock. Mr. Dalfonsi has not yet closed his purchase.

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

Convertible Note Financing

 

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, par value $0.001 per share (“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”) to be made to the Company under the Convertible Note on the “Initial Closing Date” (as defined in the SPA), subject to the terms and conditions thereof. On July 19, 2024, the Company, Mr. Kaufman and Kaufman Kapital LLC entered into an amendment to the SPA (the “SPA Amendment”), which among other things, replaced Mr. Kaufman with Kaufman Kapital LLC as the “Investor” under the SPA.

 

On July 24, 2024, the Company issued the Purchased Securities to the Investor in consideration of the Investor making the Initial Loan to the Company.

 

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, provided that the holder may not convert amounts outstanding under the Convertible Note into Common Stock, and the Warrants may not be exercised, until the Company has obtained the approval of its shareholders for such conversion in accordance with Listing Rule 5635(b) and 5635(d) of The Nasdaq Stock Market, Inc., as applicable, to the extent that, at such time, such approval is required under such Listing Rules for such conversion.

 

The Company’s obligations under the Convertible Note are secured by a lien granted to the Investor on substantially all of the Company’s assets pursuant to a Security Agreement entered between the Company and the Investor (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.

 

Amendment of Senior Notes and Warrants

 

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.

 

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

You should read the following discussion of our financial condition and results of operations in conjunction with the condensed financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. In addition to historical condensed financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements.

 

Overview

 

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. The manufacturing facility in Peru houses our new large-scale continuous through-put dehydration machine that completed its first production run in the first quarter of 2023, and which substantially increased our production capacity. 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. Our new factory is currently being built out and expected to be online and operational by October 2024. We have two large-scale REV machines on order from Enwave Corporation, a REV 100 and REV 120 machine. Both are currently in transit to the Peru facility. We also purchased a small REV 10 R&D machine that is also being delivered to Peru for installation into our new facility. In addition, we expect to move the REV 60 machine that is installed at our prior leased facility to our new facility in the near term.

 

Using our licensed technology platform, we believe our lines of both branded and private-labeled food 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 avocados. In addition, BranchOut has the nonexclusive rights to use the licensed technology platform for other products.

 

We entered into a private labeling contract with one of the world’s largest retailers in late 2022 to supply the retailer with two products for placement in half of their domestic stores. In April 2023, the same retailer agreed to carry two additional products of ours in certain of their stores. In April 2024, we received a commitment from this retailer to carry another product of ours in their stores. Based on this most recent commitment, we anticipate that our products will be carried in a total of 1,400 of this retailer’s stores in September 2024, which will increase the total annualized revenues that we may generate from this retailer to $8 million.

 

Our Products

 

We plan to grow revenues strategically by penetrating the multi-billion dollar grocery market opportunity presented by our current product lines, as well as expanding our platform to include additional products that meet our strict plant-based ingredient criteria. Our current primary branded products are:

 

	●	BranchOut Snacks: dehydrated fruit and vegetable-based snacks, including Avocado Chips, Chewy Banana Bites, Pineapple Chips, Brussels Sprout Crisps and Bell Pepper Crisps.
	●	BranchOut Powders: Avocado Powder, Banana Powder and Blueberry Powder.
	●	BranchOut Industrial Ingredients: Bulk Avocado Powder, dried avocado pieces and other fruit powders/pieces.

 

We are currently developing additional products, including dragon fruit and private label products for large retailers.

 

Going Concern Uncertainty

 

As of June 30, 2024, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $14,804,062, with working capital of $1,302,986. We are too early in our development stage to project revenue with a necessary level of certainty; therefore, we may not have sufficient funds to sustain our operations for the next twelve months and we may need to raise additional cash to fund our operations. These factors raise substantial doubt about our ability to continue as a going concern. The Company continues to develop its operations. In the event sales do not materialize at the expected rates, management would seek additional financing or would attempt to conserve cash by further reducing expenses. There can be no assurance that we will be successful in achieving these objectives.

 

The condensed consolidated financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. The 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. Our ability to scale production and distribution capabilities and further increase the value of our brands, is largely dependent on our success in raising additional capital.

