BranchOut Food (BOF) - 2025 Q2 - Quarterly Report

PART I PART I. FINANCIAL INFORMATION This section presents the unaudited financial statements, management's discussion and analysis, and disclosures on market risk and controls Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for the period ended June 30, 2025, show significant revenue growth alongside widening net losses, driven by the scaling of new manufacturing operations, with the notes highlighting high customer concentration, related-party debt, and going concern doubts Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $13.15 million from $12.86 million at year-end 2024, primarily due to a significant rise in accounts receivable, while total liabilities decreased from $10.51 million to $9.61 million, largely because convertible notes were reclassified from current to long-term, consequently improving stockholders' equity to $3.54 million from $2.34 million and turning working capital positive Condensed Consolidated Balance Sheet Highlights (in USD) | Balance Sheet Item | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $5,201,109 | $4,916,614 | | Total Assets | $13,151,387 | $12,855,875 | | Total Current Liabilities | $4,538,892 | $8,813,996 | | Total Liabilities | $9,608,777 | $10,514,292 | | Total Stockholders' Equity | $3,542,610 | $2,341,583 | Condensed Consolidated Statements of Operations and Comprehensive Loss For the three and six months ended June 30, 2025, net revenue more than doubled year-over-year, reaching $3.3 million and $6.5 million, respectively, but despite improved gross profit, the net loss widened for both periods due to a sharp increase in operating expenses, particularly general and administrative costs associated with scaling production Statement of Operations Summary (in USD) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $3,299,738 | $1,362,986 | $6,493,260 | $2,830,002 | | Gross Profit | $606,459 | $148,759 | $1,158,974 | $432,347 | | Operating Loss | $(1,346,021) | $(826,415) | $(2,028,561) | $(1,851,515) | | Net Loss | $(1,603,156) | $(942,554) | $(2,521,538) | $(1,993,521) | | Net Loss Per Share | $(0.17) | $(0.22) | $(0.27) | $(0.48) | Condensed Statements of Changes in Stockholders' Equity Stockholders' equity increased from $2.34 million at December 31, 2024, to $3.54 million at June 30, 2025, primarily driven by capital raising activities, including $2.4 million from the At-The-Market (ATM) program and $1.17 million from the exercise of warrants, which more than offset the $2.52 million net loss incurred during the period - Key drivers for the increase in stockholders' equity during the first six months of 2025 were: - Common stock issued via ATM program: +$2,407,448[17] - Exercise of warrants: +$1,173,158[17] - Net loss: -$2,521,538[17] Condensed Statements of Cash Flows For the six months ended June 30, 2025, the company's cash position decreased by $1.69 million, with net cash used in operating activities significantly increasing to $3.94 million from $1.36 million in the prior year, driven by higher net loss and investments in working capital, partially offset by $2.72 million in net cash provided by financing activities, mainly from stock sales and warrant exercises Cash Flow Summary (in USD) | Cash Flow Activity | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,942,856) | $(1,357,463) | | Net cash used in investing activities | $(491,332) | $(566,431) | | Net cash provided by financing activities | $2,717,102 | $2,202,108 | | Net (decrease) increase in cash | $(1,688,323) | $278,272 | | Cash - ending of period | $641,129 | $936,061 | Notes to Financial Statements The notes provide critical context to the financial statements, detailing the company's business, accounting policies, and significant transactions, including a going concern warning due to recurring losses and an accumulated deficit of over $20 million, significant reliance on related-party financing, extremely high customer concentration, and commitments related to the new Peru facility lease, technology licensing, and a pending lawsuit - The company is engaged in developing, marketing, and distributing plant-based, dehydrated fruit and vegetable snacks and powders from its production facility in Pisco, Peru, using proprietary GentleDry™ Technology[23][24] - The financial statements were prepared under the assumption of a going concern, but recurring losses, an accumulated deficit of $20,083,595, and limited working capital raise substantial doubt about the company's ability to continue operations without additional funding[28] - The company has a very high customer concentration, with three customers accounting for 97.1% of net revenue and 97.6% of accounts receivable for the six months ended June 30, 2025, compared to one customer accounting for 99% of net revenue in the same period of 2024[81] - The company initiated an organizational realignment to open its Peru factory, incurring total costs of approximately $5.5 million, with realignment costs for the six months ended June 30, 2025, being approximately $1.07 million, including capitalized equipment and factory idle capacity expenses[157][158] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant revenue growth of 142% in Q2 and 129% in H1 2025, driven by increased sales to major customers, with the transition to in-house manufacturing at the new Peru facility improving gross margins to 18.4% in Q2, though this transition also led to higher operating expenses, including $480,320 in idle capacity costs, which widened the net loss, and liquidity remains a concern with