BOF 8-K
BranchOut Food Inc. (BOF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
CURRENT REPORT
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
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Item 1.01. Entry into a Material Definitive Agreement.
On April 16, 2024, BranchOut Food Inc. (the “Company”) completed the sale of $225,000 of Senior Secured Promissory Notes (“Notes”), and Warrants (“Warrants”) to purchase an aggregate of 56,250 shares of the Company’s common stock, to a group of seven investors (the “Investors”), pursuant to a First Amendment to Subscription Agreement between the Company and the Investors dated as of April 16, 2024 (the “First Amendment”). The First Amendment incorporates and amends certain provisions of the Subscription Agreement, dated January 10, 2024 (the “Subscription Agreement”), previously entered into by the Company and investors that purchased Notes and Warrants from the Company on January 10, 2024 (the “January Investors”). The transaction was effected pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended and Rule 506(b) promulgated thereunder.
The 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 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 Notes (the “Security Agreement”).
Each Warrant is exercisable for a ten-year period at an exercise price of $2.00 per share.
Pursuant to the First Amendment, $10,000 of the proceeds received by the Company were used to pay legal fees of counsel to the Investors.
The First Amendment also (i) increases the aggregate principal amount of Notes available to be sold from time to time under the Subscription Agreement from $400,000 to $2,000,000, (ii) increases 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) provides for the payment of up to $80,000 to EagleVision Fund L.P., an affiliate of John Dalfonsi, a director of the Company and its Chief Financial Officer, with the proceeds of Notes to be issued by the Company at subsequent closings of sales of Notes and Warrants, in consideration of services rendered and to be rendered by EagleVision to holders of the Notes while the Notes are outstanding, including acting as collateral agent and due diligence and collateral monitoring services.
The information set forth above is qualified in its entirety by reference to the actual terms of the Subscription Agreement, the Notes, the Security Agreement, the First Amendment, and the Warrants, which are filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 4.1 hereto, respectively, and which are incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 is incorporated herein by reference.
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Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.
On April 11, 2024, the Company received a letter from The Nasdaq Stock Market (“Nasdaq”) stating that the Company was not in compliance with Nasdaq Listing Rule 5550(b)(1) (the “Rule”) because the stockholders’ equity of the Company of $2,210,476 as of December 31, 2023, as reported in the Company’s Annual Report on Form 10-K filed with the SEC on April 1, 2024, was below the minimum requirement of $2,500,000.
Pursuant to Nasdaq’s Listing Rules, the Company has until May 28, 2024 to submit a plan to regain compliance with the Rule (a “Compliance Plan”). The Company intends to submit a Compliance Plan within the required time, although there can be no assurance that the Compliance Plan will be accepted by Nasdaq. If the Compliance Plan is accepted by Nasdaq, the Company will be granted an extension of up to 180 calendar days from April 11, 2024 to regain compliance with the Rule.
In the event the Compliance Plan is not accepted by Nasdaq, or in the event the Compliance Plan is accepted but the Company fails to regain compliance within the extension period, the Company will have the right to a hearing before Nasdaq’s Hearing Panel. The hearing request would stay any suspension or delisting action pending the conclusion of the hearing process and the expiration of any additional extension period granted by the panel following the hearing.
Item 3.02. Unregistered Sales of Equity Securities.
The information set forth under Item 1.01 is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BranchOut Food Inc. | ||
| Date: April 16, 2024 | By: | /s/ Eric Healy |
| Eric Healy, Chief Executive Officer | ||
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Exhibit 10.4
FIRST AMENDMENT TO SUBSCRIPTION AGREEMENT
THIS FIRST AMENDMENT TO SUBSCRIPTION AGREEMENT (this “Amendment”), dated as of April 16, 2024, is by and among BranchOut Food Inc., a Nevada corporation (fka Avolov LLC, an Oregon limited liability company) (the “Company”), the purchasers listed on Appendix A hereto, as the same may be updated from time to time (the “New Purchasers”) and those existing purchasers listed on Appendix B hereto (“Existing Purchasers”).
Reference is made to that certain Subscription Agreement, dated January 9, 2024, between the Company and the purchasers listed on Schedule A thereto (the “Subscription Agreement”). Capitalized terms used herein, but not otherwise defined, shall have the meanings given to them in the Subscription Agreement.
WHEREAS, the Company desires to increase the aggregate original principal value of the Secured Senior Notes offered and sold in the Offering from Four Hundred Thousand Dollars ($400,000) to Two Million Dollars ($2,000,000) in order to offer additional Senior Secured Notes and Warrants to New Purchasers who shall be bound to the terms and provisions of the Subscription Agreement, as amended by this Amendment;
WHEREAS, the Company desires to amend the Secured Senior Notes (the “First Notes”) issued on the First Closing Date (as defined below) to provide an additional lump sum payment of Interest on the unpaid principal balance of such Purchaser’s First Note as set forth below; and
WHEREAS, the parties hereto desire to amend the Subscription Agreement and the Senior Secured Notes accordingly, and pursuant to Section 12.12, the Subscription Agreement may be amended with the written consent of the Company and the Purchasers and such amendment shall be binding upon each party to the Subscription Agreement and each Holder of a Senior Secured Note, and the Existing Purchasers constitute the Purchasers.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Amendments.
