[10-Q] Sow Good Inc. Quarterly Earnings Report
Sow Good Inc. (SOWG) reported a sharp year-over-year revenue decline and operating losses while disclosing substantial doubt about its ability to continue as a going concern. Revenue for the six months ended June 30, 2025 was $4.33 million versus $27.05 million a year earlier, and the company incurred a six-month net loss of $6.76 million. Cash fell to $959,416 at June 30, 2025 from $3.72 million at year-end, and the accumulated deficit is $69.2 million. Management cites working capital of $17.4 million but warns these sources may not sustain operations for the next 12 months and has implemented debt restructuring, cost reductions, headcount cuts and business development initiatives. The company converted related-party short-term notes into $2.80 million of senior convertible notes maturing in 2030 (convertible at $0.62–$0.63). Operationally, Sow Good operates a Texas freeze-drying facility with six bespoke freeze driers, access to six additional units and claimed capacity of up to 24 million units per year, sells in ~5,000 U.S. stores and began sales into Middle East distributors.
Sow Good Inc. (SOWG) ha registrato un forte calo dei ricavi su base annua e perdite operative, esprimendo al contempo seri dubbi sulla sua capacità di continuare come azienda in funzionamento. I ricavi per i sei mesi terminati il 30 giugno 2025 sono stati $4.33 million rispetto a $27.05 million dell'anno precedente, e la società ha riportato una perdita netta semestrale di $6.76 million. La liquidità è scesa a $959,416 al 30 giugno 2025 da $3.72 million a fine esercizio, e il disavanzo accumulato è di $69.2 million. La direzione indica un capitale circolante di $17.4 million ma avverte che tali risorse potrebbero non bastare per i prossimi 12 mesi; sono state quindi avviate ristrutturazioni del debito, riduzione dei costi, tagli al personale e iniziative di sviluppo commerciale. La società ha convertito cambiali a breve termine con parti correlate in $2.80 million di senior convertible notes con scadenza 2030 (convertibili a $0.62–$0.63). Sul piano operativo, Sow Good gestisce uno stabilimento di liofilizzazione in Texas con sei essiccatori su misura, accesso ad altre sei unità e una capacità dichiarata fino a 24 million di unità all'anno, vende in circa 5,000 negozi negli Stati Uniti e ha avviato vendite tramite distributori in Medio Oriente.
Sow Good Inc. (SOWG) registró una fuerte caída interanual de los ingresos y pérdidas operativas, además de expresar dudas significativas sobre su capacidad para continuar como empresa en marcha. Los ingresos para los seis meses terminados el 30 de junio de 2025 fueron $4.33 million frente a $27.05 million del año anterior, y la compañía registró una pérdida neta semestral de $6.76 million. El efectivo se redujo a $959,416 al 30 de junio de 2025 desde $3.72 million al cierre del ejercicio, y el déficit acumulado asciende a $69.2 million. La dirección indica un capital de trabajo de $17.4 million pero advierte que estas fuentes podrían no ser suficientes para sostener las operaciones durante los próximos 12 meses; por ello ha implementado reestructuración de deuda, recortes de costos, reducción de plantilla e iniciativas de desarrollo comercial. La compañía convirtió pagarés a corto plazo con partes relacionadas en $2.80 million de bonos convertibles senior con vencimiento en 2030 (convertibles a $0.62–$0.63). En lo operativo, Sow Good gestiona una planta de liofilización en Texas con seis equipos diseñados a medida, acceso a seis unidades adicionales y una capacidad declarada de hasta 24 million de unidades al año, vende en aproximadamente 5,000 tiendas en EE. UU. y empezó ventas a distribuidores en Oriente Medio.
Sow Good Inc. (SOWG)는 전년 대비 매출이 급감하고 영업 손실을 기록했으며, 계속기업으로 존속할 수 있을지에 대해 중대한 의문을 제기했습니다. 2025년 6월 30일로 끝나는 6개월 동안의 매출은 $4.33 million으로 전년의 $27.05 million에 비해 크게 감소했으며, 해당 기간 순손실은 $6.76 million입니다. 현금은 2025년 6월 30일 기준 $959,416으로 연말의 $3.72 million에서 감소했고, 누적 적자는 $69.2 million입니다. 경영진은 운전자본을 $17.4 million이라고 밝혔지만 이 자원들이 향후 12개월 동안 운영을 유지하기에 충분하지 않을 수 있다고 경고하며 부채 재조정, 비용 절감, 인원 감축 및 사업 개발 조치를 시행했습니다. 회사는 관련 당사자 단기 어음들을 2030년 만기인 $2.80 million의 선순위 전환사채(전환가 $0.62–$0.63)로 전환했습니다. 운영 측면에서 Sow Good는 텍사스에 맞춤형 동결건조기 6대가 있는 동결건조 공장을 운영하며 추가 6대에 접근할 수 있고 연간 최대 24 million 유닛의 생산능력을 주장하고, 미국 내 약 5,000개 매장에서 판매하며 중동 유통업체로의 판매를 시작했습니다.
Sow Good Inc. (SOWG) a annoncé une forte baisse de son chiffre d'affaires en glissement annuel et des pertes d'exploitation, tout en exprimant un doute substantiel sur sa capacité à poursuivre son activité. Le chiffre d'affaires pour les six mois clos le 30 juin 2025 s'élève à $4.33 million contre $27.05 million un an plus tôt, et la société a inscrit une perte nette semestrielle de $6.76 million. La trésorerie est tombée à $959,416 au 30 juin 2025 contre $3.72 million à la clôture de l'exercice, et le déficit accumulé s'élève à $69.2 million. La direction indique un fonds de roulement de $17.4 million mais avertit que ces ressources pourraient ne pas suffire à soutenir les opérations au cours des 12 prochains mois ; des restructurations de dette, réductions de coûts, suppressions d'emplois et initiatives de développement commercial ont été mises en œuvre. La société a converti des billets à court terme liés à des parties liées en $2.80 million de obligations convertibles senior arrivant à échéance en 2030 (convertibles à $0.62–$0.63). Sur le plan opérationnel, Sow Good exploite une installation de lyophilisation au Texas dotée de six lyophilisateurs sur mesure, a accès à six unités supplémentaires et revendique une capacité allant jusqu'à 24 million d'unités par an, vend dans environ 5,000 magasins aux États-Unis et a commencé des ventes via des distributeurs au Moyen-Orient.
Sow Good Inc. (SOWG) meldete einen starken Umsatzrückgang im Jahresvergleich und operative Verluste und äußerte zugleich erhebliche Zweifel an ihrer Fähigkeit, das Unternehmen fortzuführen. Die Umsätze für die sechs Monate zum 30. Juni 2025 betrugen $4.33 million gegenüber $27.05 million im Vorjahr, und das Unternehmen verzeichnete einen Nettoverlust von $6.76 million für diesen Zeitraum. Die liquiden Mittel sanken zum 30. Juni 2025 auf $959,416 von $3.72 million zum Jahresende, und der kumulierte Fehlbetrag beläuft sich auf $69.2 million. Das Management gibt ein Working Capital von $17.4 million an, warnt jedoch, dass diese Mittel die Geschäftstätigkeit in den nächsten 12 Monaten möglicherweise nicht sichern; daher wurden Schuldenrestrukturierungen, Kostensenkungen, Personalabbau und Maßnahmen zur Geschäftsentwicklung eingeleitet. Das Unternehmen wandelte kurzfristige, mit verbundenen Parteien gewährte Schuldscheine in $2.80 million vorrangige Wandelanleihen mit Fälligkeit 2030 um (wandlungsfähig zu $0.62–$0.63). Operativ betreibt Sow Good eine Gefriertrocknungsanlage in Texas mit sechs maßgeschneiderten Gefriertrocknern, Zugang zu sechs weiteren Einheiten und einer angegebenen Kapazität von bis zu 24 million Einheiten pro Jahr, verkauft in rund 5,000 US-Filialen und hat den Verkauf über Distributorennetzwerke im Nahen Osten begonnen.
- Debt re-profiling: Related-party short-term notes were exchanged for $2.803M senior convertible notes maturing April 30, 2030, reducing immediate cash maturities.
- Manufacturing capacity: Company operates six bespoke freeze driers with access to six additional units and claims capacity to freeze dry up to 24 million units per year.
- Retail distribution: Products offered in approximately 5,000 U.S. brick-and-mortar stores and recent expansion into Middle East distributors (contributed up to 9% of revenue in a period).
- Working capital: Reported working capital of $17.4 million at June 30, 2025, providing operating runway while additional financing options are pursued.
- Material losses and cash decline: Net loss of $6,757,566 for six months ended June 30, 2025 and cash decreased to $959,416 from $3,723,440 at year-end.
- Substantial doubt on going concern: Management disclosed that these factors raise substantial doubt about ability to continue for the next 12 months.
- Sharp revenue contraction: Six-month revenue fell to $4.33M from $27.05M year-over-year, compressing margins and driving inventory accumulation.
- Customer concentration: Top customers comprise a large share of sales (top three accounted for 48%, 17%, and 9% of six-month revenues), increasing exposure to customer loss.
- Significant lease and long-term liabilities: Operating lease liabilities totaled approximately $16.9M, and convertible related-party notes carry potential dilution.
- High non-cash compensation: Amortization of stock options was ~$2.5M for the six months, increasing reported losses and potential equity dilution.
Insights
TL;DR: Sow Good shows a sharp revenue drop, heavy losses and cash decline; debt re-profiling buys time but near-term liquidity remains a material risk.
The six-month revenue collapse from $27.05M to $4.33M correlates with inventory build and negative gross margins in the most recent quarter, producing a $6.76M net loss and cash of $959K. Management reduced near-term liability pressure by converting related-party notes into $2.803M convertible notes maturing 2030, which defers cash outflows but adds potential dilution at conversion prices of $0.62–$0.63. Operating lease liabilities and right-of-use assets remain substantial (~$16.9M lease liability), and stock-based compensation (~$2.5M amortization) materially increases non-cash expenses. Overall, the restructuring is credit-positive in the near term but insufficient to remove substantial going-concern risk without successful capital raises or improved sales.
TL;DR: Several related-party arrangements, equity compensation in lieu of cash, and director/officer stock issuances raise governance considerations amid financial stress.
The filing discloses multiple related-party transactions: a lease for a facility owned by the Executive Chairman's entity, conversion of related-party promissory notes into senior convertible debt, and issuance of material common stock to officers and directors as compensation (e.g., 783,068 shares to officers during 2025). These actions can be legitimate liquidity solutions but also concentrate economic risk with insiders and increase potential dilution for public shareholders. The audit committee and disinterested directors approved the debt exchange, which the company notes; investors should note the explicit governance disclosures when assessing control, insider alignment and conflict risks.
