BOF 10-Q
BranchOut Food Inc. (BOF)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
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
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction | (IRS Employer | |
| of incorporation or organization) | Identification No.) |
(Address of principal executive offices, including zip code)
Registrant’s
telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of exchange on which registered | ||
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.
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).
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 | ☐ |
| ☒ | 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 November 12, 2025 | |
| Common Stock, $ par value |
TABLE OF CONTENTS
| 2 |
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRANCHOUT FOOD INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2025 | December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Advances on inventory purchases | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets | ||||||||
| Other assets | ||||||||
| Other receivable, net of current portion | ||||||||
| Note receivable | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Other current liabilities | ||||||||
| Convertible notes payable, related parties, net of discounts | ||||||||
| Equipment notes payable, current portion | ||||||||
| Notes payable, related parties | ||||||||
| Finance lease liability, current portion | ||||||||
| Total current liabilities | ||||||||
| Notes payable | ||||||||
| Equipment notes payable, net of current portion | ||||||||
| Convertible notes payable, related parties, net of discounts | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Finance lease liability, net of current portion | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity: | ||||||||
| Preferred stock, $ par value, shares authorized; shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to financial statements.
| 3 |
BRANCHOUT FOOD INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net revenue | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit (loss) | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Shipping and handling to customers | ||||||||||||||||
| Advertising and promotions | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss): | ||||||||||||||||
| Gain (loss) on foreign currency translation | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Net other comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding - basic and diluted | ||||||||||||||||
| Net loss per common share - basic and diluted | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
See accompanying notes to financial statements.
| 4 |
BRANCHOUT FOOD INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
| For the Three Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-In | Subscriptions | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Payable | Income (Loss) | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| Common stock issued pursuant to ATM program | - | |||||||||||||||||||||||||||||||||||
| Exercise of warrants by note holders | - | |||||||||||||||||||||||||||||||||||
| Stock options issued for services | - | - | ||||||||||||||||||||||||||||||||||
| Gain on foreign currency translation | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| For the Three Months Ended September 30, 2024 | ||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-In | Subscriptions | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Payable | Income (Loss) | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance, June 30, 2024 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| Common stock issued pursuant to secondary public offering | - | |||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | |||||||||||||||||||||||||||||||||||
| Stock options issued for services | - | - | ||||||||||||||||||||||||||||||||||
| Common stock warrants granted to note holders pursuant to debt financing | - | - | ||||||||||||||||||||||||||||||||||
Fair value adjustment on amended warrants | - | - | ||||||||||||||||||||||||||||||||||
| Loss on foreign currency translation | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
See accompanying notes to financial statements.
| 5 |
| For the Nine Months Ended September 30, 2025 | ||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-In | Subscriptions | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Payable | Income (Loss) | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
| Common stock issued pursuant to ATM program | - | |||||||||||||||||||||||||||||||||||
| Exercise of Kaufman Kapital convertible debt warrants | - | |||||||||||||||||||||||||||||||||||
| Exercise of warrants by note holders | - | |||||||||||||||||||||||||||||||||||
Fair value adjustment on amended warrant | - | - | ||||||||||||||||||||||||||||||||||
| Stock options issued for services | - | - | ||||||||||||||||||||||||||||||||||
| Gain on foreign currency translation | - | - | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| For the Nine Months Ended September 30, 2024 | ||||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional Paid-In | Subscriptions | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Payable | Income (Loss) | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||
| Common stock issued pursuant to secondary public offering | - | |||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | |||||||||||||||||||||||||||||||||||
| Stock options issued for services | - | - | ||||||||||||||||||||||||||||||||||
| Common stock warrants granted to note holders pursuant to debt financing | - | - | ||||||||||||||||||||||||||||||||||
Fair value adjustment on amended warrants | - | - | ||||||||||||||||||||||||||||||||||
| Loss on foreign currency translation | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance, September 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
See accompanying notes to financial statements.
| 6 |
BRANCHOUT FOOD INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation expense | ||||||||
| Provision for prepaid inventory | ||||||||
| Amortization of debt discounts | ||||||||
| Fair value adjustment on amended warrant | ||||||||
| Common stock issued for services | ||||||||
| Options and warrants issued for services | ||||||||
| Decrease (increase) in assets: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Advances on inventory purchases | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Right-of-use asset | ||||||||
| Other long term asset and receivable | ( | ) | ||||||
| Increase (decrease) in liabilities: | ||||||||
| Accounts payable | ||||||||
| Accounts payable, related parties | ||||||||
| Accrued expenses | ( | ) | ||||||
| Operating lease liability | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Payments received on notes receivable | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Payment of deferred offering costs | ( | ) | ( | ) | ||||
| Repayment of equipment notes payable | ( | ) | ( | ) | ||||
| Proceeds received on notes payable, related parties | ||||||||
| Proceeds received on convertible notes payable, related parties | ||||||||
| Repayment on notes payable, related parties | ( | ) | ( | ) | ||||
| Principal payments on finance lease | ( | ) | ( | ) | ||||
| Proceeds from sale of common stock pursuant to ATM program | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash | ( | ) | ||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash - beginning of period | ||||||||
| Cash - ending of period | $ | $ | ||||||
| Supplemental disclosures: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| Non-cash investing and financing transactions: | ||||||||
| Equipment purchased with debt financing | $ | $ | ||||||
| Relative fair value of warrants issued as a debt discount | $ | $ | ||||||
| Initial recognition of right-of-use assets and lease liabilities | $ | $ | ||||||
See accompanying notes to financial statements.
| 7 |
BRANCHOUT FOOD INC.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Organization and Background
Nature of Business
BranchOut
Food Inc., a Nevada corporation, together with its Peruvian subsidiary (collectively, “BranchOut,” the “Company,”
“we,” “our” or “us”), is engaged in the development, marketing, sale and distribution of plant-based,
dehydrated fruit and vegetable snacks and powders manufactured at a
In April 2024, we formed BranchOut Food Sucursal Peru, our Peruvian wholly-owned subsidiary, to operate our production facility in Pisco Peru, which commenced operations in December 2024. Our products are produced using our advanced dehydration platform licensed exclusively from EnWave Corporation (“EnWave”) to create our private label, branded, and bulk wholesale products. We use proprietary GentleDry™ Technology optimized to preserve taste, texture, color, and nutrients. Our GentleDry™ Technology is protected by over 17 patents. Prior to operating our production facility, we relied on contract manufacturers.
Company Realignment
Beginning
April 2024, the Company initiated an organizational realignment to expand manufacturing operations by opening and operating a
factory in Pisco, Peru. This large-scale initiative aligned the Company’s resources, strategies, and goals with our desired
outcomes. Through September 30, 2025, we have incurred total aggregate costs of approximately $
For
the nine months ended September 30, 2025, we incurred approximately $
| 8 |
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies
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 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 September 30, 2025, the results of operations for the three and nine months ended September 30, 2025 and 2024, and cash flows for the nine months ended September 30, 2025 and 2024. The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for the full year. The balance sheet as of December 31, 2024 was derived from our audited financial statements. The accompanying condensed consolidated financial statements and notes thereto should be read in conjunction with the audited financial statements for the year ended December 31, 2024, which were included in our Annual Report on Form 10-K. The Company follows the same accounting policies in the preparation of interim reports.