 

Access to our Equipment in Peru; NXTDried Superfoods

 

During the fourth quarter of 2023, NXTDried Superfoods, our contract manufacturer located in Peru, became involved in a legal dispute with its landlord and another third party, which resulted in that manufacturer suspending operations. As a result of such dispute, we currently do not have access to the dehydration machine that was previously operated by this manufacturer. Although we have been able to continue to fulfill orders by shifting fulfillment to other manufacturing sources, our costs of goods have increased as a result. In addition, during 2023, we recognized $761,085 of impairment expense, consisting of $485,265, $243,305 and $32,515 on the collectability of a note receivable, VAT taxes receivable and prepaid inventory, respectively, 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 a 50,000 square-foot food processing plant located in Peru. We expect to relocate our dehydration machine to the Peru Facility along with a new large-scale machine we recently ordered form Enwave, and resume our Peruvian manufacturing operations there in the third quarter of 2024. 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 Peru Facility for $1,865,456.

 

In connection with our lease of the Peru Facility, we paid $275,000 on May 10, 2024, toward 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, for a purchase price of $1,267,000. The remaining $992,000 was due and payable by us on August 10, 2024, subject to certain requirements which haven’t yet been met, therefore the Company has deferred payment until a later date, to be determined.

 

 

Results of Operations for the Three Months Ended June 30, 2024 and 2023

 

The following table summarizes selected items from the statement of operations for the three months ended June 30, 2024 and 2023, respectively.

 

		Three Months Ended
		June 30,								Increase /
		2024				2023				(Decrease)
Net revenue		$	1,362,986			$	343,065			$	1,019,921
Cost of goods sold			1,214,227				361,461				852,766
Gross profit			148,759				(18,396	)			167,155
Operating expenses:
General and administrative			321,201				141,031				180,170
Salaries and benefits			349,597				436,238				(86,641	)
Professional services			304,376				158,205				146,171
Total operating expenses			975,174				735,474				239,700
Operating loss			(826,415	)			(753,870	)			72,545
Other income (expense):
Interest income			2,818				2,911				(93	)
Interest expense			(118,957	)			(222,551	)			(103,594	)
Total other income (expense)			(116,139	)			(219,640	)			(103,501	)
Net loss		$	(942,554	)		$	(973,510	)		$	(30,956	)

 

Net Revenue

 

Our net revenue for the three months ended June 30, 2024 was $1,362,986, compared to $343,065 for the three months ended June 30, 2023, an increase of $1,019,921, or 297%. The increase in revenue was primarily due to increased sales to our largest customer during the three months ended June 30, 2024.

 

Cost of Goods Sold and Gross Profit

 

Our cost of goods sold for the three months ended June 30, 2024 was $1,214,227, compared to $361,461 for the three months ended June 30, 2023, an increase of $852,766, or 236%. Cost of goods sold increased primarily due to increased sales during the three months ended June 30, 2024. As a result of the foregoing, we had gross profit of $148,759, representing gross margins of 11%, for the three months ended June 30, 2024 as compared to a gross loss of $18,396, or negative gross margins of 5%, for the three months ended June 30, 2023. Our gross profit margin increased primarily due to cost savings realized as a result of our transition to bulk shipping arrangements during the current period. Cost of goods sold included depreciation expense for the three months ended June 30, 2024 of $56,335, compared to $55,758 for the three months ended June 30, 2023, an increase of $577, or 1%.

 

General and Administrative

 

Our general and administrative expense for the three months ended June 30, 2024 was $321,201, compared to $141,031 for the three months ended June 30, 2023, an increase of $180,170, or 128%. The largest components of our general and administrative expenses are advertising and marketing, travel, commissions, and storage, shipping and handling expense, as shown below.

 

		Three Months Ended June 30,
		2024				2023				Difference				% change
Advertising and marketing		$	41,145			$	25,691			$	15,454				60	%
Travel		$	27,220			$	4,471			$	22,749				509	%
Storage, shipping and handling		$	88,384			$	78,724			$	9,660				12	%
Commissions		$	47,625			$	35,500			$	12,125				34	%

 

Advertising and marketing expenses increased for the three months ended June 30, 2024, compared to the corresponding period in 2023, as we focused our resources on our IPO in the prior period. Our travel expenses increased for the same reason, as we resumed our international travel after the IPO that was completed in the prior year. Storage, shipping and handling expenses increased primarily due to increased international shipping rates and increased production that was driven by our increased sales. Likewise, commissions increased due to our increased sales.