Sow Good Inc. (SOWG) ha registrato un forte calo dei ricavi su base annua e perdite operative, esprimendo al contempo seri dubbi sulla sua capacità di continuare come azienda in funzionamento. I ricavi per i sei mesi terminati il 30 giugno 2025 sono stati $4.33 million rispetto a $27.05 million dell'anno precedente, e la società ha riportato una perdita netta semestrale di $6.76 million. La liquidità è scesa a $959,416 al 30 giugno 2025 da $3.72 million a fine esercizio, e il disavanzo accumulato è di $69.2 million. La direzione indica un capitale circolante di $17.4 million ma avverte che tali risorse potrebbero non bastare per i prossimi 12 mesi; sono state quindi avviate ristrutturazioni del debito, riduzione dei costi, tagli al personale e iniziative di sviluppo commerciale. La società ha convertito cambiali a breve termine con parti correlate in $2.80 million di senior convertible notes con scadenza 2030 (convertibili a $0.62–$0.63). Sul piano operativo, Sow Good gestisce uno stabilimento di liofilizzazione in Texas con sei essiccatori su misura, accesso ad altre sei unità e una capacità dichiarata fino a 24 million di unità all'anno, vende in circa 5,000 negozi negli Stati Uniti e ha avviato vendite tramite distributori in Medio Oriente.
Sow Good Inc. (SOWG) registró una fuerte caída interanual de los ingresos y pérdidas operativas, además de expresar dudas significativas sobre su capacidad para continuar como empresa en marcha. Los ingresos para los seis meses terminados el 30 de junio de 2025 fueron $4.33 million frente a $27.05 million del año anterior, y la compañía registró una pérdida neta semestral de $6.76 million. El efectivo se redujo a $959,416 al 30 de junio de 2025 desde $3.72 million al cierre del ejercicio, y el déficit acumulado asciende a $69.2 million. La dirección indica un capital de trabajo de $17.4 million pero advierte que estas fuentes podrían no ser suficientes para sostener las operaciones durante los próximos 12 meses; por ello ha implementado reestructuración de deuda, recortes de costos, reducción de plantilla e iniciativas de desarrollo comercial. La compañía convirtió pagarés a corto plazo con partes relacionadas en $2.80 million de bonos convertibles senior con vencimiento en 2030 (convertibles a $0.62–$0.63). En lo operativo, Sow Good gestiona una planta de liofilización en Texas con seis equipos diseñados a medida, acceso a seis unidades adicionales y una capacidad declarada de hasta 24 million de unidades al año, vende en aproximadamente 5,000 tiendas en EE. UU. y empezó ventas a distribuidores en Oriente Medio.
Sow Good Inc. (SOWG)는 전년 대비 매출이 급감하고 영업 손실을 기록했으며, 계속기업으로 존속할 수 있을지에 대해 중대한 의문을 제기했습니다. 2025년 6월 30일로 끝나는 6개월 동안의 매출은 $4.33 million으로 전년의 $27.05 million에 비해 크게 감소했으며, 해당 기간 순손실은 $6.76 million입니다. 현금은 2025년 6월 30일 기준 $959,416으로 연말의 $3.72 million에서 감소했고, 누적 적자는 $69.2 million입니다. 경영진은 운전자본을 $17.4 million이라고 밝혔지만 이 자원들이 향후 12개월 동안 운영을 유지하기에 충분하지 않을 수 있다고 경고하며 부채 재조정, 비용 절감, 인원 감축 및 사업 개발 조치를 시행했습니다. 회사는 관련 당사자 단기 어음들을 2030년 만기인 $2.80 million의 선순위 전환사채(전환가 $0.62–$0.63)로 전환했습니다. 운영 측면에서 Sow Good는 텍사스에 맞춤형 동결건조기 6대가 있는 동결건조 공장을 운영하며 추가 6대에 접근할 수 있고 연간 최대 24 million 유닛의 생산능력을 주장하고, 미국 내 약 5,000개 매장에서 판매하며 중동 유통업체로의 판매를 시작했습니다.
Sow Good Inc. (SOWG) a annoncé une forte baisse de son chiffre d'affaires en glissement annuel et des pertes d'exploitation, tout en exprimant un doute substantiel sur sa capacité à poursuivre son activité. Le chiffre d'affaires pour les six mois clos le 30 juin 2025 s'élève à $4.33 million contre $27.05 million un an plus tôt, et la société a inscrit une perte nette semestrielle de $6.76 million. La trésorerie est tombée à $959,416 au 30 juin 2025 contre $3.72 million à la clôture de l'exercice, et le déficit accumulé s'élève à $69.2 million. La direction indique un fonds de roulement de $17.4 million mais avertit que ces ressources pourraient ne pas suffire à soutenir les opérations au cours des 12 prochains mois ; des restructurations de dette, réductions de coûts, suppressions d'emplois et initiatives de développement commercial ont été mises en œuvre. La société a converti des billets à court terme liés à des parties liées en $2.80 million de obligations convertibles senior arrivant à échéance en 2030 (convertibles à $0.62–$0.63). Sur le plan opérationnel, Sow Good exploite une installation de lyophilisation au Texas dotée de six lyophilisateurs sur mesure, a accès à six unités supplémentaires et revendique une capacité allant jusqu'à 24 million d'unités par an, vend dans environ 5,000 magasins aux États-Unis et a commencé des ventes via des distributeurs au Moyen-Orient.
Sow Good Inc. (SOWG) meldete einen starken Umsatzrückgang im Jahresvergleich und operative Verluste und äußerte zugleich erhebliche Zweifel an ihrer Fähigkeit, das Unternehmen fortzuführen. Die Umsätze für die sechs Monate zum 30. Juni 2025 betrugen $4.33 million gegenüber $27.05 million im Vorjahr, und das Unternehmen verzeichnete einen Nettoverlust von $6.76 million für diesen Zeitraum. Die liquiden Mittel sanken zum 30. Juni 2025 auf $959,416 von $3.72 million zum Jahresende, und der kumulierte Fehlbetrag beläuft sich auf $69.2 million. Das Management gibt ein Working Capital von $17.4 million an, warnt jedoch, dass diese Mittel die Geschäftstätigkeit in den nächsten 12 Monaten möglicherweise nicht sichern; daher wurden Schuldenrestrukturierungen, Kostensenkungen, Personalabbau und Maßnahmen zur Geschäftsentwicklung eingeleitet. Das Unternehmen wandelte kurzfristige, mit verbundenen Parteien gewährte Schuldscheine in $2.80 million vorrangige Wandelanleihen mit Fälligkeit 2030 um (wandlungsfähig zu $0.62–$0.63). Operativ betreibt Sow Good eine Gefriertrocknungsanlage in Texas mit sechs maßgeschneiderten Gefriertrocknern, Zugang zu sechs weiteren Einheiten und einer angegebenen Kapazität von bis zu 24 million Einheiten pro Jahr, verkauft in rund 5,000 US-Filialen und hat den Verkauf über Distributorennetzwerke im Nahen Osten begonnen.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______________________ to ______________________
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Table of Contents
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PART I. |
FINANCIAL INFORMATION |
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Item 1. |
Financial Statements (Unaudited) |
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Condensed Balance Sheets as of June 30, 2025 (Unaudited) and December 31, 2024 |
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Unaudited Condensed Statements of Operations for the Three and Six Months Ended June 30, 2025 and 2024 |
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Unaudited Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2025 and 2024 |
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Unaudited Condensed Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 |
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Notes to the Condensed Financial Statements (Unaudited) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
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Controls and Procedures |
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PART II. |
OTHER INFORMATION |
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Item 1. |
Legal Proceedings |
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Item 1A. |
Risk Factors |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 3. |
Defaults Upon Senior Securities |
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Item 4. |
Mine Safety Disclosures |
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Other Information |
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Exhibits |
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Signatures |
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect our company and to take advantage of the “safe harbor” protection for forward-looking statements that applicable federal securities law affords.
From time to time, our management or persons acting on our behalf may make forward-looking statements to inform existing and potential security holders about our company. All statements other than statements of historical facts included in this report regarding our financial position, business strategy, plans and objectives of management for future operations and industry conditions are forward-looking statements. When used in this report, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “target,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items making assumptions regarding actual or potential future sales, market size, collaborations, trends or operating results also constitute such forward-looking statements.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements include the following:
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. We have based these forward-looking statements and statements of belief on our current expectations and assumptions about future events as of the date of this report. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. You should consider carefully the statements in “Item 1A. Risk Factors” and other sections of this report, which describe factors that could cause our actual results to differ from those set forth in the forward-looking statements.
Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the United States Securities and Exchange Commission (the “SEC”) which
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attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.
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PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
SOW GOOD INC.
CONDENSED BALANCE SHEETS
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||
Right-of-use asset |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued interest |
|
|
|
|
|
|
||
Accrued expenses |
|
|
|
|
|
|
||
Current portion of operating lease liabilities |
|
|
|
|
|
|
||
Current maturities of notes payable, related parties, net of $ |
|
|
|
|
|
|
||
Current maturities of notes payable, net of $ |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
|
|
|
|
||
Convertible notes payable, related parties, net of $ |
|
|
|
|
|
|
||
Notes payable |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
||
Stockholders' equity: |
|
|
|
|
|
|
||
Preferred stock, $ |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total stockholders' equity |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Total liabilities and stockholders' equity |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these condensed financial statements.
5
SOW GOOD INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and benefits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net operating income (loss) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Loss on early extinguishment of debt |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Total other expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) before income tax |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Income tax provision |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net income (loss) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding - basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) per common share - basic |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding - diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income (loss) per common share - diluted |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
The accompanying notes are an integral part of these condensed financial statements.
6
SOW GOOD INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
|
|
For the Three Months Ended June 30, 2025 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Total |
|
|||||
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Stockholders' |
|
||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|||||
Balance, March 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Common stock issued to officers for services |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
|
|||||
Common stock options granted to directors and advisors for services |
|
– |
|
|
– |
|
|
|
|
|
– |
|
|
|
|
|||||
Common stock options granted to officers and employees for services |
|
– |
|
|
– |
|
|
|
|
|
– |
|
|
|
|
|||||
Additional paid in capital from exchange of related party debt, net |
|
– |
|
|
– |
|
|
|
|
|
– |
|
|
|
|
|||||
Net income for the three months ended June 30, 2025 |
|
– |
|
|
– |
|
|
– |
|
|
|
( |
) |
|
|
( |
) |
|||
Balance, June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
For the Three Months Ended June 30, 2024 |
|
|||||||||||||||||
|
|
|
|
|
– |
|
|
Additional |
|
|
|
|
|
Total |
|
|||||
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Stockholders' |
|
||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|||||
Balance, March 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Common stock issued in public offering, net of offering costs |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
|
|||||
Common stock issued in private placement offering |
|
– |
|
|
– |
|
|
– |
|
|
– |
|
|
|
- |
|
||||
Proceeds from exercise of stock options and warrants |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
|
|||||
Common stock issued to directors for services |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
|
|||||
Common stock options granted to directors and advisors for services |
|
– |
|
|
– |
|
|
|
|
|
– |
|
|
|
|
|||||
Common stock options granted to officers and employees for services |
|
– |
|
|
– |
|
|
|
|
|
– |
|
|
|
|
|||||
Net income for the three months ended June 30, 2024 |
|
– |
|
|
– |
|
|
– |
|
|
|
|
|
|
|
|||||
Balance, June 30, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
For the Six Months Ended June 30, 2025 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Total |
|
|||||
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Stockholders' |
|
||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|||||
Balance, December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Common stock issued to directors for services |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
|
|||||
Common stock issued to officers for services |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
|
|||||
Common stock options granted to directors and advisors for services |
|
– |
|
|
– |
|
|
|
|
|
– |
|
|
|
|
|||||
Common stock options granted to officers and employees for services |
|
– |
|
|
– |
|
|
|
|
|
– |
|
|
|
|
|||||
Additional paid in capital from exchange of related party debt, net |
|
– |
|
|
– |
|
|
|
|
|
– |
|
|
|
|
|||||
Net loss for the six months ended June 30, 2025 |
|
– |
|
|
– |
|
|
– |
|
|
|
( |
) |
|
|
( |
) |
|||
Balance, June 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
|
( |
) |
|
$ |
|
||||
|
|
For the Six Months Ended June 30, 2024 |
|
|||||||||||||||||
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Total |
|
|||||
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Stockholders' |
|
||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|||||
Balance, December 31, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Common stock issued in public offering, net of offering costs |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
|
|||||
Common stock issued in private placement offering |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
|
|||||
Proceeds from the exercise of stock options and warrants |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
|
|||||
Common stock issued to directors for services |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
|
|||||
Common stock options granted to directors and advisors for services |
|
– |
|
|
– |
|
|
|
|
|
– |
|
|
|
|
|||||
Common stock options granted to officers and employees for services |
|
– |
|
|
– |
|
|
|
|
|
– |
|
|
|
|
|||||
Net income for the three months ended June 30, 2024 |
|
– |
|
|
– |
|
|
– |
|
|
|
|
|
|
|
|||||
Balance, June 30, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
The accompanying notes are an integral part of these condensed financial statements.
