BranchOut Food Inc. (BOF) - 10-Q Summary for Period Ended September 30, 2025
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended September 30, 2025. BranchOut Food Inc. is a Nevada corporation engaged in the development, marketing, and distribution of plant-based, dehydrated fruit and vegetable snacks and powders. The Company operates a 50,000-square-foot production facility in Pisco, Peru, which commenced operations in December 2024, utilizing proprietary GentleDry™ Technology licensed from EnWave Corporation. The Company is classified as a smaller reporting company and an emerging growth company.
Key Financial Metrics
| Metric | Three Months Ended Sept 30, 2025 | Nine Months Ended Sept 30, 2025 | Balance Sheet (Sept 30, 2025) |
|---|---|---|---|
| Net Revenue | $3,220,027 | $9,713,287 | - |
| Gross Profit | $569,550 | $1,728,524 | - |
| Gross Margin | 17.7% | 17.8% | - |
| Operating Loss | $(1,427,504) | $(3,456,065) | - |
| Net Loss | $(1,572,552) | $(4,094,090) | - |
| Cash and Equivalents | - | - | $812,007 |
| Total Assets | - | - | $14,657,328 |
| Total Liabilities | - | - | $9,544,563 |
| Working Capital | - | - | $2,118,922 |
| Accumulated Deficit | - | - | $(21,656,147) |
Material Changes vs. Prior Period
- Revenue Growth: Net revenue increased 48% quarter-over-quarter (QoQ) and 94% year-over-year (YoY) for the nine-month period, driven primarily by increased sales to the Company's largest customers.
- Margin Expansion: Gross margin improved from 15.4% to 17.7% (QoQ) and 15.3% to 17.8% (YoY nine-month). Management attributes this to the transition from third-party contract manufacturing to in-house production at the Peru facility, which reduced costs and improved efficiency.
- Operating Expenses: Operating expenses increased significantly due to the ramp-up of the Peru facility. General and Administrative (G&A) expenses rose 183% QoQ, largely due to $368,586 in factory idle capacity costs and $190,875 in R&D expenses, which were not present in the prior year period.
- Liquidity Position: Working capital improved from a negative $(3,897,382) at December 31, 2024, to a positive $2,118,922 at September 30, 2025. This was achieved through the repayment of significant related-party debt and equity raises.
- Debt Reduction: The Company repaid $1,560,000 of Senior Secured Notes held by Eagle Vision and $700,000 of the Kaufman Senior Secured Promissory Note during the period. However, a new $1,500,000 equipment note was incurred for a third EnWave machine.
Guidance, Outlook, Risks, and Unusual Items
- Going Concern: The filing explicitly states that the Company's recurring losses and accumulated deficit raise substantial doubt about its ability to continue as a going concern. Management is actively seeking additional capital to fund short-term operations.
- Outlook: Management expects further margin expansion as production scales and the Peru facility reaches higher utilization rates. The objective is to achieve 100% utilization to leverage fixed costs.
- Capital Raises: The Company raised approximately $5.24 million in net proceeds through At-The-Market (ATM) offerings and $1.39 million through warrant exercises during the nine-month period.
- Legal Proceedings: The Company is subject to a lawsuit filed by its former Chief Financial Officer alleging wrongful termination. Management believes the outcome is not probable to result in a material adverse effect, and no liability has been accrued.
- Controls and Procedures: Management concluded that disclosure controls and procedures were not effective as of September 30, 2025.
- Unusual Items: Significant non-cash expenses included $177,257 in stock-based compensation and $32,099 in interest expense related to warrant amendments.
Investor Verification Checklist
- Cash Runway: Verify the sufficiency of the $812,007 cash balance against the burn rate, given the "Going Concern" warning and the need for additional capital.
- Customer Concentration: Confirm the stability of revenue sources, as three customers accounted for approximately 96% of net revenue for the nine months ended September 30, 2025.
- Debt Covenants: Review the terms of the remaining $3.4 million Kaufman Convertible Note and the $500,000 Kaufman Senior Secured Note, including maturity dates and conversion terms.
- Facility Ownership: Assess the risk associated with the Peru facility lease, specifically the landlord's bankruptcy proceedings and the Company's strategy to acquire the facility via a first mortgage position or buy-out option.
- Internal Controls: Investigate the specific deficiencies leading to the conclusion that disclosure controls were ineffective.