 

Salaries and Wages

 

Salaries and wages for the three months ended June 30, 2024 was $349,597, compared to $436,238 for the three months ended June 30, 2023, a decrease of $86,641, or 20%. This decrease was primarily attributable to bonuses awarded in the comparative period that were not recognized in the current period. In addition, salaries and wages included $17,751 of non-cash, stock-based compensation related to stock options awarded during the current period.

 

Professional Fees

 

Professional fees for the three months ended June 30, 2024 was $304,376, compared to $158,205 for the three months ended June 30, 2023, an increase of $146,171, or 92%. This increase was primarily attributable to increased legal and consulting fees in the current period, as a portion of these fees were capitalized as offering costs on our IPO in the comparative period. Professional fees included $140,491 and $18,046 of non-cash, stock-based compensation for the three months ended June 30, 2024 and 2023, respectively.

 

Other Income (Expense)

 

In the three months ended June 30, 2024, other expense was $116,139 on a net basis, consisting of $118,957 of interest expense, as partially offset by $2,818 of interest income. For the three months ended June 30, 2023, other expense was $219,640 on a net basis, consisting of $222,551 of interest expense, as partially offset by $2,911 of interest income. Other expense decreased by $103,501, or 47%, primarily due to the decreased interest on debt which was mostly settled in June of 2023.

 

Net loss

 

Net loss for the three months ended June 30, 2024 was $942,554, compared to $973,510 for the three months ended June 30, 2023, a decrease of $30,956, or 3%. The decreased net loss was primarily due to increased gross profit and decreased interest on debt, as partially offset by increased non-cash, stock-based compensation costs and compliance costs related to reporting as a public company.

 

 

Results of Operations for the Six Months Ended June 30, 2024 and 2023

 

The following table summarizes selected items from the statement of operations for the six months ended June 30, 2024 and 2023, respectively.

 

		Six Months Ended
		June 30,								Increase /
		2024				2023				(Decrease)
Net revenue		$	2,830,002			$	440,405			$	2,389,597
Cost of goods sold			2,397,655				488,443				1,909,212
Gross profit			432,347				(48,038	)			480,385
Operating expenses:
General and administrative			640,937				321,931				319,006
Salaries and benefits			947,883				688,048				259,835
Professional services			695,042				302,346				392,696
Total operating expenses			2,283,862				1,312,325				971,537
Operating loss			(1,851,515	)			(1,360,363	)			491,152
Other income (expense):
Interest income			5,695				5,756				(61	)
Interest expense			(147,701	)			(395,996	)			(248,295	)
Total other income (expense)			(142,006	)			(390,240	)			(248,234	)
Net loss		$	(1,993,521	)		$	(1,750,603	)		$	242,918

 

Net Revenue

 

Our net revenue for the six months ended June 30, 2024 was $2,830,002, compared to $440,405 for the six months ended June 30, 2023, an increase of $2,389,597, or 543%. The increase in revenue was primarily due to increased sales to our largest customer during the six months ended June 30, 2024.

 

Cost of Goods Sold and Gross Profit

 

Our cost of goods sold for the six months ended June 30, 2024 was $2,397,655, compared to $488,443 for the six months ended June 30, 2023, an increase of $1,909,212, or 391%. Cost of goods sold increased primarily due to increased sales during the six months ended June 30, 2024. As a result of the foregoing, we had gross profit of $432,347, representing gross margins of 15%, for the six months ended June 30, 2024 as compared to a gross loss of $48,038, or negative gross margins of 11%, for the six months ended June 30, 2023. Our gross profit margin increased primarily due to cost savings realized as a result of our transition to bulk shipping arrangements during the current period. Cost of goods sold included depreciation expense for the six months ended June 30, 2024 of $112,671, compared to $111,581 for the six months ended June 30, 2023, an increase of $1,091, or 1%.