7
SOW GOOD INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For the Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
( |
) |
|
$ |
|
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Bad debts expense |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Non-cash amortization of right-of-use asset and liability |
|
|
|
|
|
|
||
Common stock issued to officers and directors for services |
|
|
|
|
|
|
||
Amortization of stock options |
|
|
|
|
|
|
||
Amortization of debt discounts |
|
|
|
|
|
|
||
Loss on early extinguishment of debt |
|
|
|
|
|
|
||
Decrease (increase) in current assets: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses |
|
|
|
|
|
|
||
Inventory |
|
|
( |
) |
|
|
( |
) |
Security deposits |
|
|
|
|
|
( |
) |
|
Increase (decrease) in current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
|
( |
) |
|
|
|
|
Income tax payable |
|
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
( |
) |
|
Accrued expenses |
|
|
|
|
|
|
||
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
||
Purchase of property and equipment |
|
|
|
|
|
( |
) |
|
Cash paid for construction in progress |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Proceeds from common stock offerings, net |
|
|
|
|
|
|
||
Proceeds from the exercise of warrants and options |
|
|
|
|
|
|
||
Repayments of borrowings |
|
|
|
|
|
( |
) |
|
Net cash provided by financing activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
NET CHANGE IN CASH AND CASH EQUIVALENTS |
|
|
( |
) |
|
|
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD |
|
|
|
|
|
|
||
CASH AND CASH EQUIVALENTS AT END OF PERIOD |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
SUPPLEMENTAL INFORMATION: |
|
|
|
|
|
|
||
Interest paid |
|
$ |
|
|
$ |
|
||
Interest received |
|
$ |
|
|
$ |
|
||
Income taxes paid |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Non-cash exercise of warrants |
|
$ |
|
|
$ |
|
||
Retirement of Notes Payable, related party in non-cash debt exchange |
|
$ |
( |
) |
|
$ |
( |
) |
Issuance of Convertible Notes Payable, related party, including accrued interest of $ |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Repayment of interest |
|
$ |
( |
) |
|
$ |
( |
) |
Repayments of borrowings |
|
$ |
( |
) |
|
$ |
( |
) |
Reclassification of construction in progress to property and equipment |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
The accompanying notes are an integral part of these condensed financial statements.
8
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Note 1 – Organization and Nature of Business
Sow Good Inc. (“SOWG,” “Sow Good,” “us,” “our,” “we,” or the “Company”) is a U.S.-based freeze dried candy and snack manufacturer. Formerly Black Ridge Oil & Gas, Inc. (a business that participated in the acquisition and development of oil and gas leases and acquired by the Company in October 1, 2020) , the Company was initially focused on the production of freeze dried fruits and vegetables, a business later expanded to include freeze dried candy. At that time of the acquisition of Black Ridge Oil & Gas, Inc., the Company’s common stock began to be quoted on the OTCQB under the trading symbol “SOWG,” from the former trading symbol “ANFC.” Effective
In May of 2021, the Company announced the launch of its first direct-to-consumer freeze dried consumer packaged goods (“CPG”) line of non-GMO products including ready-to-make smoothies, gluten-free granola and snacks. After launching a freeze dried candy product line in the first quarter of 2023, the Company now has twenty-one SKU offerings of candy, eight holiday SKU, and three crunch ice cream SKU as of June 30, 2025, that together make up the entirety of the Company’s product portfolio. After launching its freeze dried candy product line the Company discontinued its smoothie, snack and granola products. The Company has six freeze driers in a facility in Irving, Texas and has access to six additional freeze driers, which we expect to be able to place in operations if and as needed.
Note 2 – Summary of Significant Accounting Policies
The accompanying unaudited interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and stated in U.S. dollars, consistent in all material respects with those applied in our financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Because these financial statements address interim periods, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Such interim financial information is unaudited but reflects all adjustments that in the opinion of management are necessary for the fair presentation of the interim periods presented. The results of operations presented in this Quarterly Report on Form 10-Q are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or for any future periods. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited financial statements and footnotes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Segment Reporting
FASB ASC 280-10-50 requires annual and interim reporting for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and expenses, and about which separate financial information is regularly evaluated by the chief operating decision maker in deciding how to allocate resources. The Company operates as a single segment. Segment disclosures are included in Note 15 – Segment Reporting.
During the quarter ended three and six months ended June 30, 2025, the Company began sales activity in the Middle East. While these sales contributed approximately
Environmental Liabilities
The Company was formerly a direct owner of assets in the oil and gas industry. The oil and gas industry is subject, by its nature, to environmental hazards and clean-up costs. At this time, management knows of no substantial losses from environmental accidents or events which would have a material effect on the Company.
9
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Cash and Cash Equivalents
Cash equivalents include money market accounts which have maturities of three months or less. Cash equivalents are stated at cost plus accrued interest, which approximates market value.
Cash in Excess of FDIC Insured Limits
The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) and the Securities Investor Protection Corporation (“SIPC”) up to $
Accounts Receivable
Accounts receivable are carried at their estimated collectible amounts. Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition. The Company had an allowance for doubtful accounts of $
The Company estimates its reserve based on historical loss information. The Company believes that historical loss information is a reasonable base on which to determine expected credit losses for trade receivables held at the reporting date because the composition of the trade receivables at the reporting date is consistent with that used in developing the historical credit-loss percentages. However, the Company will continue to monitor and adjust the historical loss rates to reflect the effects of current conditions and forecasted changes.
Inventory
Inventory is valued at the lower of average cost or net realizable value. The cost of substantially all of the Company’s inventory has been determined by the first-in, first-out (“FIFO”) method.
Property and Equipment
Property and equipment are stated at the lower of cost or estimated net recoverable amount.
Software |
|
|
Website (years) |
|
|
Office equipment (years) |
|
|
Furniture and fixtures (years) |
|
|
Machinery and equipment (years) |
|
|
Leasehold improvements |
|
Construction in progress is stated at cost, which predominately relates to the cost of freeze driers and equipment not yet placed into service. No depreciation expense is recorded on construction-in-progress until such time as the relevant assets are completed and put into use.
Repairs and maintenance expenditures are charged to operations as incurred. Major improvements and replacements, which extend the useful life of an asset, are capitalized and depreciated over the remaining estimated useful life of the asset. When assets are retired or sold, the cost and related accumulated depreciation and amortization are eliminated and any resulting gain or loss is reflected in operations.
Depreciation of property and equipment was $
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue from the sale of its freeze dried food products, in accordance with a five-step
10
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
model in which the Company evaluates the transfer of promised goods or services and recognizes revenue when customers obtain control of promised goods or services in an amount that reflects the consideration which the Company expects to be entitled to receive in exchange for those goods or services. To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The Company has elected, as a practical expedient, to account for the shipping and handling as fulfillment costs, rather than as a separate performance obligation. For the six months ended June 30, 2025 and 2024, shipping and handling costs of $
Customer Concentration
For the six months ended June 30, 2025, our top
For the three months ended June 30, 2025, our top
Our top
Supplier Concentration
For the six months ended June 30, 2025,
For the three months ended June 30, 2025, our top
Basic and Diluted Earnings (Loss) Per Share
The basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding. Diluted net income (loss) per common share is computed by dividing the net income (loss) adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods where potential dilutive securities would have an anti-dilutive effect and they were not included in the calculation of diluted net loss per common share.
Stock-Based Compensation
The Company accounts for equity instruments issued to employees in accordance with the provisions of ASC 718 – Stock Compensation (“ASC 718”) and Equity-Based Payments to Non-employees pursuant to ASC 2018-07 – Compensation – Stock Compensation (“ASC 2018-07”). All transactions in which the consideration provided in exchange for the purchase of goods or services consists of the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached because of sufficiently large disincentives for nonperformance.
Stock-based compensation related to the issuance of shares of common stock for Board of Directors' services consisted of $
On March 31, 2025 and June 5, 2025, the Board of Directors unanimously approved revisions to the annual compensation of Claudia Goldfarb, the Company's Chief Executive Officer, and Ira Goldfarb, the Company's Executive Chairman, whereby Ms. Goldfarb and Mr. Goldfarb would receive a certain percentage of their annual cash salaries in shares of the Company's common stock
11
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
in lieu of cash payments. The aggregate number of shares issued was
Stock-based compensation related to amortization of stock option grants to officers and employees consisted of $
Income Taxes
The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.
Uncertain Tax Positions
In accordance with ASC 740 – Income Taxes (“ASC 740”), the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.
Various taxing authorities can periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. The Company has not yet undergone an examination by any taxing authorities.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, "Improvements to Income Tax Disclosures." The amendments in this update affect annual income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments in this update are effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the effects of this pronouncement on its financial statements and does not expect the adoption to impact our results or presentation.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The ASU requires disclosures about specific types of expenses, including purchases of inventory, employee compensation, depreciation and amortization. The amendments in this ASU are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its Consolidated Financial Statements and related disclosures.
No other new accounting pronouncements, issued or effective during the three and six months ended June 30, 2025, have had or are expected to have a significant impact on the Company’s financial statements.
Note 3 – Going Concern
As of June 30, 2025, the Company had an accumulated retained deficit of $
During the three months ended June 30, 2025, management has implemented its comprehensive plans to improve the Company's financial position. These initiatives included restructuring of debt, which was effected through an exchange transaction in
12
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
the current quarter, ongoing strategic cost cutting and firmwide headcount reductions, on-boarding new customers in existing markets, entering new markets overseas, and entering new product categories to fully utilize any excess capacity. In addition, management is investigating potential partnership opportunities, asset sales, and capital raises through debt and or equity offerings, including the sales of shares available under our at-the-market program.
