BOF

BranchOut Food Inc. (BOF) - 10-K Summary for Fiscal Year Ended December 31, 2025

Business Context and Reporting Period

This Annual Report on Form 10-K covers the fiscal year ended December 31, 2025. BranchOut Food Inc. is a growth-stage consumer packaged foods company manufacturing clean-label, plant-based dried fruit and vegetable snacks. The company operates a 50,000-square-foot manufacturing facility in Pisco, Peru, utilizing proprietary GentleDry™ technology licensed from EnWave Corporation. The company is classified as an Emerging Growth Company and a Smaller Reporting Company.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Net revenue increased 113% year-over-year, driven by higher sales volumes to existing customers (Costco, Walmart) and new product introductions.
• Margin Expansion: GAAP gross margin improved to 14.8% from 12.2%. Management highlights an Adjusted Gross Margin of 27.8%, excluding depreciation, specific air freight costs, and IEEPA tariffs (which were later ruled unlawful).
• Operating Expenses: Increased to $7.40 million from $4.68 million. This includes a new $1.20 million "idle capacity" expense due to the Peru facility operating below normalized utilization levels.
• Debt Repayment: The company repaid $2.76 million in related party notes payable during 2025, reducing total liabilities despite new financing activities.
• Impairment: Recorded a $401,522 impairment charge on a note receivable from a former third-party manufacturer (Nanuva) due to uncertainty regarding repayment.

Guidance, Outlook, Risks, and Contingencies

• Going Concern: The independent auditor has issued an explanatory paragraph expressing substantial doubt about the company's ability to continue as a going concern. Management states that existing cash balances and operating cash flows are insufficient to fund operations for the next 12 months without additional financing.
• Liquidity Strategy: The company is actively seeking additional capital through equity or debt financings. Subsequent to year-end, the company raised approximately $1.5 million via an At-The-Market (ATM) offering and borrowed $1.5 million under a new senior secured promissory note.
• Operational Risks: Key risks include reliance on a single manufacturing facility in Peru, customer concentration (three customers accounted for 96.8% of revenue), and the need to scale production to absorb fixed costs and improve margins.
• Legal Proceedings: The company is defending a wrongful termination lawsuit filed by its former CFO. Settlement discussions are ongoing, but no liability has been accrued as the outcome is uncertain.
• Tariff Contingency: The company paid $348,752 in IEEPA tariffs in 2025. Following a March 2026 court ruling declaring these tariffs unlawful, the company expects a refund but has not recognized it as a receivable under ASC 450.

Investor Verification Checklist

• Cash Runway: Verify the sufficiency of the $1.5 million ATM proceeds and $1.5 million new debt (secured by substantially all assets) to cover the negative operating cash flow of ~$7 million annually.
• Customer Concentration: Assess the risk of revenue volatility given that 96.8% of revenue comes from three customers, primarily large retailers.
• Peru Facility Utilization: Monitor the ramp-up of the Peru facility; current margins are depressed by idle capacity costs that must be absorbed through volume growth.
• Related Party Transactions: Review the terms of the $3.4 million convertible note and new $1.5 million secured note held by Kaufman Kapital, a significant shareholder.
• Internal Controls: Note the disclosure of material weaknesses in internal controls, including lack of segregation of duties and formal policies for related party transactions.