SOWG Sow Good Inc

Delaware

000-53952

27-2345075

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Title of each Class

Trading Symbol

Name of each exchange on which registered

Common Stock

SOWG

The Nasdaq Capital Market

Item 9.01.

Financial Statements and Exhibits.

Exhibit No.

Description

99.1

Press Release issued by Sow Good Inc., dated November 14, 2024

104

Cover Page Interactive Data File (embedded within the Inline XBRL document)

SOW GOOD INC.

By:

/s/ Claudia Goldfarb

Claudia Goldfarb

Chief Executive Officer

Date: November 14, 2024

•

Revenue in the third quarter of 2024 was $3.6 million compared to $5.0 million for the same period in 2023. The decrease was largely due to the Company’s decision to delay the majority of product shipments as the extreme heat during the period was negatively impacting product quality. In addition, revenue was affected by an increase in promotional activity and customer allowances.

•

Gross profit in the third quarter of 2024 was $0.6 million compared to $1.3 million for the same period in 2023. Gross margin was 16.0% in the third quarter of 2024 compared to 27.0% in the prior year period. The decline in margin was primarily due to higher costs of goods sold as a percentage of revenue due to higher costs related to the company’s new facility and a lower production yield.

•

Operating expenses in the third quarter of 2024 were $3.8 million compared to $1.0 million for the same period in 2023, primarily due to strategic investments in brand expansion and infrastructure growth as well as higher salaries and benefits expense. The Company allocated more resources toward trade shows and branding and marketing efforts, aiming to strengthen its market presence and support the expansion into new retail and distribution channels. Occupancy costs also increased as the Company transitioned to a 320,000-square-foot facility to accommodate rising demand.

•

Net loss in the third quarter of 2024 was $3.4 million, or $(0.33) per diluted share, compared to net income of $0.3 million, or $0.04 per diluted share, for the same period in 2023. The decline reflects the lower level of gross profit generated during the quarter and increased operating expenses during the 2024 period.

•

Adjusted EBITDA (a non-GAAP financial measure defined and reconciled herein) in the third quarter of 2024 was ($1.9) million compared to $0.6 million for the same period in 2023. For a reconciliation of Adjusted EBITDA to the nearest comparable GAAP metric, net income, please see the tables below.

•

Cash and cash equivalents were $6.9 million at September 30, 2024, compared to $2.4 million at December 31, 2023.

•

Revenue for the nine months ending September 30, 2024, increased significantly to $30.6 million compared to $6.5 million in 2023. The substantial revenue growth underscores the effectiveness of the Company’s retail distribution outlet expansion strategy as well as price improvements.

•

Gross profit for the nine months ending September 30, 2024, increased significantly to $14.2 million compared to $(0.1) million in 2023. Gross margin was 46.4% in the first nine months of 2024 compared to negative 2.0% in the prior year period. This was driven by strong revenue growth combined with raw material cost improvements.

•

Operating expenses for the nine months ending September 30, 2024, increased to $11.6 million from $2.9 million in 2023 as the Company scaled operations to support the strong revenue growth referenced above.

●

Adjusted EBITDA excludes stock-based compensation expense as it has recently been, and will continue to be for the foreseeable future, a significant recurring non-cash expense for our business;

●

Adjusted EBITDA excludes depreciation and amortization expense and, although this is a non-cash expense, the assets being depreciated and amortized may have to be replaced in the future;

●

Adjusted EBITDA does not reflect the cash requirements necessary to service interest on our debt which affects the cash available to us;

●

Adjusted EBITDA does not reflect the monies earned from our investments since it does not reflect our core operations;

●

Adjusted EBITDA does not reflect change in fair value of financial instruments since it does not reflect our core operations and is a non-cash expense;

●

Adjusted EBITDA does not reflect income tax expense that affects cash available to us; and

●

the expenses and other items that we exclude in our calculations of Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from Adjusted EBITDA when they report their operating results.