The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. The financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 4 – Related Party
Related Party Debt Exchange
On April 28, 2025, the Company entered into an exchange agreement (the “Exchange Agreement”) with Lyle Berman, Claudia Goldfarb and Ira Goldfarb, as holders of the Company’s outstanding promissory notes (the “Outstanding Notes”) with an aggregate principal amount of $
Common Stock Issued to Officers and Directors for Services
On June 5, 2025, the Board of Directors unanimously approved a revision to the annual compensation of Claudia Goldfarb, the Company's Chief Executive Officer, and Ira Goldfarb, the Company's Executive Chairman, whereby Ms. Goldfarb and Mr. Goldfarb would receive approximately
On March 31, 2025, the Board of Directors unanimously approved a revision to the annual compensation of Claudia Goldfarb, the Company's Chief Executive Officer, and Ira Goldfarb, the Company's Executive Chairman, whereby Ms. Goldfarb and Mr. Goldfarb would receive approximately
On February 6, 2025, the Company issued an aggregate
On February 9, 2024, the Company issued an aggregate
13
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
On January 11, 2024, the Company issued an aggregate
Common Stock Options Awarded to Officers and Directors
On June 3, 2025, the Company granted Donna Guy, Chief Financial Officers, options to purchase
On January 29, 2025, the Company granted Brendon Fischer, Interim Chief Financial Officer, options to purchase
Common Stock Sold for Cash
On March 28, 2024, the Company raised $
|
|
|
Shares |
|
|
Amount |
Ira and Claudia Goldfarb, Executive Chairman and CEO, respectively |
|
|
|
$ |
||
Lyle A. Berman Revocable Trust, Director |
|
|
|
|
||
Bradley Berman, Director |
|
|
|
|
||
Edward Shensky |
|
|
|
|
||
Brendon Fischer |
|
|
|
|
||
Cesar J. Gutierrez |
|
|
|
|
||
Alexandria Gutierrez |
|
|
|
|
||
Ava Gutierrez |
|
|
|
|
||
Brett Goldfarb |
|
|
|
|
||
|
|
|
|
$ |
Leases
The Company leases a
At June 30, 2025 and December 31, 2024, included in the operating lease liabilities was $
Note 5 – Fair Value of Financial Instruments
The Company's financial statements are prepared in accordance with ASC 820, “Fair Value Measurement,” which requires the measurement of certain financial instruments at fair value. The Company's financial instruments primarily consist of cash and cash equivalents, and accounts receivable, which approximate fair value due to their short-term nature, and Term Loans issued in connection with detachable warrants, which are carried on the balance sheet net of the unamortized portion of the related discounts. For financial instruments or investments that are required to be reported at fair value on a recurring or nonrecurring basis under GAAP, the applicable guidance for fair value measurement requires the Company to include the determination of the appropriate fair value hierarchy level for each instrument. The fair value hierarchy levels consist of the following:
Level 1: Quoted Prices in Active Markets for Identical Assets or Liabilities - This level represents the highest degree of observability, where fair values are based on quoted market prices for identical assets or liabilities in active markets.
14
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Level 2: Inputs Other Than Quoted Prices Included within Level 1 - Fair values in this level are based on inputs other than quoted market prices but are still observable, such as quoted market prices for similar assets or liabilities, or inputs derived from market data.
Level 3: Unobservable Inputs - This level includes fair values for which there are no observable inputs and relies on the reporting entity's own assumptions and estimates. These fair values are considered the least reliable and most subjective.
Detachable common stock warrants issued in connection with debt may be recorded as either liabilities or equity depending on the applicable accounting guidance. The Company determined that warrants issued in connection with notes payable met the definition of a freestanding financial instrument and qualified for treatment as permanent equity. We utilized the Black-Scholes valuation model to estimate the fair value of warrants granted at issuance date. The initial measurement of the fair value of the notes considers the present value of future cash flows, discounted at the current market rate of interest at the issuance date, and time to liquidity. The Company allocated the value of warrants between the relative fair value of the notes payable without the warrants, and the warrants themselves at the time of issuance. The allocated portion of the warrants was treated as a debt discount, and amortized over the term of the note. The amortization of the debt discount is recognized as interest expense. When a notes payable are issued at a discount, wherein a significant portion of the issuance is between related parties, the valuation of the notes and the discount involve significant judgment and the use of unobservable inputs, classifying it into Level 3 of the fair value hierarchy, requiring a nonrecurring fair value measurement. Changes other than additions, settlements, or discount amortization, in the fair value of the notes payable, net of discounts do not impact net income or cash flows. The debt related to the issuance of the detachable warrants was fully retired during the three month period ended June 30, 2025.
On April 28, 2025, the Company entered into an exchange agreement (the “Exchange Agreement”) with Lyle Berman, Claudia Goldfarb and Ira Goldfarb, as holders of the Company’s outstanding promissory notes (the “Outstanding Notes”) with an aggregate principal amount of $
The Outstanding Notes payable and related discounts on the detachable warrants were exchanged for the Convertible Notes. The Company determined that the conversion feature of the Convertible Notes is not bifurcated as a derivative and is therefore not within the scope of ASC 815 and ASC 820.
The following schedule summarizes the valuation of financial instruments at fair value on a nonrecurring basis in the balances sheet as of June 30, 2025 and December 31, 2024:
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||||||||||
|
|
Carrying |
|
|
Estimated |
|
|
Carrying |
|
|
Estimated |
|
||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Notes payable, related parties, net of debt discounts |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Convertible notes payable, related parties, net of discounts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Notes payable |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
15
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Note 6 – Inventory
Inventory
As of June 30, 2025 and December 31, 2024 the Company's inventory consisted of raw materials, material overhead, labor, and manufacturing overhead, categorized as follows:
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
Finished goods |
|
$ |
|
|
$ |
|
||
Overhead allocated to inventory |
|
|
|
|
|
|
||
Packaging materials |
|
|
|
|
|
|
||
Work in progress |
|
|
|
|
|
|
||
Raw materials |
|
|
|
|
|
|
||
Inventory Reserve - Allowance for Obsolescence |
|
|
( |
) |
|
|
( |
) |
Total inventory |
|
$ |
|
|
$ |
|
||
Prepaid Inventory
The company had reported a total of $
The Company accounts for prepaid inventory at cost, which includes all charges necessary to bring the inventory items to their present location and condition. Upon shipment of the inventory, these amounts are reclassified from prepaid inventory to the appropriate inventory accounts on the balance sheet.
Note 7 – Prepaid Expenses
Prepaid expenses consist of the following at June 30, 2025 and December 31, 2024:
|
|
|
|
|
|
|
||
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
Prepaid software licenses |
|
$ |
|
|
$ |
|
||
Prepaid insurance costs |
|
|
|
|
|
|
||
Prepaid other |
|
|
|
|
|
|
||
Total prepaid expenses |
|
$ |
|
|
$ |
|
||
16
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Note 8 – Property and Equipment
Property and equipment at consist of the following at June 30, 2025 and December 31, 2024:
|
|
|
|
|
|
|
||
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
Machinery |
|
$ |
|
|
$ |
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Software |
|
|
|
|
|
|
||
Website |
|
|
|
|
|
|
||
Office equipment |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less: Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Total property and equipment, net |
|
$ |
|
|
$ |
|
||
Construction in progress consists of costs incurred to build out our manufacturing facilities in Texas, along with the construction of our freeze driers. These costs will be capitalized as Leasehold Improvements and Machinery, respectively, upon completion.
Depreciation of property and equipment was $
Depreciation of property and equipment was $
Note 9 – Leases
The Company determines if an arrangement is a finance lease or operating lease at inception and recognizes right-of-use (“ROU”) assets and lease liabilities at commencement date based on the present value of the lease payments over the lease term. For operating leases, our right-of-use assets are amortized on a straight-line basis over the lease term with rent expense recorded to operating expenses. The Company has elected the practical expedient of not separating lease components from nonlease components. The depreciable life of related leasehold improvements is based on the shorter of the useful life or the lease term.
The Company leases its
On May 22, 2024, the Company entered into an industrial lease with USCIF Pinnacle Building B LLC. The Company leased approximately
On January 19, 2024, Sow Good Inc., the Company entered into a sublease agreement with Papsa Merx S. de R.S. de C.V., a corporation registered in Mexico City, Mexico. The Company subleased approximately 141 rentable square meters at Av. Roble 660, Valle del Campestre, 66265 San Pedro Garza García Municipality, Nuevo León, 66269 for a term of approximately seventeen months, which the Company intends to use as office space. The term of the lease agreement commenced on February 1, 2024. The sublease
17
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
agreement provides for rent payments at fixed price of $
On October 26, 2023, the Company entered into a lease agreement with Prologis, Inc., a Maryland corporation, which the Company intends to use as production space. The Company leased approximately
On July 1, 2023, the Company entered into a lease for additional warehouse space in Irving, Texas, of approximately
The components of lease expense were as follows:
|
|
For the Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Right-of-Use lease cost: |
|
|
|
|
|
|
||
Amortization of right-of-use asset |
|
$ |
|
|
$ |
|
||
Supplemental balance sheet information related to leases was as follows:
|
|
|
|
|
|
|
||
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
Operating lease: |
|
|
|
|
|
|
||
Operating lease assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Current portion of operating lease liability |
|
$ |
|
|
$ |
|
||
Noncurrent operating lease liability |
|
|
|
|
|
|
||
Total operating lease liability |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Weighted average remaining lease term: |
|
|
|
|
|
|
||
Operating leases (in years) |
|
|
|
|
|
|
||
Weighted average discount rate: |
|
|
|
|
|
|
||
Operating lease |
|
|
% |
|
|
% |
||
18
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Supplemental cash flow and other information related to operating leases was as follows:
|
|
For the Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
||
Operating cash flows used for operating leases |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
The future minimum lease payments due under operating leases as of June 30, 2025 is as follows:
Fiscal Year Ending |
|
Minimum Lease |
|
|
December 31, |
|
Commitments |
|
|
2025 |
|
$ |
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 and thereafter |
|
|
|
|
Total |
|
$ |
|
|
Less effects of discounting |
|
|
( |
) |
Lease liability recognized |
|
$ |
|
|
19
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Note 10 – Notes Payable, Related Parties
On April 28, 2025, the Company entered into an exchange agreement (the “Exchange Agreement”) with Lyle Berman, Claudia Goldfarb and Ira Goldfarb, as holders of the Company’s outstanding promissory notes (the “Outstanding Notes”) with an aggregate principal amount of $
Notes payable, related parties consists of the following at June 30, 2025 and December 31, 2024, respectively:
|
|
|
|
|
|
|
||
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
Convertible Notes payable, bearing interest at 8% per annum, maturing on April 30, 2030 |
|
$ |
2,563,890 |
|
|
$ |
2,500,000 |
|
Convertible Notes payable, bearing interest at 6% per annum, maturing on April 30, 2030 |
|
|
239,928 |
|
|
- |
|
|
Total notes payable, related parties |
|
|
2,803,818 |
|
|
|
2,500,000 |
|
Less unamortized debt discounts: |
|
|
847,592 |
|
|
|
304,500 |
|
Notes payable |
|
|
1,956,226 |
|
|
|
2,195,500 |
|
Less current maturities |
|
- |
|
|
|
2,195,500 |
|
|
Notes payable, related parties, less current maturities |
|
$ |
1,956,226 |
|
|
$ |
- |
|
Note 11 – Notes Payable
On June 16, 2020, the Company entered into a loan authorization and loan agreement with the United States Small Business Administration (the “SBA”), as lender, pursuant to the SBA’s Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business (the “EIDL Loan Agreement”) encompassing a $
On April 8, 2022, the Company issued unsecured notes bearing interest of
20
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Notes payable consists of the following at June 30, 2025 and December 31, 2024, respectively:
|
|
|
|
|
|
|
||
|
|
June 30, 2025 |
|
|
December 31, 2024 |
|
||
Notes payable, bearing interest of |
|
$ |
|
|
$ |
|
||
EIDL Note |
|
|
|
|
|
|
||
Total notes payable |
|
|
|
|
|
|
||
Less unamortized debt discounts: |
|
|
|
|
|
|
||
Notes payable |
|
|
|
|
|
|
||
Less: current maturities |
|
|
|
|
|
|
||
Notes payable, less current maturities |
|
$ |
|
|
$ |
|
||
The Company recognized interest expense related to related party notes payable and other notes payable for six months ended June 30, 2025 and 2024, as follows:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Interest on notes payable, related parties |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest on notes payable |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of debt discounts on notes payable |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Note 12 – Stockholders’ Equity
Preferred Stock
The Company has
Common Stock Sold for Cash
On March 28, 2024, the Company raised $
On May 2, 2024, the Company priced its registered underwritten public offering of 1,200,000 shares of the Company’s common stock, par value $0.001 at a price of $10.00 per share. In addition, the Company granted the underwriters a 30-day overallotment option to purchase up to 180,000 additional shares of common stock and issued to the underwriters warrants to purchase 120,000 shares of Common Stock. On May 9, 2024, the underwriters purchased all of the additional shares pursuant to the full exercise of their overallotment option. Including proceeds from the additional shares, the proceeds from the public offering were approximately $11,974,976 net of offering expenses and underwriting discounts and commissions.