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 September 30, 2025:
| Name of Entity | Jurisdiction | Relationship | ||
| BranchOut Food Inc.(1) | Nevada, U.S. | Parent | ||
| BranchOut Food Sucursal Peru(2) | Peru | Subsidiary |
| (1) | Holding company in the form of a corporation. |
| (2) | Peruvian wholly-owned subsidiary of BranchOut Food Inc. established on April 26, 2024 in the form of a branch. |
The consolidated financial statements herein contain the operations of the wholly-owned subsidiaries listed above. The Company’s headquarters are located in Bend, Oregon.
Going Concern
As
shown in the accompanying condensed consolidated financial statements, as of September 30, 2025, the Company has incurred recurring losses
from operations resulting in an accumulated deficit of $
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Segment Reporting
Under ASC 280, Segment Reporting, operating segments are defined as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance. The Company has two components, consisting of its sales operations in the United States, and its production operations in Peru. Therefore, the Company’s Chief Executive Officer, who is also the CODM, makes decisions and manages the Company’s operations based on these two operating segments for the manufacture and distribution of its products.
| 9 |
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
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 $
Research and Development
We operate in a fast-moving category shaped by shifting consumer preferences, requiring continuous innovation and new product development. To support this, we rely on our proprietary GentleDry™ Technology, an advanced dehydration platform licensed exclusively from EnWave Corporation. We expect to continue investing in R&D as we scale our GentleDry™ product portfolio and bring new, innovative offerings to market that align with evolving consumer needs.
Research
and development costs include salaries, building costs, utilities, administrative expenses and other corporate costs. For the nine months
ending September 30, 2025, our research and development expenses totaled $
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:
| Office equipment | ||
| Furniture and fixtures | ||
| Equipment and machinery | ||
| Leasehold Improvements |
| 10 |
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.
Derivatives
The Company evaluates convertible notes payable, stock options, stock warrants and other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of ASC Topic 815-40, Derivative Instruments and Hedging: Contracts in Entity’s Own Equity.
The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income or other expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.
Cost of Goods Sold
Cost of goods sold includes the direct costs associated with the purchase, production and manufacturing of the Company’s products. Production costs are primarily calculated from direct raw materials, labor, and variable manufacturing costs. We determine manufacturing overhead by applying a predetermined rate based on actual machine hours used in production. Overhead costs include factory rent, utilities, depreciation, and other factory-related expenses, allocated to products based on the factory’s capacity and actual machine hours incurred during production.
We analyze factory capacity to establish a normal level of production, which serves as the basis for allocating manufacturing overhead costs. This approach ensures that our overhead costs are systematically and consistently allocated to inventory.
Advertising and Promotions Costs
The
Company incurs advertising and promotional expenses related to demos with customers, trade shows, and promotional allowances. Advertising
and promotional costs are expensed as incurred. Advertising and promotional expenses were $
| 11 |
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 incurred stock-based compensation in the amount of $ and $ for the nine months ended September 30, 2025 and 2024, respectively.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) that are adopted by the Company as of the specified effective date. If not discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption.
Recently Adopted Accounting Standards
In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure.” The ASU updated reportable segment disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess segment performance. The Company adopted ASU No. 2023-07 during the year ended December 31, 2024. See Note 17 “Segment Reporting” in the accompanying Notes to the Consolidated Financial Statements for additional information.
Accounting Standards Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments in this ASU add specific requirements for income tax disclosures to improve transparency and decision usefulness. The guidance in ASU 2023-09 requires that public business entities disclose specific categories in the income tax rate reconciliation and provide additional qualitative information for reconciling items that meet a quantitative threshold. In addition, the amendments in ASU 2023-09 require that all entities disclose the amount of income taxes paid disaggregated by federal, state, and foreign taxes and disaggregated by individual jurisdictions. The ASU also includes other disclosure amendments related to the disaggregation of income tax expense between federal, state and foreign taxes. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis and retrospective application is permitted. The Company does not expect a material impact to its financial position, results of operations, or cash flows from adoption of this guidance.
In November 2024, the FASB issued Accounting Standards Update (“ASU”) 2024-03 and in January 2025, the FASB issued ASU 2025-01, “Income Statement - Reporting Comprehensive Income -Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” The guidance requires disclosures about specific expense categories, including but not limited to, purchases of inventory, employee compensation, depreciation, amortization and selling expenses. The ASU is effective in the first annual reporting period beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently assessing the effect that adoption of this guidance will have on its Consolidated Financial Statements.
In July 2025, the FASB issued ASU No. 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets” (“ASU 2025-05”) which provides a practical expedient for all entities related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under Topic 606. ASU 2025-05 will be adopted prospectively and will be effective for the Company beginning January 1, 2026, including interim periods in 2026, with early adoption permitted. The Company is currently assessing the effect that adoption of this guidance will have on its Consolidated Financial Statements.
| 12 |
Note 3 – 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 nine months ended September 2025 and 2024:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Less: slotting, discounts, and allowances | ||||||||||||||||
| Net revenue | $ | $ | $ | $ | ||||||||||||
Note 4 – Inventories
The Company’s products consist of pre-packaged and bulk-dried fruit and vegetable-based snacks, powders and ingredients developed at its production facility in Peru and purchased products from contract-manufacturers in Chile and/or Peru. Raw materials consist of purchased fruits and vegetables and packaging materials. Appropriate consideration is given to obsolescence, excessive levels, deterioration, and other factors in evaluating net realizable value. No reserve for obsolete inventories has been recognized. Manufacturing overhead costs are allocated to work in progress based on the factory’s normal capacity and actual machine hours incurred during production. Overhead costs include indirect labor, factory rent, utilities, depreciation, and other factory-related expenses. Costs such as packaging, tariffs, and inbound freight are included in finished goods inventory as they are necessary to bring products to their final condition and location for sale.
Inventory, consisting of raw materials, work in progress and finished goods are stated at the lower of cost or net realizable value using the average cost valuation method, and consisted of the following as of September 30, 2025 and December 31, 2024:
| September 30, 2025 | December 31, 2024 | |||||||
| Raw materials | $ | $ | ||||||
| Work in progress | ||||||||
| Finished goods | ||||||||
| Total inventory | ||||||||
The
Company secures raw materials with advances of up to
| 13 |
Note 5 – Accounts Receivable, Net
Accounts receivable are stated at their estimated
net realizable value. The Company evaluates the collectability of trade receivables on an ongoing basis and establishes an allowance for
doubtful accounts as needed based on a combination of factors, including historical collection experience, the financial condition of
customers, specific account reviews, and current economic conditions. Management believes the allowance for doubtful accounts is adequate
to cover expected credit losses. The allowance for doubtful accounts was $
The Company had certain customers whose revenue or accounts receivable balances individually represented 10% or more of total net revenue or total accounts receivable, respectively. For the nine months ended September 30, 2025, three customers accounted for approximately 96% of net revenue and 97% of accounts receivable as of period-end. For the nine months ended September 30, 2024, two customers accounted for approximately 99% of net revenue and 97% of accounts receivable as of period-end.