(a) Recitals.
| i. | The reference to an aggregate Offering amount of “$400,000” in the recitals of the Subscription Agreement is hereby deleted in its entirety and replaced with “$2,000,000.” For purposes of clarity, $400,000 of the aggregate Offering amount was sold on January 9, 2024 (the “First Closing Date”) and the remainder shall be sold on additional closing dates after the date hereof (each, a “Subsequent Closing Date”). |
| ii. | The reference to “100,000 shares of Common Stock” included in the recitals of the Subscription Agreement is hereby deleted in its entirety and replaced with “600,000 shares of Common Stock”. For purposes of clarity, Warrants to purchase 100,000 shares of Common Stock were issued on the First Closing Date and Warrants to purchase the remaining 500,000 shares of Common Stock in aggregate shall be issued on the Subsequent Closing Dates in accordance with Section 4 of this Amendment. |
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(b) Section 1.1(a). Section 1.1(a) of the Subscription Agreement is hereby deleted in its entirety and amended and restated to read as follows:
“The Company has authorized the issuance and sale of promissory notes that shall be dated as of the First Closing Date or the applicable Subsequent Closing Date as applicable (as defined below) and shall be in the aggregate original principal amount of up to Two Million Dollars ($2,000,000) USD in substantially the form attached hereto as Exhibit A (the “Senior Secured Notes” and each a “Senior Secured Note”), subject to the receipt by the Company or Persons as directed by the Company of the Consideration no later than the applicable Closing Date. In exchange for the Consideration paid by each Purchaser, the Company will sell and issue to such Purchaser a Senior Secured Note. Each Senior Secured Note will have a principal balance equal to the Consideration paid by such Purchaser for such Senior Secured Note, as set forth opposite such Purchaser’s name on Schedule A, and shall accrue interest on its unpaid principal balance at an aggregate rate of fifteen percent (15%) per annum (with a minimum of one year of interest), which interest shall accrue from the Closing Date and all accrued and unpaid interest shall be due and payable in full on the first Business Day of each month (the “Interest”). There will be a three (3)-day grace period following the first Business Day of each month, after which a late payment fee of $100 (the “Late Payment Fee”) per day per Senior Secured Note shall be assessed and payable in addition to the past due Interest. Any arrears in Interest or the incurrence of a Late Payment Fee shall constitute an Event of Default under the Senior Secured Notes until cured, and the Purchaser shall be entitled to all remedies available to it under the Senior Secured Notes and this Agreement. In addition, each holder of a Senior Secured Note issued effective as of January 9, 2024 (each a “First Note”) shall be entitled to a lump sum cash payment in an amount equal to the difference between (a) twelve (12) months of Interest on the unpaid principal balance of such First Note and (b) the amount of Interest previously paid to such holder through the initial Subsequent Closing Date (the “Additional Payment”), which Additional Payment shall be paid by the Company to each holder of a First Note on the initial Subsequent Closing Date. For the avoidance of doubt, the Interest on each First Note shall thereafter continue to accrue and be payable on a monthly basis in accordance with the terms of such First Note. The Senior Secured Notes shall be secured pursuant to the terms of a security agreement in substantially the form attached hereto as Exhibit B, as amended form time to time (the “Security Agreement”).
(c) Section 1.4. Section 1.4 of the Subscription Agreement is hereby deleted in its entirety and amended and restated to read as follows:
The closing of the sale of the Senior Secured Notes and Warrants in return for the Consideration paid by the Purchasers shall occur in one or more closings (each, a “Closing Date”); provided that references to the initial closing of the sale of Senior Secured Notes and Warrants that occurred on January 9, 2024 shall be referred to herein as the First Closing Date, and the closing of the sale of the Senior Secured Notes and Warrants issued to the New Purchasers hereafter shall each be referred to herein as a Subsequent Closing Date. At each Closing, (i) each Purchaser will deliver to the Company the amount of Consideration set forth opposite such Purchaser’s name on Schedule A, and (ii) the Company will (A) deliver to each Purchaser an executed Senior Secured Note and Warrant and the Other Investor Agreements in return for the Consideration provided to the Company and (B) pay the Closing Fees as set forth in Section 12.10 below (which Closing Fees shall be deducted from the Consideration as described above).