On November 14, 2024 the Company filed a shelf registration to offer and sell from time to time in one or more offerings, up to $50.0 million in aggregate of common stock, preferred stock, debt securities, warrants, and units, including an at-the-market program for up to $20 million of our common stock. As of December 31, 2024, 1,042,862 shares of our common stock have been issued under the at-the-market program netting aggregate proceeds of $2.2 million.
Common Stock Issued to Officers for Services
On June 5, 2025, the Board of Directors unanimously approved a revision to the annual compensation of Claudia Goldfarb, the Company's Chief Executive Officer, and Ira Goldfarb, the Company's Executive Chairman, whereby Ms. Goldfarb and Mr. Goldfarb would receive approximately
21
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
with a stock price equal to the most recent closing price of the Company's common stock, on June 4, 2025. Ms. Goldfarb received
On March 31, 2025, the Board of Directors unanimously approved a revision to the annual compensation of Claudia Goldfarb, the Company's Chief Executive Officer, and Ira Goldfarb, the Company's Executive Chairman, whereby Ms. Goldfarb and Mr. Goldfarb would receive approximately
Common Stock Issued to Directors for Services
On February 6, 2025, the Company issued an aggregate
On February 9, 2024, the Company issued an aggregate
On January 11, 2024, the Company issued an aggregate
Note 13 – Options
2024 Stock Incentive Plan
Effective February 15, 2024, the Board of Directors adopted the 2024 Plan (the “2024 Plan”) under which a total of
Outstanding Options
Options to purchase an aggregate total of
The Company recognized compensation expense related to common stock options that are being amortized over the implied service term, or vesting period, of the options during the three and six months ended June 30, 2025 and 2024, as follows:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Directors |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Officers and employees |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total amortized options expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
22
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
The remaining unamortized balance of these options is $
Options Granted
During the six months ended June 30, 2025,
Options Cancelled or Forfeited
Approximately
Options Expired
Options Exercised
Options Exercisable
There were
Note 14 – Warrants
Outstanding Warrants
Warrants to purchase an aggregate total of
Note 15 – Segment Reporting
The Company operates as a reportable segment, which is engaged in the production and sale of freeze-dried candy products.
The following table provides the operating financial results of our freeze-dried candy segment for the three and six months ended June 30, 2025 and 2024:
23
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: Significant other segment expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of goods sold |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and benefits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Professional services |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on early extinguishment of debt |
|
|
|
|
|
|
|
|
|
|
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|
||||
Income tax expense (benefit) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Segment net income (loss) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
Note 16 – Earnings Per Share
Basic and diluted earnings per share for the three months ended June 30, 2025 and June 30, 2024:
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Net income (loss) attributable to common shareholders |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted average shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic income (loss) per share |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted weighted average shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted income (loss) per share |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
The table below includes information related to stock options and warrants that were outstanding at the end of each respective the three and six months ended June 30, 2025 and June 30, 2024. For periods in which the Company incurred a net loss, these options and warrants are not included in weighted average dilutive shares because their impact would be anti-dilutive. For the six months ended June 30, 2025 and 2024, there were approximately
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
|
2025 |
|
|
2024 |
|
||||
Weighted average stock options |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average price of exercisable stock options |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average warrants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average price of warrants |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Average price of common stock |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
24
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Note 17 – Income Taxes
The Company recognized income $
The Company continually monitors and performs an assessment of the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of deferred tax assets using a “more likely than not” standard. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Based on the Company’s review of this evidence, management determined that a full valuation allowance against all of the Company’s net deferred tax assets at June 30, 2025 was appropriate.
Note 18 – Subsequent Events
Management has evaluated events and transactions subsequent to the balance sheet date through the date of this report (the day the financial statements were available to be issued) for potential recognition or disclosure in the financial statements.
25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated historical financial statements and the notes to those statements that appear elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and the notes to those statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Certain statements in the discussion contain forward-looking statements based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q titled “Risk Factors.” The information included herein represents our estimates and assumptions as of the date of this filing. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Factors that might cause or contribute to actual results or performance being materially different from those expressed or implied by such forward-looking statements include, but are not limited to, those set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Item 1A. Risk Factors in the 2024 Annual Report on 10-K.
Overview and Outlook
Sow Good is a trailblazing U.S.-based freeze dried candy and snack manufacturer dedicated to providing consumers with innovative and explosively flavorful freeze dried treats. Sow Good has harnessed the power of our proprietary freeze drying technology and product-specialized manufacturing facility to transform traditional candy into a novel and exciting everyday confectioneries subcategory that we call freeze dried candy. We began commercializing our freeze dried candy products in the first quarter of 2023, and as of June 30, 2025, we have twenty-one stock keeping units (“SKUs”) and eight holiday SKUs in our Sow Good Candy line of treats and three SKUs in our Sow Good Crunch Cream line, which consists of freeze dried ice cream bars and sandwiches. We sell our treats using an omnichannel strategy primarily focused on the wholesale and retail channels with less than 2% of sales coming from e-commerce as of June 30, 2025. As of June 30, 2025, our treats are offered for sale in approximately 5,000 brick-and-mortar retail outlets in the United States.
We have custom-built a 20,945 square foot freeze drying facility in Irving, Texas. Freeze drying removes up to 99% of moisture from a product in its frozen state by applying a small amount of heat in an extremely low air pressure, near outer space-like environment, through the use of massive vacuum chambers, resulting in moisture being removed from the product at the speed of sound. This process of removing moisture from the product, which can take up to twenty-four hours, concentrates its flavor, creating a “hyper dried, hyper crunchy, and hyper flavorful” snackable treat. Our freeze drying process and expertise allow us to easily expand our manufacturing into other freeze dried snacks, such as yogurt snacks. Our commitment to providing the most flavorful and crunchy treats extends into the product packaging process, where our employees are dedicated to hand-packaging our treats through our precision packaging process in vigilantly managed low humidity conditions to protect our treats from reintroduction to moisture.
We have built six bespoke freeze driers using proprietary technology tailored specifically to our products which allows us to freeze dry up to 24 million units of freeze dried candy per year, creating a truly state-of-the-art facility in Irving, Texas. We have six additional freeze driers, which we can have operational, as needed.
Sow Good, co-founded by Claudia and Ira Goldfarb, brings over a decade of manufacturing expertise to the consumer packaged goods (“CPG”) sector, specializing in advanced freeze-drying technology. With experience across pet, baby, and candy products, they have a proven track record of transforming niche trends into everyday consumer staples. Leveraging our proprietary technology, Sow Good delivers innovative, high-quality products with a long shelf life and natural preservation. Beyond product innovation, they are committed to job creation and positive community impact, making Sow Good a forward-thinking force in the industry.
Our products are sold in retailers nationwide from convenience and grocery stores to big-box retailers, such as Five Below, H-E-B, Kroger, Albertsons, and Ace Hardware. In addition, we sell a substantial portion of our products through distributors such as C&S Wholesale and Dutch Valley Food Distributors. In addition, we have expanded our market to two Middle East distributors, Sugary Trading and Festival Sweets. We believe there is a significant growth opportunity in increasing our shelf presence, SKU portfolio, and number of stores with our existing customers. We aim to have the ability to increase the availability of our products to these customers in current locations and distribution to more of their stores, while also broadening our SKU portfolio offerings. Bolstering our distribution and sales force will be a key growth driver for Sow Good so more of our products are available wherever our consumers choose to shop, whether it be a retail store, convenience store, or directly online. To further support our retail launches with existing customers and strengthen our brand name, we provide our product displays with distinctive designs and product highlights to enhance our visibility in current stores and educate new consumers on the value of freeze dried treats. We believe this
26
strategy will capture the attention of new consumers, further educate and attract current consumers, and ultimately, increase sales for our retailers.
Our omnichannel distribution strategy has three key components: retailers, e-commerce, and distributors. In aggregate, this omnichannel strategy provides us with a diverse set of consumers and customer partners, which may lead to a larger total addressable market opportunity than is normally available to products sold only in grocery stores, along with an opportunity to develop a direct relationship with our customers at our website, www.thisissowgood.com and our social media pages.
Key Factors Affecting our Performance
Our future success is dependent upon many factors. While the factors and trends described below present opportunities for us, they also pose significant challenges that we must successfully address to enable us to sustain and grow of our business and improve our results of operations. These factors and trends in our business have driven fluctuations in revenues over the periods presented and are expected to be key drivers of our results of operations and liquidity position for the foreseeable future.
Ability to Compete Against Competitors with Greater Resources and Market Clout
We operate in a highly competitive industry against competitors with significantly greater financial and other resources. We have become aware of certain of our competitors using their status in the market and marketing spend to limit our current and future customers from purchasing our products or reducing our shelf space. This caused the loss of significant customers with resulted in a significant reduction in revenue and an increase in our inventory. Our ability to keep our current customers, or grow our SKU portfolio on their shelves, and expand our sales with new customers will depend on our competitors’ ability to leverage their market status and financial resources to limit our access to consumers and our ability to compete with these larger competitors.