Note 6 – Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following as of September 30, 2025 and December 31, 2024:
| September 30, 2025 | December 31, 2024 | |||||||
| Prepaid insurance costs | $ | $ | ||||||
| Prepaid advertising and trade show fees | ||||||||
| Prepaid professional fees & license fees | ||||||||
| Prepaid software service | ||||||||
| Prepaid taxes | ||||||||
| Miscellaneous prepaid expenses | ||||||||
| Interest receivable | ||||||||
| Miscellaneous receivable | ||||||||
| VAT tax receivable | ||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
Note 7 – Property and Equipment
Property and equipment as of September 30, 2025 and December 31, 2024 consisted of the following:
| September 30, 2025 | December 31, 2024 | |||||||
| Leasehold Improvements | $ | $ | ||||||
| Machinery and equipment | ||||||||
| Office Furniture, fixtures and equipment | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
Depreciation
of property and equipment was $
The Company leases a manufacturing facility located in Pisco, Peru, which is accounted for as an operating lease (see Note 11). The lease includes a purchase option that allows the Company to acquire the facility at the end of the lease term. During 2024, the landlord of this facility entered bankruptcy proceedings.
To
protect its long-term strategic interests, the Company purchased the first mortgage position on the facility and continues to hold its
contractual purchase option under the lease. Management currently intends to acquire ownership of the facility either (i) through the
landlord’s bankruptcy settlement process or (ii) by exercising the purchase option at the end of the lease term, although there
can be no assurance that the Company will be successful in this regard. The Company accounts for the facility as a leased asset. The
first mortgage position is included on the balance sheet in other assets of $
| 14 |
Note 8 – Other Assets and Other Receivable
Other Assets
The
Company has other assets of $
On
May 10, 2024, the Company made the first payment of $
Other Receivable
The
Company’s Peruvian operations are subject to an
As
of September 30, 2025, the Company’s Peruvian operations had paid more IGV on purchases than it had collected on sales, resulting
in a net IGV receivable of $
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 $
On
February 4, 2024, the Company and Nanuva entered into an amendment to the MDA which extended the date on which Nanuva is required to
make the first minimum contractual annual payment to September 30, 2024. Repayments are based on kilograms produced by Nanuva for the
Company, or a minimum of $
In
April 2024 the Company advanced Nanuva $
As
of September 30, 2025, a total of $
The Note Receivable is current with the next $
| 15 |
Note 10 – Accrued Expenses
Accrued expenses consisted of the following as of September 30, 2025 and December 31, 2024, respectively:
| September 30, 2025 | December 31, 2024 | |||||||
| Accrued payroll and taxes | $ | $ | ||||||
| Accrued interest | ||||||||
| Accrued chargebacks | ||||||||
| Accrued demos | ||||||||
| Accrued royalties | ||||||||
| Total accrued expenses | $ | $ | ||||||
Note 11 – Leases
Equipment Lease
The
Company has financed production equipment with an acquisition cost of approximately $
Peru Facility Lease
On
May 10, 2024, the Company entered into a ten-year lease for the
In
connection with the lease of the Peru Facility, the Company purchased a first position mortgage receivable in the amount of $
The components of lease expense were as follows:
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2025 | 2024 | |||||||
| Operating lease cost: | ||||||||
| Amortization of right-of-use asset | $ | $ | ||||||
| Interest on lease liability | ||||||||
| Total operating lease cost | ||||||||
| Finance lease cost: | ||||||||
| Amortization of right-of-use asset | $ | $ | ||||||
| Interest on lease liability | ||||||||
| Total finance lease cost | ||||||||
| Total lease costs | $ | $ | ||||||
| 16 |
Supplemental balance sheet information related to leases was as follows:
| September 30, 2025 | December 31, 2024 | |||||||
| Operating lease: | ||||||||
| Operating lease assets | $ | $ | ||||||
| Current portion of operating lease liability | $ | |||||||
| Noncurrent operating lease liability | ||||||||
| Total operating lease liability | $ | $ | ||||||
| Finance lease: | ||||||||
| Finance lease assets | $ | $ | ||||||
| Current portion of finance lease liability | $ | |||||||
| Noncurrent finance lease liability | ||||||||
| Total finance lease liability | $ | $ | ||||||
| Weighted average remaining lease term: | ||||||||
| Operating lease | ||||||||
| Finance lease | ||||||||
| Weighted average discount rate: | ||||||||
| Operating lease | % | % | ||||||
| Finance lease | % | % | ||||||
Supplemental cash flow and other information related to finance leases was as follows:
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows (provided by) used for operating leases | $ | ( | ) | $ | ||||
| Finance cash flows used for finance leases | $ | $ | ||||||
| Leased assets obtained in exchange for lease liabilities: | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
| Total finance lease liabilities | $ | $ | ||||||
The future minimum lease payments due under operating leases as of September 30, 2025, is as follows:
| Year Ending | Minimum Lease | |||
| December 31, | Commitments | |||
| 2025 (for the three months remaining) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total minimum lease payments | ||||
| Less effects of discounting | ||||
| Lease liability recognized | ||||
| Less current portion | ||||
| Long-term operating lease liability | $ | |||
| 17 |
The future minimum lease payments due under finance leases as of September 30, 2025, is as follows:
| Year Ending | Minimum Lease | |||
| December 31, | Commitments | |||
| 2025 (for the three months remaining) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Total minimum lease payments | ||||
| Less effects of discounting | ||||
| Lease liability recognized | ||||
| Less current portion | ||||
| Long-term finance lease liability | $ | |||
Note 12 – Debt
Kaufman Convertible Notes Payable, Related Party
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
On July 19, 2024, the Company, Mr. Kaufman and Kaufman Kapital LLC (“Kaufman Kapital”) entered into an amendment to the SPA, which among other things, replaced Mr. Kaufman with Kaufman Kapital as the “Investor” under the SPA.
The
Convertible Note matures on the earlier of (i)
On
July 24, 2024 the, the Initial Loan payment of $
On
June 1, 2025 the Company and Kaufman Kapital entered into a Warrant Exercise and Amendment to Notes and Warrant Agreement (the “Warrant
Exercise Agreement”), pursuant to which Kaufman Kapital exercised in full the $
| 18 |
The Company’s obligations under the Convertible Note are secured by a lien granted to Kaufman Kapital on substantially all of the Company’s assets pursuant to a Security Agreement entered between the Company and Kaufman Kapital (the “Security Agreement”). In addition, the Convertible Note includes affirmative and negative covenants, events of defaults and other terms and conditions, customary in transactions of this nature.