 

General and Administrative

 

Our general and administrative expense for the six months ended June 30, 2024 was $640,937, compared to $321,931 for the six months ended June 30, 2023, an increase of $319,006, or 99%. The largest components of our general and administrative expenses are advertising and marketing, travel, commissions, and storage, shipping and handling expense, as shown below.

 

		Six Months Ended June 30,
		2024				2023				Difference				% change
Advertising and marketing		$	98,204			$	62,360			$	35,844				57	%
Travel		$	68,630			$	29,411			$	39,219				133	%
Storage, shipping and handling		$	192,821			$	101,614			$	91,207				90	%
Commissions		$	114,139			$	60,765			$	53,374				88	%

 

Advertising and marketing expenses increased for the six months ended June 30, 2024, compared to the corresponding period in 2023, as we focused our resources on our IPO in the prior period. Our travel expenses increased for the same reason, as we resumed our international travel after the IPO that was completed in the prior year. Storage, shipping and handling expenses increased primarily due to increased international shipping rates and increased production that was driven by our increased sales. Likewise, commissions increased due to our increased sales.

 

 

Salaries and Wages

 

Salaries and wages for the six months ended June 30, 2024 was $947,883, compared to $688,048 for the six months ended June 30, 2023, an increase of $259,835, or 38%. This increase was primarily attributable to $394,135 of non-cash, stock-based compensation related to stock options awarded during the current period.

 

Professional Fees

 

Professional fees for the six months ended June 30, 2024 was $695,042, compared to $302,346 for the six months ended June 30, 2023, an increase of $392,696, or 130%. This increase was primarily attributable to increased legal and consulting fees in the current period, as a portion of these fees were capitalized as offering costs on our IPO in the comparative period. Professional fees included $290,85 and $68,492 of non-cash, stock-based compensation for the six months ended June 30, 2024 and 2023, respectively.

 

Other Income (Expense)

 

In the six months ended June 30, 2024, other expense was $142,006 on a net basis, consisting of $147,701 of interest expense, as partially offset by $5,695 of interest income. For the six months ended June 30, 2023, other expense was $390,240 on a net basis, consisting of $395,996 of interest expense, as partially offset by $5,756 of interest income. Other expense decreased by $248,234, or 64%, primarily due to the decreased interest on debt which was mostly settled in June of 2023.

 

Net loss

 

Net loss for the six months ended June 30, 2024 was $1,993,521, compared to $1,750,603 for the six months ended June 30, 2023, an increase of $242,918, or 14%. The increased net loss was primarily due to increased non-cash, stock-based compensation costs, and compliance costs related to reporting as a public company, as partially offset by increased gross profits and decreased interest on debt which was mostly settled in the prior year.

 

Liquidity and Capital Resources

 

The following table summarizes our total current assets, liabilities and working capital as of June 30, 2024 and December 31, 2023.

 

		June 30,				December 31,
		2024				2023
Current Assets		$	2,585,907			$	1,678,243
Current Liabilities		$	1,282,921			$	779,093
Working Capital		$	1,302,986			$	899,150

 

As of June 30, 2024, we had working capital of $1,302,986. We have incurred net losses since our inception and we anticipate net losses and negative operating cash flows for the near future, and we may not be profitable or realize growth in the value of our assets. To date, our primary sources of capital have been cash generated from the sales of our products, common stock sales, and debt financing. As of June 30, 2024, we had cash of $936,061, total liabilities of $4,672,312, and an accumulated deficit of $14,804,062. As of December 31, 2023, we had cash of $657,789, total liabilities of $914,622, and an accumulated deficit of $12,810,541.

 

 

Cash Flow

 

Comparison of the Six Months Ended June 30, 2024 and the Six Months Ended June 30, 2023

 

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

 

		Six Months Ended
		June 30,
		2024				2023
Net cash used in operating activities		$	(1,357,463	)		$	(2,799,724	)
Net cash used in investing activities			(566,431	)			(10,100	)
Net cash provided by financing activities			2,202,108				3,850,171
Effect of exchange rate changes on cash			58				-
Net change in cash		$	278,272			$	1,040,347

 

Net Cash Used in Operating Activities

 

Net cash used in operating activities was $1,357,463 for the six months ended June 30, 2024, compared to $2,799,724 for the six months ended June 30, 2023, a decrease of $1,442,261, or 52%. The decrease was primarily due to our increased stock-based compensation, accounts receivable, and accounts payable, as partially offset by the $275,000 payment for other assets.