September 30,

December 31,

2024

2023

ASSETS

(Unaudited)

Current assets:

Cash and cash equivalents

$

6,946,387

$

2,410,037

Accounts receivable, net

1,232,958

2,578,259

Inventory

19,434,041

4,123,246

Prepaid inventory

572,098

563,131

Prepaid expenses

202,430

563,164

Total current assets

28,387,914

10,237,837

Property and equipment:

Construction in progress

2,848,191

1,522,465

Property and equipment

9,430,983

6,287,422

Less accumulated depreciation

(1,550,550

)

(967,602

)

Total property and equipment, net

10,728,624

6,842,285

Security deposit

1,357,956

346,616

Right-of-use asset

17,193,154

4,061,820

Total assets

$

57,667,648

$

21,488,558

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

1,301,098

$

853,535

Accrued interest

398,617

860,693

Accrued expenses

1,839,323

648,947

Income tax payable - current

65,603

-

Current portion of operating lease liabilities

2,140,084

550,941

Current maturities of notes payable, related parties, net of $447,236 and $431,854 of debt discounts at September 30, 2024 and December 31, 2023, respectively

2,731,901

2,543,146

Current maturities of notes payable, net of $26,116 and $86,062 of debt discounts as of September 30, 2024 and December 31, 2023, respectively

213,134

313,938

Total current liabilities

8,689,760

5,771,200

Operating lease liabilities

16,005,280

3,671,729

Notes payable, related parties, net of $0 and $1,448,858 of debt discounts as of September 30, 2024 and December 31, 2023, respectively

-

4,171,142

Notes payable, net of $0 and $135,962 of debt discounts as of September 30, 2024 and December 31, 2023, respectively

150,000

594,038

Total liabilities

24,845,040

14,208,109

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.001 par value, 20,000,000 shares authorized, no shares issued and outstanding

-

-

Common stock, $0.001 par value, 500,000,000 shares authorized, 10,245,388 and 6,029,371 shares issued and outstanding as of September 30, 2024 and December 31, 2023

10,245

6,029

Additional paid-in capital

91,086,537

66,014,415

Accumulated deficit

(58,274,174

)

(58,739,995

)

Total stockholders' equity

32,822,608

7,280,449

Total liabilities and stockholders' equity

$

57,667,648

$

21,488,558

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2024

2023

2024

2023

Revenues

$

3,554,157

$

5,034,203

$

30,608,526

$

6,548,479

Cost of goods sold

2,998,171

3,698,962

16,415,970

6,679,224

Gross profit

555,986

1,335,241

14,192,556

(130,745

)

Operating expenses:

General and administrative expenses:

Salaries and benefits

1,875,908

618,907

6,350,038

1,450,103

Professional services

320,289

294,720

1,382,393

404,256

Other general and administrative expenses

1,607,844

74,728

3,879,350

959,218

Total general and administrative expenses

3,804,041

988,355

11,611,781

2,813,577

Depreciation and amortization

8,583

9,261

23,060

94,638

Total operating expenses

3,812,624

997,616

11,634,841

2,908,215

Net operating income (loss)

(3,256,638

)

337,625

2,557,715

(3,038,960

)

Other income (expense):

Interest income

39,509

-

43,639

-

Interest expense

(225,095

)

(3,641

)

(1,243,428

)

(1,349,486

)

Loss on early extinguishment of debt

-

-

(696,502

)

-

Total other income (expense)

(185,586

)

(3,641

)

(1,896,291

)

(1,349,486

)

Income (loss) before income tax

(3,442,224

)

333,984

661,424

(4,388,446

)

Benefit (provision) for income tax

62,315

-

(195,603

)

-

Net income (loss)

$

(3,379,909

)

$

333,984

$

465,821

$

(4,388,446

)

Weighted average common shares outstanding - basic

10,245,388

5,123,735

8,651,223

4,942,182

Net income (loss) per common share - basic

$

(0.33

)

$

0.07

$

0.05

$

(0.89

)

Weighted average common shares outstanding - diluted

10,245,388

8,066,577

9,613,553

4,942,182

Net income (loss) per common share - diluted

$

(0.33

)

$

0.04

$

0.05

$

(0.89

)

For the Three Months Ended September 30, 2024

Additional

Total

Common Stock

Paid-in

Accumulated

Stockholders'

Shares

Amount

Capital

Deficit

Equity

Balance, June 30, 2024

10,245,388

10,245

89,899,666

(54,894,265

)

35,015,646

Common stock issued in public offering, net of offering costs

–

–

–

–

-

Common stock issued in private placement offering

–

–

–

–

-

Common stock issued to directors for services

–

–

–

-

-

Proceeds from exercise of stock options and warrants

–

–

–

–

-

Common stock options granted to directors and advisors for services

–

–

29,284

–

29,284

Common stock options granted to officers and employees for services

–

–

1,157,587

–

1,157,587

Net loss for the three months ended September 30, 2024

–

–

–

(3,379,909

)