In
accordance with ASC 470, the Company recorded total discounts of $
Kaufman Senior Secured Promissory Note, Related Party
On
August 29, 2024, the Company borrowed $
On
May 7, 2025, and September 30, 2025 the Company repaid $
Eagle Vision Senior Notes and Warrants, Related Party
On
January 9, 2024 the Company entered into a Subscription Agreement (the “Subscription Agreement”) with Eagle Vision Fund
LP., for the sale of Senior Secured Notes (“Senior Secured Notes”) to Purchasers in the aggregate amount of up to $
On
April 16, 2024, the Company amended the Subscription Agreement (the “First Amendment”) to complete the sale of $
The
First Amendment incorporates and amends certain provisions of the Subscription Agreement. The First Amendment also (i) increased the
aggregate principal amount of the Senior Secured Notes available to be sold from time to time under the Subscription Agreement from
$
During
the period of May 14, 2024, through May 22, 2024, the Company completed the sale of an aggregate of $
To
date, in a series of closings pursuant to the Subscription Agreement, including the sales described above, the Company has issued an
aggregate $
| 19 |
In
connection with the sale of the Purchased Securities to Kaufman Kapital under the SPA, the Company entered into an Omnibus Amendment
to Note Documents with substantially all of the Holders of the Company’s Senior Secured 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 $
The
Senior Secured Notes mature on the earlier of December 31, 2025, or the occurrence of a Qualified Subsequent Financing or Change of
Control (as such terms are defined in the Subscription Agreement) and bear interest at a rate of
In
accordance with ASC 470, the Company recorded total discounts of $
Eagle
Vision has been paid aggregate cash fees in the amount of $
During the nine months ended September 30, 2025, the Company repaid $
During
the period ended September 30, 2025, of the
Notes payable to related parties, consists of the following as of September 30, 2025 and December 31, 2024:
| September 30, 2025 | December 31, 2024 | |||||||
| Total Kaufman Convertible Notes Payable, related party | $ | $ | ||||||
| Less: discounts | ||||||||
| Convertible notes payable, related parties, net of discounts | ||||||||
| Less: current maturities | ||||||||
| Convertible notes payable, related parties, less current maturities | $ | $ | ||||||
| Total Kaufman Senior Secured Promissory Note, related party | ||||||||
| Total Senior Notes held by Eagle Vision | ||||||||
| Total notes payable, related parties | ||||||||
| Less: current maturities | ||||||||
| Notes payable, related parties, less current maturities | $ | $ | ||||||
| 20 |
The
Company recognized $
The
Company recognized $
EnWave Equipment Promissory Note
On
May 22, 2023, the Company entered into an equipment purchase agreement with EnWave for the purchase of a used 100kW Rev vacuum microwave
dehydration machine (the “EnWave Machine”). Cash payments of $
On September 16, 2025, the Company and EnWave entered into (i) a Fifth Amendment to License Agreement (the “Amendment”), which amended certain terms of the License Agreement between the Company and EnWave originally dated May 7, 2021 (as amended, the “License Agreement”), and (ii) an Equipment Purchase Agreement (the “Purchase Agreement”).
Pursuant to the Amendment, among other things, EnWave granted the Company a global exclusive license (but subject to existing licenses previously issued by EnWave to two other manufacturers) to manufacture Dragon Fruit products using EnWave’s technology under the License Agreement.
Pursuant
to the Purchase Agreement, the Company purchased from EnWave a refurbished 120kW REV vacuum microwave for a purchase price of $
SBA EIDL Loan Agreement
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 $
| 21 |
The Company has notes payable (in addition to the Senior Secured Notes and the notes payable to Kaufman Kapital described above), consisting of the following as of September 30, 2025, and December 31, 2024:
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| EnWave Equipment Loan | $ | $ | ||||||
| SBA EIDL Loan | ||||||||
| Total notes payable | $ | $ | ||||||
| Less: current maturities | ||||||||
| Notes payable, less current maturities | $ | $ | ||||||
The
Company recognized $
The Company recognized aggregate interest expense for the nine months ended September 30, 2025, and 2024 respectively, as follows:
| September 30, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Interest on convertible notes payable, related parties | $ | $ | ||||||
| Amortization of debt discounts on related party convertible notes | ||||||||
| Amortization of debt discounts on related party convertible notes, warrants | ||||||||
| Interest on notes payable | ||||||||
| Interest on notes payable, related parties | ||||||||
| Amortization of debt discounts on related party notes | ||||||||
| Amortization of debt discounts on related party notes, warrants | ||||||||
| Amended warrant | ||||||||
| Interest on credit cards | ||||||||
| Interest on first credit position financing | ||||||||
| Total interest expense | $ | $ | ||||||
Note 13 – Changes in Stockholders’ Equity
Preferred Stock
The Company has authorized shares of $ par value preferred stock. As of September 30, 2025, none of the preferred stock had been designated or issued.
Common Stock
The Company has authorized shares of $ par value common stock. As of September 30, 2025, a total of shares of common stock had been issued. Each holder of common stock is entitled to one vote for each share of common stock held.
ATM Offerings
On
October 23, 2024, we entered into an At-The-Market Issuance Sales Agreement (the “2024 ATM Agreement”) with Alexander
Capital, L.P., as selling agent (“Alexandar Capital” or the “Sales Agent”), relating to shares of our common
stock, par value $
per share (“common stock”). In accordance with the ATM Agreement, we were authorized to offer and sell shares of our
common stock having an aggregate offering price of up to $
On
February 18, 2025, we entered into a First Amendment to the ATM Agreement to increase the aggregate offering price of our shares of
common stock that we may sell under the 2024 ATM Agreement to up to $
The Sales Agent was entitled to commissions of 3.0% of the gross proceeds of the sales of common stock under the 2024 ATM Agreement
| 22 |
At
the termination of the 2024 ATM Agreement on March 21, 2025, we had sold
shares of common stock through the Sales Agent for aggregate gross proceeds of $
On
July 29, 2025, we entered into a second ATM Agreement with Alexander Capital (the “2025 ATM Agreement”), on substantially
the same terms as the 2024 ATM Agreement, under which we may offer and sell shares of our common stock from time to time through the
Sales Agent having an aggregate offering price of up to $
At
the termination of the 2025 ATM Agreement on September 30, 2025, we had sold
shares of common stock through the Sales Agent for aggregate gross proceeds of $
For the period ending September 30, 2025, the Company sold an aggregate of shares of common stock pursuant
to its 2024 and 2025 ATM Agreements through the Sales Agent, resulting in net proceeds of $
Exercise of Warrants
On
February 14, 2025, the Company received aggregate proceeds of $
On
June 4, 2025, Kaufman Kapital exercised warrants to purchase an aggregate of shares of the Company’s common stock at
an exercise price of $ per share. These warrants were originally issued in connection with the Kaufman Kapital Senior Secured Convertible
note. The exercises resulted in aggregate cash proceeds of $
During the period ended September 30, 2025, additional Warrants were exercised to purchase an aggregate of
shares of the Company’s common stock at an exercise price
of $
per share for aggregate cash proceeds
of $
Note 14 – 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 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 reserved shares as of September 30, 2025. There were options with a weighted
average exercise price of $ per share, and a weighted average remaining life of approximately
Common Stock Options Issued for Services Pursuant to the Company’s 2022 Equity Incentive Plan
On February 13, 2025, the Company granted options to purchase shares of the Company’s common stock, having an exercise price of $ per share, exercisable over a -year term, to a new employee. The options will vest quarterly over three years from the date of grant. The aggregate estimated value using the Black-Scholes Pricing Model, based on a volatility rate of % and a call option value of $, was $.
On April 11, 2025, the Company granted options to purchase shares of the Company’s common stock, having an exercise price of $ per share, exercisable over a -year term, to one of the Company’s directors. The options vested immediately. The estimated value using the plain vanilla Black-Scholes Pricing Model, based on a volatility rate of % and a call option value of $, and an expected term of years, was $.