Ability to Retain and Grow Our Customer Base in Retail and Traditional Wholesale Distribution Channels
We are currently seeking to grow our customer base in a variety of physical retail and traditional wholesale distribution channels. Our products have launched in retailers nationwide from convenience and grocery stores to big-box retailers, such as Five Below, H-E-B, Kroger, Albertsons, and Ace Hardware. In addition, we sell a substantial portion of our products through distributors such as C&S Wholesale and Dutch Valley Food Distributors. In addition, we have expanded our market to two Middle East distributors. Given the nascent state of the freeze dried candy segment and the number of potential retailer and wholesaler customers, we also believe there is a significant growth opportunity with customer acquisition in both the retail and wholesale channels, domestically and internationally. Customer acquisition in these channels depends on, among other things, our go-to-market function and our ability to meet the demand of customers who require large volumes of products.
Ability to Expand Our Product Line
Our goal is to substantially expand our product line over time to increase our growth opportunity and reduce product-specific risks through SKU diversification into multiple products, including freeze dried products beyond our freeze dried treats, such as yogurt snacks and jerky. Our pace of growth will be partially affected by the cadence and magnitude of new product launches over time. We believe the commercialization of any new products will require us to hire additional employees within our product design and commercialization team, thereby increasing our marketing expense, as well as research and development costs within our administrative expense.
Impact of Inflation, Tariff and Trade Policies and Other Factors on Our Supply Chain and Operations
We expect supplies and prices of the ingredients that we are going to use to be affected by a variety of factors, such as weather, seasonal fluctuations, demand, politics and macroeconomic trends, including tariff and trade policies. These factors subject us to shortages or interruptions in product supplies, which could adversely affect our revenue and profits. In addition, we may face limits on the ability to source some of the candy for our freeze dried candy products.
Seasonality
Because we are early in our lifecycle as a public company, it is difficult to discern the exact magnitude of seasonality affecting our business from a demand standpoint. While evidence of any demand seasonality remains difficult to assess, we anticipate certain holiday cycles such as Halloween, Christmas, Easter and Valentine’s Day contributing to revenue fluctuations within a given year. In addition, candy purchasing in summer months may be reduced due to a variety of factors including greater levels of health consciousness during warm weather. Operationally, heat waves from July through October of 2024 presented challenges in transporting our freeze-dried treats in the summer months. These conditions led to reduced shipments, higher inventory levels, and a
27
decline in revenue. Additionally, some candy transported via external distribution channels during the extreme summer heat melted, impacting its shelf performance. We worked to remove affected products from shelves and replace them promptly to support recovery in product velocity. In the short term, these measures have impacted our market reputation, sell-through rates, and operational results. As a result, we anticipate an annual temporary decrease in shipments of our treats during summer months.
Components of Results of Operations
Revenues
We derive revenues from the sales of our freeze dried treats. The Company recognizes revenues when orders are shipped to customers.
Cost of Goods Sold
Our cost of goods sold, which may include inventory write-downs, consists primarily of facilities costs, material costs, and labor on the production of freeze dried treats.
Operating Expenses
Our operating expenses consist of general and administrative expenses, which includes salaries and benefits expenses, professional services expenses and other general and administrative expenses.
We expect our general and administrative expenses will increase as our business grows.
Interest Expense
Interest expense consists primarily of the cash interest expense on outstanding debt and the amortization of the debt discount created upon the issuance of warrants in connection with debt.
Interest Income
Interest income consists primarily of the interest on short-term U.S Treasury Bonds.
Provision for Income Taxes
The Company recognized a federal income tax expense of $0 and $257,918, for the six months ended June 30, 2025 and 2024, respectively. The Company’s effective tax rates for the three months ended June 30, 2025 and 2024 differed from the federal statutory tax rate of 21% primarily due to a valuation allowance for the Company’s deferred tax assets and permanent differences.
Segment Overview
Our chief operating decision makers, who are our Chief Executive Officer and our Executive Chairman, review financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance, as well as for strategic operational decisions and managing the organization. For each of the six months ended June 30, 2025 and 2024, we have determined that we have one operating segment and one reportable segment.
28
Results of Operations for the Three Months Ended June 30, 2025 and June 30, 2024.
The following table summarizes selected items from the statement of operations for the three-month periods ended June 30, 2025 and June 30, 2024:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
June 30, |
|
|
Increase / |
|
|
|
|
|||||||
|
|
2025 |
|
|
2024 |
|
|
(Decrease) |
|
|
% Change |
|
||||
Revenues |
|
$ |
1,856,312 |
|
|
$ |
15,648,046 |
|
|
$ |
(13,791,734 |
) |
|
|
(88 |
%) |
Cost of goods sold |
|
|
1,986,021 |
|
|
|
6,640,917 |
|
|
|
(4,654,896 |
) |
|
|
(70 |
%) |
Gross profit (loss) |
|
|
(129,709 |
) |
|
|
9,007,129 |
|
|
|
(9,136,838 |
) |
|
|
(101 |
%) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and benefits |
|
|
1,931,713 |
|
|
|
2,123,572 |
|
|
|
(191,859 |
) |
|
|
(9 |
%) |
Professional services |
|
|
258,230 |
|
|
|
594,278 |
|
|
|
(336,048 |
) |
|
|
(57 |
%) |
Other general and administrative expenses |
|
|
1,745,670 |
|
|
|
1,399,244 |
|
|
|
346,426 |
|
|
|
25 |
% |
Total general and administrative expenses |
|
|
3,935,613 |
|
|
|
4,117,094 |
|
|
|
(181,481 |
) |
|
|
(4 |
%) |
Depreciation and amortization |
|
|
8,583 |
|
|
|
4,939 |
|
|
|
3,644 |
|
|
|
74 |
% |
Total operating expenses |
|
|
3,944,196 |
|
|
|
4,122,033 |
|
|
|
(177,837 |
) |
|
|
(4 |
%) |
Net operating income (loss) |
|
|
(4,073,905 |
) |
|
|
4,885,096 |
|
|
|
(8,959,001 |
) |
|
|
(183 |
%) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
556 |
|
|
|
4,130 |
|
|
|
(3,574 |
) |
|
|
(87 |
%) |
Interest expense |
|
|
(113,163 |
) |
|
|
(599,664 |
) |
|
|
486,501 |
|
|
|
81 |
% |
Total other expense |
|
|
(112,607 |
) |
|
|
(1,292,036 |
) |
|
|
1,179,429 |
|
|
|
(91 |
%) |
Net income (loss) before tax provision |
|
$ |
(4,186,512 |
) |
|
$ |
3,593,060 |
|
|
$ |
(7,779,572 |
) |
|
|
(217 |
%) |
Comparison of the three months ended June 30, 2025 and June 30, 2024
Revenues
Sales of freeze dried candy for the three months ended June 30, 2025 were $1.86 million, compared to $15.6 million for the three months ended June 30, 2024, a decrease of $13.8 million, or 88%, driven by significantly reduced demand due in large part to increased competitive and market pressure by large competitors.
Cost of Goods Sold
Cost of goods sold for the three months ended June 30, 2025 were $1.99 million, compared to $6.6 million for the three months ended June 30, 2024, a decrease of $4.7 million, or 70%. The decrease in cost of goods sold is primarily related to the decline in revenue.
Gross Profit
Gross profit for the three months ended June 30, 2025 was $(0.1) million compared to gross profit of $9.0 million for the three months ended June 30, 2024, a decrease of $9.1 million, or 101%. Gross profit decreased over the comparative period due to a decrease in revenues of $13.8 million, partially offset by a decrease in the cost of goods sold of $4.7 million.
Our gross margin loss was (7%) during the three months ended June 30, 2025, compared to a gross margin profit of 58% for the three months ended June 30, 2024. Our gross margin decreased due to lower sales, and increased cost of goods sold as a percentage of revenues, due to the allocation increased overhead costs over less revenues.
Operating Expenses
Salaries and Benefits
Salaries and benefits for the three months ended June 30, 2025 were $1.9 million, compared to $2.1 million for the three months ended June 30, 2024, a decrease of $408.0 thousand, or 9%. The decrease in salaries and benefits was mainly due to a decrease in bonus compensation of approximately $450,000 compared to the prior year period. Salaries and benefits included stock-based compensation expense of $1.1 million for both of the three-month periods ended June 30, 2025, and 2024. Stock-based compensation consists of stock options expense for employees and officers of the Company.
29
Professional Services
Professional services were $258.2 thousand for the three months ended June 30, 2025, compared to $594.3 thousand for the three months ended June 30, 2024, a decrease of $336. thousand, or 57%. The decrease was primarily due to decreased legal service expenses compared to the prior year period.
Other General and Administrative Expenses
Other general and administrative expenses for the three months ended June 30, 2025 were $1.7 million, compared to $1.4 million for the three months ended June 30, 2024, an increase of $346.4 thousand, or 25%, primarily due to increased facilities costs related to the company’s new facility, to the extent they are not allocated to inventory.
Depreciation
Depreciation of property and equipment for the three months ended June 30, 2025 and 2024, respectively, was $266.3 thousand and $167.4 thousand, of which $257.7 thousand and $162.4 thousand was allocated to cost of goods sold, which resulted in net depreciation expense of $8.6 thousand and $4.9 thousand, respectively.
Other Income (Expense)
In the three months ended June 30, 2025, other expense of $113.2 thousand consisted of interest expense derived from notes payable and the amortization of warrants issued as a debt discount, net of interest income on cash deposits. During the period ended June 30, 2024, other income consisted of interest expense of $1.7 million. Interest expense decreased due to decreased amortization on notes payable discounts as notes get closer to maturity.
Net Income (Loss)
Pretax net loss for the three months ended June 30, 2025 was $4.2 million, compared to pretax net income of $3.59 million during the three months ended June 30, 2024, decrease in earnings of $7.8 million, or 217%. The transition to pretax net loss from pretax net income was primarily due the decrease in gross profit of $9.1 million, or 101% partially offset by decreased operating expenses of $177.8 thousand or 4%.
Provision for Income Taxes
The Company maintains a full valuation allowance related to our net deferred tax assets, primarily due to our historical net loss position. For the periods ended June 30, 2025 and 2024, the Company recognized federal income tax provisions of $0 and $257.9 thousand, respectively.