a low cash balance and an accumulated deficit of over $20 million, raising substantial doubt about the company's ability to continue as a going concern despite recent capital raises Results of Operations (Q2 2025 vs Q2 2024) In Q2 2025, net revenue increased by 142% to $3.3 million compared to Q2 2024, and gross margin improved significantly from 10.9% to 18.4% due to the operational start of the new Peru facility, however, operating expenses surged by 347%, primarily from $480,320 in factory idle capacity costs, leading to an increased net loss of $1.6 million, up from $0.9 million in the prior-year quarter - Net revenue grew by 142% year-over-year, primarily due to increased sales to the company's largest customer[176] - Gross margin improved to 18.4% from 10.9% in the prior year, attributed to the transition from third-party suppliers to the company's own manufacturing facility in Peru[178] - General and administrative expenses increased by 347%, largely due to $480,320 in idle capacity costs associated with the new production facility as it scales up operations[179][180] Results of Operations (H1 2025 vs H1 2024) For the first six months of 2025, net revenue grew 129% to $6.5 million, and gross margin expanded to 17.8% from 15.3% in H1 2024, reflecting efficiency gains from the new facility, but despite this, the net loss increased by 26% to $2.5 million, driven by higher general & administrative, shipping, and advertising expenses related to business expansion Six-Month Operational Highlights (in USD) | Metric | H1 2025 | H1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenue | $6,493,260 | $2,830,002 | +129% | | Gross Profit | $1,158,974 | $432,347 | +168% | | Gross Margin | 17.8% | 15.3% | +2.5 p.p. | | Operating Loss | $(2,028,561) | $(1,851,515) | +9.6% | | Net Loss | $(2,521,538) | $(1,993,521) | +26% | Liquidity and Capital Resources The company's liquidity position improved, with working capital turning positive to $662,217 at June 30, 2025, from a deficit of $3.9 million at year-end 2024, however, cash on hand was low at $641,129, and the company has historically relied on debt and equity financing to fund its operations, which have generated an accumulated deficit of $20.1 million, with cash used in operations increasing significantly to $3.9 million in H1 2025, funded primarily by $2.7 million raised from financing activities Working Capital (in USD) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Current Assets | $5,201,109 | $4,916,614 | | Current Liabilities | $4,538,892 | $8,813,996 | | Working Capital | $662,217 | $(3,897,382) | - Net cash used in operating activities increased by 190% to $3.9 million for H1 2025, mainly due to a $1.44 million increase in accounts receivable and a $0.55 million increase in prepaid inventory[205] - Net cash from financing activities was $2.7 million in H1 2025, primarily from $2.4 million in proceeds from the sale of common stock and $1.2 million from warrant exercises, offset by $0.85 million in debt repayments[207] Quantitative and Qualitative Disclosures About Market Risk The company is classified as a "smaller reporting company" and is therefore not required to provide quantitative and qualitative disclosures about market risk - As a "smaller reporting company," as defined in Rule 12b-2 of the Exchange Act, the Company is exempt from providing the information required by this item[214] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures as of June 30, 2025, and concluded that they were not effective, with no material changes in internal control over financial reporting during the six-month period - Based on an evaluation as of June 30, 2025, the chief executive officer and chief financial officer concluded that the company's disclosure controls and procedures were not effective[215] - No changes in internal control over financial reporting occurred during the six months ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, internal controls[216] PART II PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered sales of equity securities, defaults upon senior securities, other information, and exhibits Legal Proceedings The company is currently involved in a lawsuit filed by its former chief financial officer alleging wrongful termination, and while management believes the outcome is not likely to have a material adverse effect on the company's financial position, the ultimate result is unpredictable and no liability has been accrued - The Company is defending a lawsuit from its former CFO for wrongful termination, and management does not believe the outcome will be materially adverse, but cannot predict the result or estimate a potential loss[218] Risk Factors As a "smaller reporting company," BranchOut Food Inc. is not required to provide risk factor disclosures in its Form 10-Q - The Company is not required to provide the information for this item as it is a "smaller reporting company"[220] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the reporting period - None reported[221] Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None reported[222] Other Information The company reported no other information for this item - None reported[224] Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents like the Articles of Incorporation and Bylaws, as well as certifications from the CEO and CFO as required by the Sarbanes-Oxley Act, and interactive data files (XBRL) - The report includes exhibits such as Articles of Incorporation, Bylaws, CEO/CFO certifications (Rule 13a-14(a) and Section 906), and Inline XBRL documents[225]