On April 14, 2025, the Company granted options to purchase an aggregate shares of the Company’s common stock, consisting of options to purchase shares to each of six directors, having an exercise price of $ per share, exercisable over a -year term, including options to purchase shares issued to each of the Company’s CEO and CFO in consideration of their services as directors. The options vest monthly over six months following the issuance date. The aggregate estimated value using the plain vanilla Black-Scholes Pricing Model, based on a volatility rate of % and a call option value of $, and an expected term of years, was $.
| 23 |
On June 12, 2025 the Company granted options to purchase shares of the Company’s common stock having an exercise price of $ per share, exercisable over a -year term, to employees for services performed. The grant includes options to purchase and shares to the Company CEO and CFO, respectively. The options vest in 36 equal monthly installments over the three-year period following the issuance date. The aggregate estimated value using the plain vanilla Black-Scholes Pricing Model, based on a volatility rate of % and a call option value of $, and an expected term of years, was $.
| Number of Options | Weighted Average Grant Date Fair Value | Aggregate Intrinsic Value | ||||||||||
| Outstanding at December 31, 2024 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited | ||||||||||||
| Outstanding at September 30, 2025 | $ | $ | ||||||||||
| Expected to vest | $ | $ | ||||||||||
Options
are being expensed over the respective vesting period, resulting in $ of stock-based compensation expense during the nine months
ended September 30, 2025. As of September 30, 2025, a total of $
Note 15 – Common Stock Warrants
Warrants
to purchase a total of
Exercise of Warrants
On
February 14, 2025, the Company received aggregate proceeds of $
On
June 4, 2025, Kaufman Kapital exercised warrants to purchase an aggregate of shares of the Company’s common stock at
an exercise price of $ per share. These warrants were originally issued in connection with the Kaufman Kapital Senior Secured Convertible
note. The exercises resulted in aggregate cash proceeds of $
During the period ended September 30, 2025, additional
Warrants were exercised to purchase an aggregate of shares of the Company’s common stock at an exercise price of $ per
share for aggregate cash proceeds of $
| Number of Warrants | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (Years) | ||||||||||
| Outstanding at December 31, 2024 | $ | |||||||||||
| Issued | ||||||||||||
| Exercised | ||||||||||||
| Expired | ||||||||||||
| Outstanding at September 30, 2025 | $ | |||||||||||
| Exercisable at September 30, 2025 | $ | |||||||||||
Note 16 – 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.
| 24 |
The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of September 30, 2025 and December 31, 2024:
| Fair Value Measurements at September 30, 2025 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Assets | ||||||||||||
| Cash | $ | $ | $ | |||||||||
| Right-of-use-asset | ||||||||||||
| Notes receivable | ||||||||||||
| Total assets | ||||||||||||
| Liabilities | ||||||||||||
| Convertible notes payable, related parties net of $ | ||||||||||||
| Notes payable | ||||||||||||
| Notes payable, related parties | ||||||||||||
| Lease liabilities | ||||||||||||
| Total liabilities | ||||||||||||
| Total assets and liabilities | $ | $ | ( | ) | $ | ( | ) | |||||
| Fair Value Measurements at December 31, 2024 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Assets | ||||||||||||
| Cash | $ | $ | $ | |||||||||
| Right-of-use-asset | ||||||||||||
| Notes receivable | ||||||||||||
| Total assets | ||||||||||||
| Liabilities | ||||||||||||
| Convertible notes payable, related parties net of $ | ||||||||||||
| Notes payable | ||||||||||||
| Notes payable, related parties | ||||||||||||
| Lease liabilities | ||||||||||||
| Total liabilities | ||||||||||||
| Total assets and liabilities | $ | $ | ( | ) | $ | ( | ) | |||||
There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the nine months ended September 30, 2025, or the year ended December 31, 2024.
Note 17 – Segment Reporting
The
Company is engaged in the development, marketing, sale, and distribution of plant-based, dehydrated fruit and vegetable snacks and powders.
The Company’s products are currently manufactured at its new production facility that commenced production in Pisco Peru in December
2024, and is supported by contract manufacturers in Peru, as necessary. The Company’s customers are located throughout the United
States. The Company’s sales operations, which represent 100% of the Company’s consolidated sales, are one of its
| 25 |
The accounting policies of the retail operations segment are the same as those described in the summary of significant accounting policies in Note 1 to the Condensed Consolidated Financial Statements. The Company’s CODM assesses performance and allocates resources for the retail operations segment using segment earnings before net interest expense, income tax expense and depreciation and amortization (“EBITDA”). The Company defines EBITDA as earnings before interest taxes and depreciation. The Company’s CODM also uses segment EBITDA to measure the operational effectiveness of the Company’s financial model, compare the performance of core operating results between periods, against budget and against competitors and evaluate whether to invest capital in the retail operations segment or in other parts of the Company, such as for share repurchases, debt repayments or capital expenditures. The Company’s CODM is not provided asset information by reportable segment as asset information is provided to the CODM on a consolidated basis. The Company’s capital expenditures are predominately used in the Company’s production operations, rather than its retail operations.
The following table presents the Company’s retail operations segment revenue, measure of segment profit or loss, significant segment expenses and reconciliation of the U.S. and Latin America operations segments’ EBITDA to consolidated net earnings before income tax expense for the three and nine months ended September 30, 2025, and 2024:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| U.S. operations segment sales | $ | $ | $ | $ | ||||||||||||
| U.S. operations segment cost of goods sold | ||||||||||||||||
| U.S. operations segment expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Rent | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Total U.S. operating expenses | $ | $ | $ | $ | ||||||||||||
| U.S. operations segment EBITDA | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Latin American operations segment cost of goods sold | $ | $ | $ | $ | ||||||||||||
| Latin American operations segment expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Rent | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Total Latin American operating expenses | ||||||||||||||||
| Latin American operations segment EBITDA | $ | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Consolidated EBITDA | $ | ( | ) | ( | ) | $ | ( | ) | $ | ( | ) | |||||
| Reconciliation of net earnings before income tax expense: | ||||||||||||||||
| Consolidated EBITDA | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Depreciation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Stock compensation expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Consolidated net loss before income tax expense | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 26 |
Note 18 – Related Party Transactions
Kaufman
Kapital, led by Daniel Kaufman, is a beneficial owner holding more than
On July 15, 2024, the Company entered into a
Securities Purchase Agreement (as amended, the “SPA”) with Daniel L. Kaufman, as described in Note 12. As of September
30, 2025 the SPA principal outstanding on the Convertible Note was $
On
August 29, 2024, the Company borrowed $
On
May 7, 2025, and September 30, 2025 the Company repaid $
Eagle Vision Fund LP, is led by the Company’s CFO, John Dalfonsi.
As discussed further in Note 12 above, on
various dates from January 9, 2024 through May 22, 2024, the Company completed the sale of an aggregate $
During
the nine months ended September 30, 2025 the Company repaid $
During
the period ended September 30, 2025, of the
| 27 |
Note 19 – 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 the likelihood of outcomes in litigation and makes appropriate accruals and disclosures based on current information and legal counsel’s opinions. There’s no guarantee that these matters won’t significantly impact the Company’s business, financial position, or results of operations. Legal accruals are recorded when and if it is determined that a loss related to a certain matter is both probable and reasonably estimable.
The Company is the subject of a lawsuit recently commenced by its former chief financial officer alleging wrongful termination. Based on information currently available to the Company and the advice of legal counsel, management believes that the outcome of this lawsuit is not probable to result in a material adverse effect on the Company’s financial position, results of operations, or cash flows. While the Company intends to vigorously defend itself against these allegations, the ultimate outcome of the lawsuit is not possible to predict. At this time given the uncertainties inherent in litigation, it is not reasonable to estimate the amount or range of any potential loss, and therefore no liability has been accrued in the accompanying financial statements.
Other than as set forth above, there are no legal matters pending against the Company.
Operating Lease
On
May 10, 2024, the Company entered into a ten-year lease for the
Finance Lease
The
Company leases equipment under a non-cancelable finance lease payable in monthly installments of $
NXTDried Manufacturing Agreement
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.
EnWave License Agreement
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 is effective as long as EnWave possesses its EnWave technology.