 

Net Cash Used in Investing Activities

 

Net cash used in investing activities was $566,431 for the six months ended June 30, 2024, compared to $10,100 for the six months ended June 30, 2023, an increase of $556,331, or 5,508%. This increase was primarily attributable to $576,331 of property and equipment purchases, as partially offset by $9,900 of advances received on notes receivable in the current period, compared to $10,100 of property and equipment purchases in the comparative period.

 

Net Cash Provided by Financing Activities

 

Net cash provided by financing activities was $2,202,108 for the six months ended June 30, 2024, compared to $3,850,171 for the six months ended June 30, 2023, a decrease of $1,648,063, or 43%. Our decreased cash provided by financing activities was primarily from $4,826,000 of decreased proceeds received on the sale of common stock and $10,779 of increased principal payments on finance leases, as partially offset by $578,710 of increased net proceeds received on debt financing, $2,268,791 fewer debt repayments, and $341,215 of decreased deferred offering cost payments in the prior period.

 

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 

Our financial results are affected by the selection and application of accounting policies and methods. In the six-month period ended June 30, 2024 there were no changes to the application of critical accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

 

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements in this report, other than statements of historical fact, are “forward-looking statements” for purposes of these provisions, including any projections of earnings, revenues or other financial items, any statements of the plans and objectives of our management for future operations, any statements concerning proposed new products or services, any statements regarding the integration, development or commercialization of the business or any assets acquired from other parties, any statements regarding future economic conditions or performance, and any statements of assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “seeks,” “believes,” “estimates,” “potential,” “forecasts,” “continue,” or other forms of these words or similar words or expressions, or the negative thereof or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, there can be no assurance that such expectations or any of the forward-looking statements will prove to be correct, and actual results will likely differ, and could differ materially, from those projected or assumed in the forward-looking statements. Investors are cautioned not to unduly rely on any such forward-looking statements.

 

All subsequent forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Our actual results will likely differ, and may differ materially, from anticipated results. Financial estimates are subject to change and are not intended to be relied upon as predictions of future operating results. All forward-looking statements included in this report are made as of the date hereof and are based on information available to us as of such date. We assume no obligation to update any forward-looking statement. If we do update or correct one or more forward-looking statements, investors and others should not conclude that we will make additional updates or corrections.

 

NOTICE REGARDING TRADEMARKS

 

This report includes trademarks, tradenames and service marks that are our property or the property of others. Solely for convenience, such trademarks and tradenames sometimes appear without any “™” or “®” symbol. However, failure to include such symbols is not intended to suggest, in any way, that we will not assert our rights or the rights of any applicable licensor, to these trademarks and tradenames.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Our management is responsible for establishing and maintaining adequate disclosure controls and procedures for our company. Consequently, our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of June 30, 2024. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were not effective.

 

Changes in Internal Control Over Financial Reporting

 

During the three-month period ended June 30, 2024, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934).

 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We may become, from time to time, involved in routine litigation or subject to disputes or claims related to our business activities. We are not currently party to any pending legal proceedings that we believe would, individually or in the aggregate, have a material adverse effect on our financial condition, cash flows or results of operations.

 

ITEM 1A. 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.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

None

 

 

ITEM 6. EXHIBITS.

