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Notes Payable, Related Parties
 6 Months Ended
Jun. 30, 2025
Notes Payable Related Parties  
Notes Payable, Related Parties

Note 12 – Notes Payable, Related Parties

 

Kaufman Note

 

As discussed in Note 2, on August 30, 2024, the Company borrowed $1,200,000 from Kaufman Kapital pursuant to a Senior Secured Promissory Note that, as amended, matures on December 31, 2025. The loan under the Secured Note bears interest at a rate of 15% per annum. The Company’s obligations under the Secured Note are secured by a lien on substantially all of the Company’s assets pursuant to the Security Agreement. In addition, the Secured Note includes affirmative and negative covenants, events of defaults and other terms and conditions, customary in transactions of this nature.

 

On May 7, 2025, the Company repaid $325,000 of principal on the Secured Note.

 

Eagle Vision Notes

 

As discussed in Note 2, 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 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 $2.00 to $1.00, (ii) the outside maturity date of the Senior Notes held by the Holders was extended from December 31, 2024 to December 31, 2025 (subject to further extension in the event the maturity date of the Convertible Note is extended), (iii) the Company’s obligation to make payments of principal under the Senior Notes held by the Holders beginning July 1, 2024 has been eliminated, and instead all obligations of the Company under such Senior Notes will be due in one lump sum on the maturity date of the Senior Notes, and (iv) the Company’s obligations under the Convertible Note and liens granted to the holder thereof, will be pari passu with the Company’s obligations under the Senior Notes held by the Holders and liens granted to the holders thereof. The amendment warrants resulted in $89,949 of additional interest expense.

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

During the period of May 14, 2024, through May 22, 2024, the Company completed the sale of an aggregate of $1,050,000 of Senior Notes, and Warrants to purchase an aggregate of 262,500 shares of the Company’s common stock, to a group of Investors led by Eagle Vision, an affiliate of John Dalfonsi, a director of the Company and its Chief Financial Officer. The sales were effected pursuant to a Subscription Agreement, dated January 10, 2024, between the Company and the investors in the Senior Notes, as amended by an amendment (“First Amendment”) to the Subscription Agreement dated as of April 16, 2024 (as so amended, the “Subscription Agreement”).

 

The Senior 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 15% per annum. In addition, the Senior Notes are subject to covenants, events of defaults and other terms and conditions set forth in the Subscription Agreement. The Company’s obligations under the Notes are secured by liens on substantially all of the Company’s assets pursuant to the terms of the Security Agreement entered into by the Company on January 10, 2024, in favor of holders of the Senior Notes (the “Security Agreement”). Each Warrant is exercisable for a 10-year period at an exercise price of $1.00 per share.

 

On April 16, 2024, the Company completed the sale of $225,000 of Senior Notes, and Warrants to purchase an aggregate of 56,250 shares of the Company’s common stock, to a group of seven Investors, pursuant to a First Amendment to the Subscription Agreement between the Company and the Investors dated as of April 16, 2024. The First Amendment incorporates and amends certain provisions of the Subscription Agreement, dated January 10, 2024, previously entered into by the Company and investors that purchased Notes and Warrants from the Company on January 10, 2024 (the “January Investors”). On July 30, 2024, the Company repaid an aggregate total of $115,000 of principal to three of the seven Investors in settlement of their promissory notes.

 

The First Amendment also (i) increased the aggregate principal amount of the Senior Notes available to be sold from time to time under the Subscription Agreement from $400,000 to $2,000,000, (ii) increased the number of shares of common stock of the Company available to be issued under Warrants sold from time to time under the Subscription Agreement from 100,000 to 600,000, (iii) provides for an aggregate one-time payment in the amount of $46,290 to the January Investors and the issuance to them of Warrants to purchase 100,000 shares of common stock, in consideration of their agreement to enter into the First Amendment, and (iv) provided for the payment of up to $80,000 to Eagle Vision Fund with the proceeds of Notes to be issued by the Company at subsequent closings of sales of Senior Notes and Warrants, in consideration of services rendered and to be rendered by Eagle Vision to holders of the Senior Notes while the Notes are outstanding, including acting as collateral agent and due diligence and collateral monitoring services.

 

On January 9, 2024, the Company completed the sale of $400,000 of Senior Notes and Warrants to purchase an aggregate of 100,000 shares of the Company’s common stock, to a group of six Investors led by Eagle Vision, pursuant to a Subscription Agreement between the Company and the Investors.

 

In accordance with ASC 470, the Company recorded total discounts of $339,698, including $80,908 on the relative fair value of the Warrants during the year ended December 31, 2024. The discounts were amortized to interest expense during 2024 using the effective interest method.

 

Eagle Vision has been paid aggregate cash fees in the amount of $177,500 from the sales of the Senior Notes in consideration of services rendered and to be rendered by Eagle Vision to the Company and the holders of the Senior Notes, including for conducting due diligence with respect to the Company, monitoring the performance by the Company of its obligations under the Senior Notes, servicing the interest and principal payments for holders of the Senior Notes, engaging in ongoing discussions with the Company’s management regarding the Company’s operations and financial condition, acting as collateral agent, and evaluating financial and non-financial information related to the Company. The Company has also paid an aggregate of $35,000 of the investors’ legal fees from sales of the Senior Notes.

 

To date, in a series of closings pursuant to the Subscription Agreement, including the most recent sales described above, the Company has issued an aggregate $1,675,000 of principal pursuant to the Senior Notes, and Warrants to purchase an aggregate 518,750 shares of common stock.

 

On various dates in June 2025, principal repayments totaling $310,000 were made to Holders of the Senior Notes. In addition, during June 2025, those Holders exercised warrants on a cash basis for 135,000 shares of the Company’s common stock for an aggregate purchase price of $135,000.

 

Notes payable, related parties, consists of the following as of June 30, 2025 and December 31, 2024:

  

   June 30,   December 31, 
   2025   2024 
         
Total Kaufman Note  $875,000   $1,200,000 
Total Senior Notes held by Eagle Vision   1,250,000    1,560,000 
Total notes payable, related parties   2,125,000    2,760,000 
Less: current maturities   2,125,000    2,760,000 
Notes payable, related parties, less current maturities  $-   $- 

 

 

BRANCHOUT FOOD INC.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

The Company recognized $197,577 of interest expense on notes payable, related parties for the six months ended June 30, 2025, and $146,798 of interest expense on notes payable, related parties for the six months ended June 30, 2024, consisting of $54,630 of stated interest expense, $71,718 of amortized debt discounts and $20,450 of amortized debt discounts due to warrants.

 

The Company recognized aggregate interest expense for the six months ended June 30, 2025, and 2024 respectively, as follows:

  

   June 30,   June 30, 
   2025   2024 
Interest on convertible notes payable, related parties  $208,996   $- 
Amortization of debt discounts on related party convertible notes   25,808    - 
Amortization of debt discounts on related party convertible notes, warrants   7,211    - 
Interest on notes payable   9,972    903 
Interest on notes payable, related parties   197,577    54,630 
Amortization of debt discounts on related party notes   -    71,718 
Amortization of debt discounts on related party notes, warrants   -    20,450 
Amended warrant   32,099    - 
Interest on credit cards   661    - 
Interest on first credit position financing   22,389    - 
Total interest expense  $504,713   $147,701