At various dates the License Agreement has been amended 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.
| 28 |
In
order to maintain exclusivity, the Company must make annual royalty minimum payments to EnWave of $
In addition to the initial EnWave Equipment we purchased, the Company agreed to purchase additional equipment from EnWave overtime. The additional equipment purchase schedule, as amended, required the Company to purchase a “Second EnWave Machine”, which was purchased in full on December 12, 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.
On
September 16, 2025 the Company entered into a Purchase Agreement for the Third EnWave Machine, a refurbished 120kW REV vacuum microwave
for a purchase price of $
The Company is also required to enter 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 is not discernible from the equipment; therefore, the license costs have been capitalized and depreciated over the useful life of the equipment.
Note 20 - Income Taxes
The
Company incurred a net operating loss for the nine months ended September 30, 2025, 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
September 30, 2025, the Company had approximately $
The
effective income tax rate for the nine months ended September 30, 2025, and 2024, was
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 September 30, 2025, and December 31, 2024.
Additionally, in accordance with ASC 740, the Company has evaluated its tax positions and determined there are no uncertain tax positions.
Note 21 – 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:
Stock Options Grant
On October 15, 2025 the Company granted options to purchase shares of the Company’s common stock having an exercise price of $ per share, exercisable over a 10-year term, to an employee for services performed. The options vest in 36 equal monthly installments over the three-year period following the issuance date. The aggregate estimated value using the plain vanilla Black-Scholes Pricing Model, based on a volatility rate of % and a call option value of $, and an expected term of years, was $.
Exercise of Warrants
On
October 17, 2025 warrants were exercised to purchase an aggregate of shares of the Company’s common stock at an exercise
price of $ per share for aggregate cash proceeds of $
On
various dates in October and November 2025 warrants were exercised to purchase an aggregate of common stock at an exercise price of $ per share for aggregate
cash proceeds of $
| 29 |
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, 2024. 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
BranchOut Food Inc., is reimagining how the world eats fruits and vegetables. We are engaged in the development, marketing, sale and distribution of plant-based, dehydrated fruit and vegetable snacks and powders manufactured in a 50,000 square foot production facility that we lease in Pisco, Peru (the “Peru Facility”). At the Peru Facility, utilizing proprietary GentleDry™ Technology, we are able to turn fresh fruits and vegetables into clean, crunchy snacks and industrial ingredients within just 10 days.
GentleDry™ Technology is an advanced dehydration platform licensed to us exclusively by EnWave Corporation for certain fruits and vegetables. This technology allows us to develop differentiated fruit and vegetable products using optimized GentleDry™ settings that preserve taste, texture, color, and nutrients.
We believe GentleDry™ is superior to traditional freeze-dry processing because it retains:
| ● | three times more natural flavor compounds, | |
| ● | up to 22 times more aromatic compounds, and | |
| ● | up to 95% of original vitamins and antioxidants. |
Additionally, our process speed is faster, making us more energy efficient; our food doesn’t oxidize, preserving the flavor and color; and our technology is protected by more than 17 patents.
Our Products
We plan to continue to grow revenues strategically by penetrating the multi-billion dollar grocery, industrial ingredient and online markets. Our current product line includes:
| ● | BranchOut Snacks: dehydrated fruit and vegetable-based snacks, including Avocado Chips, Chewy Banana Bites, Pineapple Chips, Brussels Sprout Crisps, Strawberry Crisps and Bell Pepper Crisps. | |
| ● | Private Label: Prunes, Carrots, Brussel Sprouts and Raisins sold to major retailers. | |
| ● | BranchOut Industrial Ingredients: Banana, Mango, Blueberry, Pineapple, Cherry Tomato, Avocado and many others. |
We are currently developing many additional products for all sales channels.
Going Concern Uncertainty
As of September 30, 2025, we had a cash balance of $812,007, a positive working capital of $2,118,922, and had incurred recurring losses from operations resulting in an accumulated deficit of $21,656,147. Although we anticipate that our results of operations will improve substantially as a result of the recent launch of our new facility in Peru, there can be no assurance in that regard. If we continue to generate substantial operating losses, we will not have sufficient funds to sustain our operations for the next twelve months and we will need to raise additional cash to fund our operations. These factors raise substantial doubt about our ability to continue as a going concern.
The 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.
Peru Facility Lease
On May 10, 2024, we entered into a ten-year lease for the 50,000 square-foot Peru Facility, which commenced operations in December of 2024. The lease of the Peru Facility requires monthly lease payments of $8,000 in the first two years of the lease, $20,000 in the third year of the lease, $22,000 in the fourth year of the lease, $24,000 in the fourth year of the lease, and $25,000 thereafter. The lease also has a 10-year renewal option, and a buy-out option under which the Company plans to exercise the buy-out option and purchase the Peru Facility for $1,865,456.
In connection with the lease of the Peru Facility, we purchased a first position mortgage receivable in the amount of $1,267,000, which is secured by the Peru Facility and was owed by the landlord of the Peru Facility to its former tenant, for a purchase price of $1,267,000, of which payments were made in various installments totaling $355,000 as of December 31, 2024 and $912,000 during the nine months ended September 30, 2025.
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Results of Operations for the Three Months Ended September 30, 2025, and 2024
The following table summarizes selected items from the statement of operations for the three months ended September 30, 2025, and 2024, respectively.
| Three Months Ended | ||||||||||||
| September 30, | Increase / | |||||||||||
| 2025 | 2024 | (Decrease) | ||||||||||
| Net revenue | $ | 3,220,027 | $ | 2,181,495 | $ | 1,038,532 | ||||||
| Cost of goods sold | 2,650,477 | 1,845,155 | 805,322 | |||||||||
| Gross profit | 569,550 | 336,340 | 233,210 | |||||||||
| Gross margin | 17.7 | % | 15.4 | % | ||||||||
| Operating expenses: | ||||||||||||
| General and administrative | 897,512 | 316,688 | 580,824 | |||||||||
| Salaries and benefits | 422,069 | 309,433 | 112,636 | |||||||||
| Professional services | 248,640 | 369,525 | (120,885 | ) | ||||||||
| Advertising and promotions | 271,872 | 125,597 | 146,275 | |||||||||
| Shipping and handling | 156,961 | 118,252 | 38,709 | |||||||||
| Total operating expenses | 1,997,054 | 1,239,495 | 757,559 | |||||||||
| Operating loss | (1,427,504 | ) | (903,155 | ) | (524,349 | ) | ||||||
| Other income (expense): | ||||||||||||
| Interest income | 3,916 | 2,882 | 1,034 | |||||||||
| Interest expense | (148,964 | ) | (370,532 | ) | 221,568 | |||||||
| Total other income (expense) | (145,048 | ) | (367,650 | ) | 222,602 | |||||||
| Net loss | $ | (1,572,552 | ) | $ | (1,270,805 | ) | $ | (301,747 | ) | |||
Net Revenue
Our net revenue for the three months ended September 30, 2025, was $3,220,027, compared to $2,181,495 for the three months ended September 30, 2024, an increase of $1,038,532, or 48%. The increase in revenue was primarily due to increased sales to our largest customer during the three months ended September 30, 2025.
Cost of Goods Sold and Gross Profit
Our cost of goods sold for the three months ended September 30, 2025, was $2,650,477, compared to $1,845,155 for the three months ended September 30, 2024, an increase of $805,322, or 44%. Cost of goods sold increased primarily due to increased sales during the three months ended September 30, 2025. We had gross profit of $569,550, representing gross margins of 17.7%, for the three months ended September 30, 2025, as compared to a gross profit of $336,340, or 15.4%, for the three months ended September 30, 2024.