30
Comparison of the six months ended June 30, 2025 and June 30, 2024
The following table summarizes selected items from the statement of operations for the three-month periods ended June 30, 2025 and June 30, 2024:
|
|
Six Months Ended |
|
|
|
|
|
|
|
|||||||
|
|
June 30, |
|
|
Increase / |
|
|
|
|
|||||||
|
|
2025 |
|
|
2024 |
|
|
(Decrease) |
|
|
% Change |
|
||||
Revenues |
|
$ |
4,333,234 |
|
|
$ |
27,054,369 |
|
|
$ |
(22,721,135 |
) |
|
|
(84 |
%) |
Cost of goods sold |
|
|
3,360,220 |
|
|
|
13,417,798 |
|
|
|
(10,057,578 |
) |
|
|
(75 |
%) |
Gross profit |
|
|
973,014 |
|
|
|
13,636,571 |
|
|
|
(12,663,557 |
) |
|
|
(93 |
%) |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Salaries and benefits |
|
|
3,874,269 |
|
|
|
4,474,130 |
|
|
|
(599,861 |
) |
|
|
(13 |
%) |
Professional services |
|
|
450,553 |
|
|
|
1,062,104 |
|
|
|
(611,551 |
) |
|
|
(58 |
%) |
Other general and administrative expenses |
|
|
3,120,118 |
|
|
|
2,271,507 |
|
|
|
848,611 |
|
|
|
37 |
% |
Total general and administrative expenses |
|
|
7,444,940 |
|
|
|
7,807,741 |
|
|
|
(362,801 |
) |
|
|
(5 |
%) |
Depreciation and amortization |
|
|
17,167 |
|
|
|
14,477 |
|
|
|
2,690 |
|
|
|
19 |
% |
Total operating expenses |
|
|
7,462,107 |
|
|
|
7,822,218 |
|
|
|
(360,111 |
) |
|
|
(5 |
%) |
Net operating loss |
|
|
(6,489,093 |
) |
|
|
5,814,353 |
|
|
|
(12,303,446 |
) |
|
|
(212 |
%) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income |
|
|
27,266 |
|
|
|
4,130 |
|
|
|
23,136 |
|
|
|
560 |
% |
Interest expense |
|
|
(295,739 |
) |
|
|
(1,018,333 |
) |
|
|
722,594 |
|
|
|
(71 |
%) |
Loss on early extinguishment of debt |
|
|
- |
|
|
|
(696,502 |
) |
|
|
696,502 |
|
|
|
(100 |
%) |
Total other expense |
|
|
(268,473 |
) |
|
|
(1,710,705 |
) |
|
|
1,442,232 |
|
|
|
(84 |
%) |
Net loss before tax provision |
|
$ |
(6,757,566 |
) |
|
$ |
4,103,648 |
|
|
$ |
(10,861,214 |
) |
|
|
(265 |
%) |
Revenues
Sales of freeze dried candy for the six months ended June 30, 2025 were $4.3 million, compared to $27.1 million for the six months ended June 30, 2024, a decrease of $22.7 million or 84%, driven by significantly reduced demand due in large part to increased competitive and market pressure by large competitors.
Cost of Goods Sold
Cost of goods sold for the six months ended June 30, 2025 were $3.4 million, compared to $13.4 million for the six months ended June 30, 2024, a decrease of $10.1 million , or 75%. The decrease in cost of goods sold is primarily related to the decline in revenue. Cost of goods sold increased as a percentage of revenues due to higher occupancy costs compared to the prior year period.
Gross Profit
Gross profit for the six months ended June 30, 2025 was $973.0 thousand compared to gross profit of $13.6 million for the six months ended June 30, 2024, a decrease of $12.7 million, or 93%. Gross profit decreased over the comparative period due to decreased revenues of $22.7 million partially offset by lower cost of goods sold of $10.1 million.
Our gross profit margin was 22.5% during the six months ended June 30, 2025, compared to 50.40% for the six months ended June 30, 2024. Our gross profit margin decreased as sales decreased while overhead costs included in cost of goods sold increased over the prior year period.
Operating Expenses
Salaries and Benefits
Salaries and benefits for the three months ended June 30, 2025 were $3.9 million, compared to $4.5 million for the six months ended June 30, 2024, a decrease of $599.9 thousand, or 13%. The decrease in salaries and benefits was mainly due to a decrease in bonus compensation of approximately $850,000 and headcount reductions. Salaries and benefits included stock-based compensation expense of $2.5 million for both of the six-month periods ending June 30, 2025, and 2024. Stock-based compensation consists of stock options expense for employees and officers of the Company and share grants awarded to certain executives of the Company in lieu of salary, which are being amortized over the service period.
31
Professional Services
Professional services were $450.6 thousand for the six months ended June 30, 2025, compared to $1.1 million for the six months ended June 30, 2024, a decrease of $611.6 thousand, or 58%. The decrease was primarily due to heightened legal service expenses related to the public offering of common stock and Nasdaq listing in the prior year period.
Other General and Administrative Expenses
Other general and administrative expenses for the six months ended June 30, 2025 were $3.1 million, compared to $2.3 million for the six months ended June 30, 2024, an increase of $848.6 thousand or 37%, primarily due to increased facilities costs related to the company’s new facility, to the extent they are not allocated to inventory.
Depreciation
Depreciation of property and equipment for the six months ended June 30, 2025 and 2024, respectively, was $518.7 thousand and $371.7 thousand, of which $501.5 thousand and $357.3 thousand was allocated to cost of goods sold, which resulted in net depreciation expense of $17.2 thousand and $14.5 thousand, respectively.
Other Income (Expense)
In the six months ended June 30, 2025, other expense of $268.5 thousand consisted of interest expense derived from notes payable and the amortization of warrants issued as a debt discount, net of interest income on cash deposits. During the six months ended June 30, 2024, other income consisted of interest expense of $1.7 million. Interest expense decreased due to decreased amortization on notes payable discounts as a $5.2 million of debt was paid down during the second quarter of 2024.
Net Income (Loss)
Pretax net loss for the six months ended June 30, 2025 was $6.8 million, compared to pretax net income of $4.1 million during the six months ended June 30, 2024, a decrease in earnings of $10.9 million or 265%. The transition to pretax net loss from pretax net income was primarily due the decrease in gross profit of $12.7 million, or 93%, while operating expenses decreased $360.1 thousand, or 5%.
Provision for Income Taxes
The Company maintains a full valuation allowance related to our net deferred tax assets, primarily due to our historical net loss position. For the periods ended June 30, 2025 and 2024, the Company recognized federal income tax provisions of $0 and $257.9 thousand, respectively.
Liquidity, Going Concern and Capital Resources
The following table summarizes our total current assets, liabilities and working capital at June 30, 2025 and December 31, 2024.
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2025 |
|
|
2024 |
|
||
Current Assets |
|
$ |
22,800,083 |
|
|
$ |
25,076,140 |
|
|
|
|
|
|
|
|
||
Current Liabilities |
|
$ |
5,384,019 |
|
|
$ |
7,364,541 |
|
|
|
|
|
|
|
|
||
Working Capital |
|
$ |
17,416,064 |
|
|
$ |
17,711,599 |
|
As of June 30, 2025, we had working capital of $17.4 million, compared to working capital of $17.7 million as of December 31, 2024. The decreased working capital is mainly attributable a decrease in cash of $2.8 million, partially offset by a decrease in current notes payable as a result of the Notes Exchange. As of June 30, 2025, our balance of cash and cash equivalents was $959.4 thousand, compared to $3.7 million at December 31, 2024. We expect to continue to incur significant capital expenditures related to the development and operation of our freeze dried candy business. Our ability to resume our production levels and distribution capabilities and further increase the value of our brands is in part dependent on our success in deploying additional capital. Our plan for satisfying our cash requirements for the next twelve months is through cash on hand, however we will require additional financing in the form of equity or debt which may not be available on favorable terms, or at all. We may not have sufficient funds to sustain our operations for the next twelve months. These factors raise substantial doubt about our ability to continue as a going concern. See Note 3 – “Going Concern” of the notes to consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.
32
Indebtedness
On April 28, 2025, the Company restructured its outstanding current debt through the issuance of Convertible Notes in a dollar-for-dollar exchange. On April 28, 2025, the Company entered into an exchange agreement (the “Exchange Agreement”) with related party holders of the Company’s outstanding promissory notes (the “Outstanding Notes”) with an aggregate principal amount of $2.7 million, maturity dates ranging from April 8, 2025 to August 23, 2025 and interest rates ranging from 6% to 8%. Pursuant to the Exchange Agreement, holders exchanged their Outstanding Notes for new senior convertible promissory notes (the “Convertible Notes”) in an amount equal to $2.8 million, the aggregate principal amount of the Outstanding Notes, plus accrued and unpaid interest thereunder. The Convertible Notes have a maturity date of April 30, 2030 and will pay interest semiannually in arrears on May 1 and November 1 beginning on November 1, 2025. At the Company’s election, interest payable on an interest payment date may be added to the principal amount of the Convertible Note on the applicable interest payment date and will no longer be owed to holders of the Convertible Notes. The Convertible Notes are convertible at the election of the holders, in whole or in part, into shares of common stock based on a price per share equal to the average closing price of such common stock for the five trading days immediately prior to the execution of and entry into the Convertible Notes, with such conversion prices ranging from $0.62 to $0.63. The Convertible Notes are senior in right of payment to all existing and future debt obligations of the Company and will be secured by all existing and future assets of the Company. The Convertible Notes are redeemable by the Company at any time upon ten days’ notice and at the option the holders for the principal amount thereof plus interest, beginning on January 1, 2026.
Cash Flows
The following table summarizes our cash flows during the six months ended June 30, 2025 and 2024, respectively.
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Net cash used in operating activities |
|
$ |
(2,514,884 |
) |
|
$ |
(939,534 |
) |
Net cash used in investing activities |
|
|
(249,140 |
) |
|
|
(2,228,050 |
) |
Net cash provided by financing activities |
|
|
- |
|
|
|
15,130,582 |
|
|
|
|
|
|
|
|
||
Net change in cash and cash equivalents |
|
$ |
(2,764,024 |
) |
|
$ |
11,962,998 |
|
Net cash used in operating activities was $2.0 million for the six months ended June 30, 2025, compared to $0.9 million of cash used in operating activities six months ended June 30, 2024. The increase in cash used in operating activities was primarily due to increases in inventory and accounts receivable.
Net cash used in investing activities was $108.0 thousand for the six months ended June 30, 2025, compared to $630.3 thousand for the six months ended June 30, 2024, a decrease of $522.5 thousand. Cash used in investing activities was primarily used to build out additional freezers and to improve our office space.
Net cash provided by financing activities was $0 and $15.1 million for the six months ended June 30, 2025 and 2024, respectively. Net cash provided by financing activities for the six months ended June 30, 2024 consisted of net proceeds of $3.7 million from private placement offerings to accredited investors and related parties from the issuance of 515,597 shares at $7.25 per share on March 28, 2024.
Contractual Obligations and Commitments
The Company is a party to a real property lease for its 20,945 square foot facility at 1440 N. Union Bower Rd., Irving, TX 75061, under which an entity owned entirely by Ira Goldfarb. The lease term is through September 15, 2025, with two five-year options to extend, at a monthly lease term of $10.0 thousand, with approximately a 3% annual escalation of lease payments commencing September 15, 2021.