 

Exhibit		Description
1.1		Underwriting Agreement, dated June 26, 2024, between the Company and Alexander Capital, L.P., as Representative of the Underwriters (Incorporated by reference to Exhibit 1.1 of the Form 8-K filed with the Securities and Exchange Commission by BranchOut Food Inc. on July 1, 2024)
3.1		Articles of Incorporation of BranchOut Food Inc. (Incorporated by reference to Exhibit 3.1 of the Company’s form S-1 filed with the Securities and Exchange Commission on April 24, 2023)
3.2		Bylaws of BranchOut Food Inc. (Incorporated by reference to Exhibit 3.2 of the Company’s form S-1 filed with the Securities and Exchange Commission on June 9, 2023)
3.3		Certificate of Amendment to Articles of Incorporation (Incorporated by reference to Exhibit 1.2 of the Company’s form 8-K filed with the Securities and Exchange Commission on June 22, 2023)
3.4		Certificate of Amendment to Articles of Incorporation of BranchOut Food Inc. filed January 4, 2024 (Incorporated by reference to Exhibit 3.1 of the Form 8-K filed with the Securities and Exchange Commission by BranchOut Food Inc. on January 8, 2024)
4.1		Form of Warrant issued under Subscription Agreement dated as of January 9, 2024, as amended on April 15, 2024 (Incorporated by reference to Exhibit 4.1 of the Form 8-K filed with the Securities and Exchange Commission by BranchOut Food Inc. on January 16, 2024)
4.2		Representative’s Warrant (Incorporated by reference to Exhibit 4.1 of the Form 8-K filed with the Securities and Exchange Commission by BranchOut Food Inc. on July 1, 2024)
10.1		Subscription Agreement dated as of January 9, 2024, between BranchOut Food Inc. and the investors named therein (Incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the Securities and Exchange Commission by BranchOut Food Inc. on January 16, 2024)
10.2		Form of Senior Secured Note issued under Subscription Agreement dated as of January 9, 2024, as amended April 15, 2024 (Incorporated by reference to Exhibit 10.2 of the Form 8-K filed with the Securities and Exchange Commission by BranchOut Food Inc. on January 16, 2024)
10.3		Security Agreement dated as of January 9, 2024, between BranchOut Food Inc. and the investors named therein (Incorporated by reference to Exhibit 10.3 of the Form 8-K filed with the Securities and Exchange Commission by BranchOut Food Inc. on January 16, 2024)
10.4		First Amendment to Subscription Agreement dated as of April 16, 2024, between BranchOut Food Inc. and the investors named therein (Incorporated by reference to Exhibit 10.4 of the Form 8-K filed with the Securities and Exchange Commission by BranchOut Food Inc. on April 16, 2024)
10.5		Lease Agreement, dated as of May 10, 2024, between BranchOut Food Inc. and landlord of the Peru Facility (Incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the Securities and Exchange Commission by BranchOut Food Inc. on May 16, 2024)
10.6		Assignment of Credit and Substitution of Mortgagee, dated as of May 10, 2024, among BranchOut Food Inc., assignor, and landlord of the Peru Facility (Incorporated by reference to Exhibit 10.2 of the Form 8-K filed with the Securities and Exchange Commission by BranchOut Food Inc. on May 16, 2024)
10.7		License Agreement between BranchOut Food, Inc. and EnWave Corporation dated May 7, 2021, together with amendments thereto dated October 26, 2022 and February 21, 2023. (Incorporated by reference to Exhibit 10.11 of the Form S-1 filed with the Securities and Exchange Commission by BranchOut Food Inc. on April 24, 2023).
10.8		Third Amendment to License Agreement, dated as of May 23, 2024, between BranchOut Food Inc. and EnWave Corporation (Incorporated by reference to Exhibit 10.2 of the Form 8-K filed with the Securities and Exchange Commission by BranchOut Food Inc. on May 28, 2024)
31.1*		Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a)
31.2*		Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a)
32.1*		Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		Inline XBRL Instance Document
101.SCH*		Inline XBRL Schema Document
101.CAL*		Inline XBRL Calculation Linkbase Document
101.DEF*		Inline XBRL Definition Linkbase Document
101.LAB*		Inline XBRL Labels Linkbase Document
101.PRE*		Inline XBRL Presentation Linkbase Document
104*		Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

*	Filed herewith

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registration has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Signature		Title		Date
/s/ Eric Healy		Chief Executive Officer		August 14, 2024
Eric Healy		(Principal Executive Officer)
/s/ John Dalfonsi		Chief Financial Officer		August 14, 2024
John Dalfonsi		(Principal Accounting and Financial Officer)