Gross margin increased primarily due to the transition of manufacturing operations from third-party suppliers to our facility located in Pisco, Peru. This insourcing initiative created greater control over production processes, improved product quality, reduced contract manufacturing costs, and improved overall efficiency shortening the production cycle and allowing for faster order fulfillment. As production continues to scale, we expect further margin expansion from manufacturing existing products more efficiently and from our enhanced ability to bring new products to market more quickly.
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General and Administrative
Our general and administrative expense for the three months ended September 30, 2025, was $897,512, compared to $316,688 for the three months ended September 30, 2024, an increase of $580,824, or 183%. The largest components of our general and administrative expenses are plant idle capacity, research and development, rent, travel, and commissions, as shown below.
| Three Months Ended September 30, | ||||||||||||||||
| 2025 | 2024 | Difference | % Change | |||||||||||||
| Idle Capacity | $ | 368,586 | $ | - | $ | 368,586 | 100 | % | ||||||||
| Research and development | $ | 190,875 | $ | - | $ | 190,875 | 100 | % | ||||||||
| Rent | $ | 50,870 | $ | 160,751 | $ | (109,881 | ) | (68 | )% | |||||||
| Travel | $ | 39,894 | $ | 30,502 | $ | 9,392 | 31 | % | ||||||||
| Commissions | $ | 63,928 | $ | 24,910 | $ | 39,018 | 157 | % | ||||||||
Idle capacity increased due to the opening of the production facility located in Pisco, Peru. In December 2024 operations commenced at the facility. As our factory scales, idle capacity will decrease. Commissions increased due to increased sales.
Salaries and Wages
Salaries and wages for the three months ended September 30, 2025, was $422,069, compared to $309,433 for the three months ended September 30, 2024, an increase of $112,636, or 36%. This increase was primarily attributable to $55,206 of amortization of stock options issued to employees for services performed and $42,238 in salaries and wages relates to the hiring of employees to support production ramp-up at the Peru facility.
Professional Fees
Professional fees for the three months ended September 30, 2025, was $248,640, compared to $369,525 for the three months ended September 30, 2024, a decrease of $120,885, or 33%. The decrease is mostly attributable to a decrease in legal fees related to establishing the Company’s Peru facility in 2024.
Shipping and handling
Shipping and handling for the three months ended September 30, 2025, was $156,961, compared to $118,252 for the three months ended September 30, 2024, an increase of $38,709 or 33%. This increase was primarily attributable to an increase in sales volumes.
Advertising and promotions
Advertising and promotions for the three months ended September 30, 2025, was $271,872, compared to $125,597 for the three months ended September 30, 2024, an increase of $146,275, or 116%. Advertising and promotions expenses increased for the three months ended September 30, 2025, mostly due to increased in-store product demos with one of our largest customers.
Other Income (Expense)
In the three months ended September 30, 2025, other expense was $145,048 on a net basis, consisting of $148,964 of interest expense, as partially offset by $3,916 of interest income. For the three months ended September 30, 2024, other expense was $367,650 on a net basis, consisting of $370,532 of interest expense, as partially offset by $2,882 of interest income. Other expense decreased by $222,602, or 61%, primarily due to the 2024 $150,462 write-off of deferred financing costs and $89,949 of additional interest expense related to the modification of warrants.
Net loss
Net loss for the three months ended September 30, 2025, was $1,572,552, compared to $1,270,805 for the three months ended September 30, 2024, an increase of $301,747, or 24%. The increased net loss was due to scaling up production at our in-house manufacturing facility. Our objective is to achieve 100% utilization, which we believe will allow us to leverage fixed costs, improve operating efficiency, and capture additional gross margin benefits as production volumes grow.
| 32 |
Results of Operations for the Nine Months Ended September 30, 2025, and 2024
The following table summarizes selected items from the statement of operations for the nine months ended September 30, 2025, and 2024, respectively.
| Nine Months Ended | ||||||||||||
| September 30, | Increase / | |||||||||||
| 2025 | 2024 | (Decrease) | ||||||||||
| Net revenue | $ | 9,713,287 | $ | 5,011,497 | $ | 4,701,790 | ||||||
| Cost of goods sold | 7,984,763 | 4,242,810 | 3,741,953 | |||||||||
| Gross profit | 1,728,524 | 768,687 | 959,837 | |||||||||
| Gross margin | 17.8 | % | 15.3 | % | ||||||||
| Operating expenses: | ||||||||||||
| General and administrative | 2,204,559 | 666,600 | 1,537,959 | |||||||||
| Salaries and benefits | 1,172,474 | 1,257,316 | (84,842 | ) | ||||||||
| Professional services | 806,736 | 1,064,567 | (257,831 | ) | ||||||||
| Advertising and promotions | 579,507 | 223,801 | 355,706 | |||||||||
| Storage, shipping and handling | 421,313 | 311,073 | 110,240 | |||||||||
| Total operating expenses | 5,184,589 | 3,523,357 | 1,661,232 | |||||||||
| Operating loss | (3,456,065 | ) | (2,754,670 | ) | (701,395 | ) | ||||||
| Other income (expense): | ||||||||||||
| Interest income | 15,652 | 8,577 | 7,075 | |||||||||
| Interest expense | (653,677 | ) | (518,233 | ) | (135,444 | ) | ||||||
| Total other income (expense) | (638,025 | ) | (509,656 | ) | (128,369 | ) | ||||||
| Net loss | $ | (4,094,090 | ) | $ | (3,264,326 | ) | $ | (829,764 | ) | |||
Net Revenue
Our net revenue for the nine months ended September 30, 2025, was $9,713,287, compared to $5,011,497 for the nine months ended September 30, 2024, an increase of $4,701,790, or 94%. The increase in revenue was primarily due to increased sales to our two largest customers during the nine months ended September 30, 2025.
Cost of Goods Sold and Gross Profit
Our cost of goods sold for the nine months ended September 30, 2025, was $7,984,763, compared to $4,242,810 for the nine months ended September 30, 2024, an increase of $3,741,953, or 125%. Cost of goods sold increased primarily due to increased sales during the nine months ended September 30, 2025. As a result of the foregoing, we had gross profit of $1,728,524, representing gross margins of 17.8%, for the nine months ended September 30, 2025, as compared to a gross margin of $768,687, of 15.3%, for the nine months ended September 30, 2024.
Gross margin increased primarily due to the transition of manufacturing operations from third-party suppliers to our facility located in Pisco, Peru. This insourcing initiative created greater control over production processes, improved product quality, reduced contract manufacturing costs, and improved overall efficiency shortening the production cycle and allowing for faster order fulfillment. As production continues to scale, we expect further margin expansion from manufacturing existing products more efficiently and from our enhanced ability to bring new products to market more quickly.
| 33 |
General and Administrative
Our general and administrative expense for the nine months ended September 30, 2025, was $2,204,559, compared to $666,600 for the nine months ended September 30, 2024, an increase of $1,537,959, or 231%. The largest components of our general and administrative expenses are plant idle capacity, research and development, rent, travel, and commissions, as shown below.
| Nine Months Ended September 30, | ||||||||||||||||
| 2025 | 2024 | Difference | % Change | |||||||||||||
| Idle Capacity | $ | 848,906 | $ | - | $ | 848,906 | 100 | % | ||||||||
| Research & Development | $ | 208,265 | $ | 14,348 | $ | 193,917 | 1,352 | % | ||||||||
| Rent | $ | 152,020 | $ | 160,751 | $ | (8,731 | ) | (5 | )% | |||||||
| Travel | $ | 172,118 | $ | 99,132 | $ | 72,986 | 74 | % | ||||||||
| Commissions | $ | 197,130 | $ | 139,049 | $ | 58,081 | 42 | % | ||||||||
Idle capacity increased due to the opening of the production facility located in Pisco, Peru. In December 2024 operations commenced at the facility. As our factory scales, idle capacity will decrease. Rent increase is related to the Pisco, Peru production facility. Travel increased due to the opening of the facility in Peru and sales initiatives to expand production distribution. Commissions increased due to increased sales.