On May 22, 2024, the Company entered into an industrial lease (the “Lease”) with USCIF Pinnacle Building B LLC, a Delaware limited liability company. Pursuant to the terms of the Lease, the Company will lease approximately 324,000 rentable square feet from the Lessor at 4024 Rock Quarry Road, Dallas, Texas for a term of approximately 62 months, which the Company intends to use as industrial and manufacturing space. The term of the Lease commenced on May 22, 2024. The Lease provides for graduated rent payments starting at $122,175 per month, and increasing up to $297,289.14 per month by the end of the Lease, plus
33
taxes, insurance and common area maintenance costs. The Company is required to provide a security deposit in the amount of $1,000,000 in connection with the Lease. The Lease may be renewed upon the extension in writing between the Company and the Lessor for a period of up to 60 months.
On January 19, 2024, the Company entered into a sublease agreement (the “Sublease Agreement”) with Papsa Merx S. de R.S. de C.V., a corporation registered in Mexico City, Mexico (the “Sublessor”). Pursuant to the terms of the Sublease Agreement, the Company will sublease approximately 141 rentable square meters at Av. Roble 660, Valle del Campestre, 66265 San Pedro Garza García Municipality, Nuevo León, 66269 (the “Premises”) for a term of approximately seventeen months (the “Term”), which the Company intends to use as office space. The Term of the Lease Agreement will commence on February 1, 2024. The Sublease Agreement provides for rent payments at fixed price of $5.25 thousand per month plus the corresponding Value Added Tax for the duration of the Term. The Company is also responsible for operating expenses of the Premises, which includes a maintenance fee, electricity and internet services. The Company is required to provide a deposit of guarantee in the amount of $5.25 thousand in connection with the Sublease Agreement. The Sublease Agreement does not have a renewal period.
On October 26, 2023, the Company entered into a lease agreement (the “2023 Lease Agreement”) with Prologis, Inc., a Maryland corporation. Pursuant to the terms of the 2023 Lease Agreement, beginning on November 1, 2023 the Company leases approximately 51,264 rentable square feet at Stemmons 10, 308 Mockingbird Lane, Dallas, TX 75247 for a term of approximately five years and two months (the “Initial Term”), which the Company intends to use as warehousing and distribution space. The 2023 Lease Agreement provides for base rent payments starting at approximately $42.5 thousand per month (taking into consideration an initial phase-in of the base rent obligation) in the first year of the Initial Term, and increase each year, up to approximately $51.7 thousand per month during the last year of the Initial Term. The 2023 Lease Agreement may be extended for a period of five years, at the option of the Company, at a rate to be based on a fair market rent rate determined at the time of the extension.
Off-Balance Sheet Arrangements
None.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of financial conditions and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements required us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates.
Our critical accounting policies are more fully described in Note 2 of the footnotes to our financial statements appearing elsewhere in this Form 10-Q, and Note 2 of the footnotes to the financial statements provided in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Commodity Price Risk
We do not expect any significant effects from commodity price risk outside of inherent inflationary risks.
Interest Rate Risk
We are not a party to agreements that subject us to floating rates of interest and do not anticipate entering into any transactions that would expose us to any direct interest rate risk.
Foreign Currency Risk
We did not hold a material amount of cash in foreign jurisdictions as of June 30, 2025. However, we anticipate that as our foreign operations grow, we may hold more cash in foreign jurisdictions, particularly Mexico, Colombia and China, and possibly expose ourselves to greater currency fluctuation risk than we currently experience.
34
Item 4. Controls and Procedures.
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2025, as such term is defined in Rules 13a-15(e) and 15d-15(e) under Securities Exchange Act of 1934, as amended (the “Exchange Act”). We maintain disclosure controls and procedures that are designed to ensure the information we are required to disclose in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on thisevaluations as of June 30, 2025, our Chief Executive Officer, Claudia Goldfarb, and our Chief Financial Officer, Donna Guy concluded that our disclosure controls and procedures are effective.
There have been no changes in the Company’s internal control over financial reporting during the six months ended June 30, 2025 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
35
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time in the ordinary course of business, we are a party to various types of legal proceedings. We do not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows.
Item 1A. Risk Factors.
Significant tariffs could increase Costs, decrease margin, and materially adversely affect the business.
Significant tariffs on certain products could materially increase the costs of our business. These additional costs may not be able to be fully passed along to our customers. These additional costs could materially adversely affect our margins. To the extent that tariffs cause any adverse impacts on global supply chains, it could further materially affect the ability of our ability to timely source our raw materials. If, as a result of tariffs, the United States’ economy experiences a recession or other economic slowdown, the demand for our products may decline materially.
There is substantial doubt about our ability to continue as a going concern.
Our financial statements as of June 30, 2025 have been prepared under the assumption that we will continue as a going concern for the next twelve months. As of June 30, 2025, we had cash and cash equivalents of $959.4 thousand and an accumulated deficit of $69.2 million. We do not believe that our cash and cash equivalents are sufficient to fund operations and capital expenditures to reach larger scale revenue generation from our product offerings. As a result of our financial condition and other factors described herein, there is substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern will depend on our ability to obtain additional funding, as to which no assurances can be given. We continue to analyze various alternatives, including potentially obtaining debt or equity financings or other arrangements. Our future success depends on our ability to raise capital. We cannot be certain that raising additional capital, whether through selling additional debt or equity securities or obtaining a line of credit or other loan, will be available to us or, if available, will be on terms acceptable to us, and, to the extent it is obtained, it would likely have rights, preferences, and privileges senior to those of holders of our common stock and would further dilute our current stockholders. Our ability to raise capital is also constrained by the price of and demand for our common stock. The inclusion of disclosures expressing substantial doubt about our ability to continue as a going concern could also materially adversely affect our stock price and our ability to raise new capital. If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our current development programs, cut operating costs, forgo future development and other opportunities, or even terminate our operations in which case our investors could lose some or all of their investment.
Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our securities.
On May 14, 2025, we received a letter from Nasdaq indicating that the listing of the Company’s common stock was not in compliance with Nasdaq Listing Rule 5550(a)(2), as the closing bid price of our common stock was less than $1.00 per share over a consecutive 30- trading-day period. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days, or until November 10, 2025, to regain compliance with the minimum bid price requirement, with the possibility of extension for an additional 180 calendar days if we meet Nasdaq’s continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market with the exception of the minimum bid price requirement. In addition, we would be required to provide written notice of our intention to cure the deficiency during such additional compliance period, by effecting a reverse stock split, if necessary
We can regain compliance if our common stock is at least $1.00 for a minimum of 10 consecutive business days (unless Nasdaq exercises its discretion to extend the 10-day period) at any time during the 180 day compliance period (or additional compliance period, if applicable) (the “Nasdaq Listing Requirement”).
If it appears to Nasdaq that we will not be able to cure the deficiency in connection with the minimum bid price requirement, or if we are otherwise not eligible for the additional compliance period, and we do not regain compliance by September 30, 2025 for the minimum bid price requirement, Nasdaq will provide written notification to us that our shares of common stock are subject to delisting. At that time, we may appeal the delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules.
36
The notice is a notice of deficiency, not delisting, and does not currently affect the listing or trading of our common stock on Nasdaq, which continues to trade under the symbol “SOWG.” However, as of June 30, 2025, we did not meet the Nasdaq Listing Requirement, and we may not meet that requirement before the end of the compliance period (or additional compliance period, if applicable).
We continue to actively monitor the closing bid price of our common stock and are evaluating available options, including by effecting the 1-for-3 reverse stock split that was approved by the Company’s stockholders at the Company’s 2025 Annual Meeting of Stockholders held on June 13, 2025, and intend to take appropriate steps to maintain our listing on Nasdaq. However, there can be no assurance that we will be able to regain compliance with the minimum bid price requirement.
Such a delisting would likely have a negative effect on the price of the securities and would impair your ability to sell or purchase the securities when you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our securities to become listed again, stabilize the market price or improve the liquidity of our securities, prevent our securities from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements. Additionally, if our securities are not listed on, or become delisted from, Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.
These are not the only risks we face. You should carefully consider these risk factors, together with the risk factors set forth in Item 1A of our Annual Report on Form 10-K. There have been no other material changes from the risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2024.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
37
Item 6. Exhibits.
Exhibit No |
Description |
2.1 |
Agreement and Plan of Merger by and between Sow Good Inc. and Black Ridge Oil & Gas, Inc., dated January 20, 2021 (incorporated by reference to Exhibit 2.1 of the Form 8-K filed with the Securities and Exchange Commission by Sow Good Inc. on January 22, 2021) |
|
|
2.2 |
Articles of Merger by and between Sow Good Inc. and Black Ridge Oil & Gas, Inc., dated January 20, 2021 (incorporated by reference to Exhibit 3.1 of the Form 8-K filed with the Securities and Exchange Commission by Sow Good Inc. on January 22, 2021) |
|
|
2.3 |
Plan of Conversion of Sow Good Inc. (incorporated by reference to Exhibit 2.1 of the Form 8-K filed with the Securities and Exchange Commission by Sow Good Inc. on February 22, 2024) |
|
|
3.1 |
Certificate of Incorporation (incorporated by reference to Exhibit 3.3 of the Form 8-K filed with the Securities and Exchange Commission by Sow Good Inc. on February 22, 2024) |
|
|
3.2 |
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.4 of the Form 8-K filed with the Securities and Exchange Commission by Sow Good Inc. on February 22, 2024) |
|
|
3.3 |
Articles of Conversion (incorporated by reference to Exhibit 3.1 of the Form 8-K filed with the Securities and Exchange Commission by Sow Good Inc. on February 22, 2024) |
|
|
3.4 |
Certificate of Conversion (incorporated by reference to Exhibit 3.2 of the Form 8-K filed with the Securities and Exchange Commission by Sow Good Inc. on February 22, 2024) |
|
|
4.1 |
Form of Common Stock Certificate of Sow Good Inc. (incorporated by reference to Exhibit 4.1 of the Form 10-K filed with the Securities and Exchange Commission by Sow Good Inc. on March 22, 2024) |
|
|
4.2 |
Description of Securities (incorporated by reference to Exhibit 4.2 of the Form 10-K filed with the Securities and Exchange Commission by Sow Good Inc. on March 22, 2024) |
|
|
10.1 |
Form of Senior Convertible Promissory Note (incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the Securities and Exchange Commission by Sow Good Inc. on April 30, 2025) |
|
|
31.1* |
Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a) |
|
|
31.2* |
Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a) |
|
|
32.1** |
Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
32.2** |
Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
101.INS |
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
|
101.SCH |
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
|
|
104* |
Cover Page Interactive Data File (embedded within the Inline XBRL Document and included in Exhibit 101) |
* Filed herewith.
** The certifications attached as Exhibit 32.1 and 32.2 accompanying this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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SOW GOOD INC. |
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Date: August 14, 2025 |
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By: |
/s/ Claudia Goldfarb |
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Claudia Goldfarb, Chief Executive Officer (Principal Executive Officer) |
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Date: August 14, 2025 |
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By: |
/s/ Donna Guy |
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Donna Guy, Chief Financial Officer (Principal Financial Officer) |
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FAQ
What was Sow Good's (SOWG) net loss for the six months ended June 30, 2025?
How much cash did SOWG have at June 30, 2025?
Did the company disclose any going-concern issues in the 10-Q?
What debt restructuring did SOWG complete in April 2025?
How concentrated are Sow Good's customers?
What are Sow Good's material lease obligations?
