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Overview
BranchOut Food Inc. (formerly known as AvoChips Inc. and Avochips, LLC) is a Nevada corporation engaged in the development, marketing, sale, and distribution of plant-based, dehydrated fruit and vegetable snacks and powders. The company was incorporated in 2017 and has undergone several organizational changes, including converting to a limited liability company and then to a Nevada corporation.
BranchOut’s products are manufactured using a proprietary dehydration technology licensed from a third party, which the company believes produces superior quality compared to conventional dehydration methods. The company’s customers are primarily located in the United States, and in 2024, BranchOut decided to initiate its own production facility in Peru to become vertically integrated.
Our Products
BranchOut’s current product line includes:
- BranchOut Snacks: Dehydrated fruit and vegetable-based snacks such as 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.
The company is currently developing many additional products for all sales channels.
Going Concern Uncertainty
As of December 31, 2024, BranchOut had a cash balance of $2,329,452, a working capital deficit of $3,897,382, and had incurred recurring losses from operations resulting in an accumulated deficit of $17,562,057. The company’s independent registered public accounting firm has included an explanatory paragraph regarding the substantial doubt about BranchOut’s ability to continue as a going concern.
NXTDried Superfoods
During 2023, one of BranchOut’s former contract manufacturers, NXTDried Superfoods, became involved in a legal dispute, which resulted in the manufacturer suspending operations. As a result, BranchOut had to shift fulfillment to other manufacturing sources until it commenced operations at its own facility in Peru in the fourth quarter of 2024. BranchOut recognized $761,085 of impairment expense related to amounts owed from NXTDried Superfoods.
Peru Facility Lease
In May 2024, BranchOut entered into a 10-year lease for a 50,000 square-foot food processing plant located in Peru. The lease requires monthly payments starting at $8,000 and increasing to $25,000 per month by the fourth year. The lease also includes a 10-year renewal option and a buy-out option.
Critical Accounting Policies
BranchOut’s critical accounting policies include:
- Initial Public Offering: In June 2023, the company completed its IPO, selling 1,190,000 shares of common stock at $6.00 per share and receiving net proceeds of $6,226,000.
- Reverse Stock Split: In June 2023, BranchOut effected a 2.5-for-1 reverse stock split of its outstanding shares.
- Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions.
- Segment Reporting: BranchOut has two operating segments - its sales operations in the United States and its production operations in Peru.
- Fair Value of Financial Instruments: BranchOut follows the fair value hierarchy established by ASC 820 to measure the fair value of its financial instruments.
- Revenue Recognition: BranchOut recognizes revenue in accordance with ASC 606, “Revenue from Contracts with Customers.”
Results of Operations for the Years Ended December 31, 2024 and 2023
The key financial results are summarized in the table below:
| Metric | 2024 | 2023 | Increase/(Decrease) |
|---|---|---|---|
| Net Revenue | $6,516,337 | $2,825,855 | $3,690,482 (131%) |
| Cost of Goods Sold | $5,652,717 | $2,922,085 | $2,730,632 (93%) |
| Gross Profit (Loss) | $863,620 | $(96,230) | $959,850 |
| Operating Expenses | $4,766,061 | $3,405,928 | $1,360,133 (40%) |
| Net Loss | $(4,751,516) | $(3,925,710) | $825,806 (21%) |
Net Revenue BranchOut’s net revenue increased by 131% in 2024 compared to 2023, primarily due to increased sales to its largest customer.
Cost of Goods Sold and Gross Profit (Loss) Cost of goods sold increased by 93% in 2024, in line with the increase in sales. As a result, BranchOut had a gross profit of $863,620 (13% of revenues) in 2024, compared to a gross loss of $96,230 (-3% of revenues) in 2023. The improvement in gross margin was due to cost savings from transitioning to bulk shipping and the company’s own production facility.
Operating Expenses BranchOut’s operating expenses increased by 40% in 2024, primarily due to higher advertising and marketing, rent, travel, and storage/shipping costs, as well as increased salaries and professional fees. The company also recognized $761,085 of impairment expense in 2023 that was not incurred in 2024.
Net Loss BranchOut’s net loss increased by 21% in 2024 compared to 2023, primarily due to the increase in operating expenses, higher interest expense, and increased stock-based compensation, partially offset by the improvement in gross profit.
Liquidity and Capital Resources
As of December 31, 2024, BranchOut had negative working capital of $3,897,382 and an accumulated deficit of $17,562,057. The company’s primary sources of capital have been cash from product sales, common stock sales, and debt/convertible debt financing.
In 2024, BranchOut used $4,859,816 in operating activities, $2,822,561 in investing activities, and received $9,362,621 from financing activities, primarily from debt and equity financing. Subsequent to year-end, the company raised an additional $2.4 million through an “At-the-Market” stock offering.
However, BranchOut anticipates continuing to generate substantial operating losses and may need to raise additional capital to fund its operations over the next 12 months. The company’s ability to continue as a going concern is uncertain, and the financial statements do not include any adjustments that might result from the outcome of this uncertainty.