Salaries and Wages
Salaries and wages for the nine months ended September 30, 2025, was $1,172,474, compared to $1,257,316 for the nine months ended September 30, 2024, a decrease of $84,842, or 7%. This decrease was primarily attributable to $408,700 of non-cash, stock-based compensation for the nine months ended September 30, 2024, compared to $102,289 of non-cash, stock-based compensation related to stock options awarded during the current period. This decrease is mostly offset by increases in salaries and wages related to the hiring of employees to support production ramp-up at the Peru facility.
Professional Fees
Professional fees for the nine months ended September 30, 2025, was $806,736, compared to $1,064,567 for the nine months ended September 30, 2024, a decrease of $257,831, or 24%. This decrease was primarily attributable to $290,085 of non-cash, stock-based compensation for the nine months ended September 30, 2024.
Shipping and handling
Shipping and handling for the nine months ended September 30, 2025, was $421,313, compared to $311,073 for the nine months ended September 30, 2024, an increase of $110,240 or 35%. This increase was primarily attributable to an increase in sales volumes.
Advertising and promotions
Advertising and promotions for the nine months ended September 30, 2025, was $579,507, compared to $223,801 for the nine months ended September 30, 2024, an increase of $355,706, or 159%. Advertising and promotions expenses increased for the nine months ended September 30, 2025, compared to the corresponding period in 2024, mostly due to increased in-store product demos with one of our largest customers.
Other Income (Expense)
In the nine months ended September 30, 2025, other expense was $638,025 on a net basis, consisting of $653,677 of interest expense, as partially offset by $15,652 of interest income. For the nine months ended September 30, 2024, other expense was $509,656 on a net basis, consisting of $518,233 of interest expense, as partially offset by $8,577 of interest income. Other expense increased by $128,369, or 25%, primarily due to interest on the Kaufman Convertible Note and notes payable with related parties.
| 34 |
Net loss
Net loss for the nine months ended September 30, 2025, was $4,094,090, compared to $3,264,326 for the nine months ended September 30, 2024, an increase of $829,764, or 25%. The increased net loss was due to scaling up production at our in-house manufacturing facility. Our objective is to achieve 100% utilization, which we believe will allow us to leverage fixed costs, improve operating efficiency, and capture additional gross margin benefits as production volumes grow.
Liquidity and Capital Resources
The following table summarizes our total current assets, liabilities and working capital as of September 30, 2025 and December 31, 2024.
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Current Assets | $ | 5,460,580 | $ | 4,916,614 | ||||
| Current Liabilities | $ | 3,341,658 | $ | 8,813,996 | ||||
| Working Capital | $ | 2,118,922 | $ | (3,897,382 | ) | |||
As of September 30, 2025, we had positive working capital of $2,118,922. We have incurred net losses since our inception and we anticipate net losses and negative operating cash flows for the near future, and we may not be profitable or realize growth in the value of our assets. To date, our primary sources of capital have been cash generated from the sales of our products, common stock sales, and debt and equity financing. As of September 30, 2025, we had cash of $812,007, total liabilities of $9,544,563, and an accumulated deficit of $21,656,147. As of December 31, 2024, we had cash of $2,329,452, total liabilities of $10,514,292, and an accumulated deficit of $17,562,057.
Cash Flow
Comparison of the Nine Months Ended September 30, 2025, and the Nine Months Ended September 30, 2024
The following table sets forth the primary sources and uses of cash for the periods presented below:
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (5,064,017 | ) | $ | (3,259,049 | ) | ||
| Net cash used in investing activities | (573,991 | ) | (2,095,691 | ) | ||||
| Net cash provided by financing activities | 4,093,929 | 5,767,938 | ||||||
| Effect of exchange rate changes on cash | 26,634 | (1,794 | ) | |||||
| Net change in cash | $ | (1,517,445 | ) | $ | 411,404 | |||
Net Cash Used in Operating Activities
Net cash used in operating activities was $5,064,017 for the nine months ended September 30, 2025, compared to $3,259,049 for the nine months ended September 30, 2024, an increase of $1,804,968, or 55%. The increase was primarily due to a $1,065,942 increase in accounts receivable due to increased sales volumes and a $573,303 increase in prepaid inventory to secure raw materials.
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Net Cash Used in Investing Activities
Net cash used in investing activities was $573,991 for the nine months ended September 30, 2025, compared to $2,095,691 for the nine months ended September 30, 2024, a decrease of $1,521,700, or 73%. This decrease was primarily attributable to less equipment purchases and capital expenditures for the build out of the Peru facility.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $4,093,929 for the nine months ended September 30, 2025, compared to $5,767,938 for the nine months ended September 30, 2024, an decrease of $1,674,009, or 29%. Our decreased cash provided by financing activities was primarily due to principal repayments on notes payable to related parties offset by proceeds from the sale of common stock and exercise of warrants.
Effect of Exchange Rate Changes on Cash
For the nine months ended September 30, 2025, the effect of exchange rate changes on cash and cash equivalents primarily reflects the translation impact from fluctuations in the value of the Peruvian sol relative to the U.S. dollar. During the period, the sol experienced modest depreciation against the U.S. dollar, resulting in a gain on foreign currency translation of $26,634 compared to a loss of $1,794 in the comparative period.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our financial results are affected by the selection and application of accounting policies and methods. As of April 1, 2025, we changed our manufacturing cost allocation methodology from kilograms produced, to machine hours used in production, to improve costing as we scale product mix and invest in research and development. The change resulted in an immaterial impact to the valuation of inventory and resulting costs of goods sold from our Annual Report on Form 10-K for the year ended December 31, 2024.
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.
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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 September 30, 2025. 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 nine months ended September 30, 2025, 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).
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is the subject of a lawsuit recently commenced by its former chief financial officer alleging wrongful termination. Based on information currently available to the Company and the advice of legal counsel, management believes that the outcome of this lawsuit is not probable to result in a material adverse effect on the Company’s financial position, results of operations, or cash flows. While the Company intends to vigorously defend itself against these allegations, the ultimate outcome of the lawsuit is not possible to predict. At this time given the uncertainties inherent in litigation, it is not reasonable to estimate the amount or range of any potential loss, and therefore no liability has been accrued in the accompanying financial statements.
Other than as set forth above, there are no legal matters pending against the Company.
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
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ITEM 6. EXHIBITS.
| * | Filed herewith |
| † | Portions of this exhibit have been redacted. |
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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 | November 12, 2025 | ||
| Eric Healy | (Principal Executive Officer) | |||
| /s/ John Dalfonsi | Chief Financial Officer | November 12, 2025 | ||
| John Dalfonsi | (Principal Accounting and Financial Officer) |
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