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(d) Section 9.1(u). A new subsection (u) shall be added to Section 9.1 to read as follows:
(u) Services. This term means the services that Eagle Vision will provide to the Company and the Purchasers, including conducting due diligence with respect to the Company, monitoring the state and performance by the Company of 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, as determined by Eagle Vision in its reasonable discretion (provided that the performance of the Services shall in no event disrupt the operations or governance of the Company), which Services shall be provided by Eagle Vision until all of the obligations due to Purchasers under the Senior Secured Notes have been finally and irrevocably paid in full in accordance with the terms thereof.
(e) Section 12.10. Section 12.10 of the Subscription Agreement is hereby amended to add the following sentences to the end of the section:
On the initial and/or second Subsequent Closing Date, from the proceeds of the EagleVision Fund L.P. Senior Secured Note, the Company shall be pay as follows: (a) for the Services to be rendered by Eaglevision, Eighty Thousand Dollars ($80,000) shall be retained by Eaglevision from the Consideration that EagleVision Fund L.P. is paying as a New Purchaser for its Senior Secured Note at a Subsequent Closing Date and (b) Ten Thousand Dollars ($10,000) shall be paid to Cairncross & Hempelmann from the Consideration payable at the initial Subsequent Closing Date.
2. Joinder to Subscription Agreement; Representations and Warranties.
| (a) | Each New Purchaser acknowledges and agrees that by executing and delivering this Amendment, such New Purchaser has agreed to become a party to, be bound by and comply with the provisions of the Subscription Agreement. Without limiting the foregoing, each New Purchaser and Designee (as defined below) hereby represents and warrants to the Company that the representations and warranties set forth in the Subscription Agreement are true and correct as to such New Purchaser and Designee as of the Second Closing Date. |
| (b) | The Company represents and warrants to the Purchasers that, as of the initial Subsequent Closing Date: The authorized capital of the Company consists of 80,000,000 shares of Common Stock, of which 4,044,252 shares are issued and outstanding as of the date hereof. All of the shares of Common Stock have been duly authorized and are validly issued, fully paid and nonassessable. All of the outstanding shares of Common Stock have been duly authorized and are validly issued, fully paid and nonassessable. |
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3. Application to Notes; Ratification. The amendments set forth in this Amendment shall apply to all outstanding Senior Secured Notes and Warrants, and such Senior Secured Notes and Warrants are hereby amended accordingly. Except as expressly modified by this Amendment, the Subscription Agreement, the Warrants and the Senior Secured Notes are hereby ratified and affirmed and remain in full force and effect. In the event of any conflict between the Subscription Agreement and the Senior Secured Notes and the Warrants and this Amendment, this Amendment shall control.
4. Warrants. The Company agrees that the Purchasers may designate other persons or entities to be issued the Warrants that would otherwise be issued to such Purchaser hereunder (each, a “Designee”). Specifically, the Company agrees that the Warrants issued at the initial Subsequent Closing Date shall be issued as set forth in the table below. Additional Warrants shall be issued at Subsequent Closing Dates to New Purchasers as set forth on Appendix A, as the same may be updated from time to time:
| Name of Warrant Holder | Number of Shares of Common Stock Subject to Warrants | |||
| 6,250 | ||||
| 6,250 | ||||
| 10,000 | ||||
| 5,000 | ||||
| 10,000 | ||||
| 12,500 | ||||
| 6,250 | ||||
| 25,000 | ||||
| 25,000 | ||||
| 12,500 | ||||
| 12,500 | ||||
| 12,500 | ||||
| 12,500 | ||||
| TOTAL | 156,250 | |||
5. Effectiveness. This Amendment will be effective when signed and delivered by each party.
6. Counterparts. This Amendment may be signed in any number of counterparts, including by email PDF, DocuSign, or other electronic transmission, each of which shall be deemed an original, and all of which, when taken together, shall constitute one and the same document.
[Signatures Page Follows]
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IN WITNESS WHEREOF, the Company and each Existing Purchaser and New Purchaser have caused this Amendment to be executed and delivered by their respective officers thereunto duly authorized.
COMPANY:
BRANCHOUT FOOD INC. (fka AVOLOV LLC)
| By: | /s/ Eric Healy | |
| Name: | Eric Healy | |
| Title: | Chief Executive Officer | |
| Company’s Address for Notices: | ||
| 20724 Carmen Loop, Suite 120 | ||
| Bend, OR 97702 | ||
| Attn: Eric Healy | ||
| Email: | [email protected] | |
(Signature Page to Amendment to Subscription Agreement)
PURCHASER:
(Signature Page to Amendment to Subscription Agreement)
APPENDIX A
NEW PURCHASERS – April 16, 2024 Subsequent Closing
| Name | Amount of Senior Secured Note | Number of Warrants | ||||||
| TOTALS | $ | 225,000.00 | 56,250 | |||||
APPENDIX B
EXISTING PURCHASERS