(3,379,909

)

Balance, September 30, 2024

10,245,388

$

10,245

$

91,086,537

$

(58,274,174

)

$

32,822,608

For the Three Months Ended September 30, 2023

Additional

Total

Common Stock

Paid-in

Accumulated

Stockholders'

Shares

Amount

Capital

Deficit

Equity

Balance, June 30, 2023

4,868,083

$

4,868

$

59,117,367

$

(60,401,992

)

$

(1,279,757

)

Common stock issued in private placement offering

735,000

74

3,674,926

–

3,675,000

Common stock issued to directors for services

–

–

–

–

-

Common stock options granted to directors and advisors for services

–

–

29,296

–

29,296

Common stock options granted to officers and employees for services

–

–

111,463

–

111,463

Net income for the three months ended September 30, 2023

–

–

–

333,984

333,984

Balance, September 30, 2023

5,603,083

$

4,942

$

62,933,052

$

(60,068,008

)

$

2,869,986

For the Nine Months Ended September 30, 2024

Additional

Total

Common Stock

Paid-in

Accumulated

Stockholders'

Shares

Amount

Capital

Deficit

Equity

Balance, December 31, 2023

6,029,371

$

6,029

$

66,014,415

$

(58,739,995

)

$

7,280,449

Common stock issued in public offering, net of offering costs

1,380,000

1,380

11,973,596

–

11,974,976

Common stock issued in private placement offering

515,597

516

3,737,484

–

3,738,000

Common stock issued to directors for services

31,211

32

295,616

–

295,648

Proceeds from exercise of stock options and warrants

2,289,209

2,288

5,670,680

–

5,672,968

Common stock options granted to directors and advisors for services

–

–

86,892

–

86,892

Common stock options granted to officers and employees for services

–

–

3,307,854

–

3,307,854

Net income for the nine months ended September 30, 2024

–

–

–

465,821

465,821

Balance, September 30, 2024

10,245,388

$

10,245

$

91,086,537

$

(58,274,174

)

$

32,822,608

For the Nine Months Ended September 30, 2023

Additional

Total

Common Stock

Paid-in

Accumulated

Stockholders'

Shares

Amount

Capital

Deficit

Equity

Balance, December 31, 2022

4,847,384

$

4,847

$

58,485,602

$

(55,679,562

)

$

2,810,887

Common stock issued in private placement offering

735,000

74

3,674,926

–

3,675,000

Common stock issued to directors for services

20,699

21

125,208

–

125,229

Common stock warrants granted to related party note holders pursuant to debt financing

–

–

197,198

–

197,198

Common stock warrants granted to note holders pursuant to debt financing

–

–

50,682

–

50,682

Common stock options granted to directors and advisors for services

–

–

91,990

–

91,990

Common stock options granted to officers and employees for services

–

–

307,446

–

307,446

Net loss for the three months ended September 30, 2023

–

–

–

(4,388,446

)

(4,388,446

)

Balance, September 30, 2023

5,603,083

$

4,942

$

62,933,052

$

(60,068,008

)

$

2,869,986

For the Nine Months Ended

September 30,

2024

2023

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$

465,821

$

(4,388,446

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Bad debts expense

176,032

-

Depreciation and amortization

582,948

306,092

Non-cash amortization of right-of-use asset and liability

791,360

15,245

Impairment of obsolete inventory

-

2,075,080

Common stock issued to directors for services

295,648

125,229

Amortization of stock options

3,394,746

399,436

Amortization of stock warrants issued as a debt discount

932,883

900,228

Loss on early extinguishment of debt

696,502

-

Decrease (increase) in current assets:

Accounts receivable

1,169,269

(1,197,608

)

Prepaid expenses

360,734

(10,760

)

Inventory

(15,319,762

)

(2,342,871

)

Security deposits

(1,011,340

)

(12,309

)

Increase (decrease) in current liabilities:

Accounts payable

447,563

257,091

Income tax payable

65,603

-

Accrued interest

(363,326

)

419,807

Accrued expenses

1,190,375

125,270

Net cash provided by used in operating activities

(6,124,944

)

(3,328,516

)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property and equipment

(3,143,561

)

(1,326,276

)

Cash paid for construction in progress

(1,325,726

)

-

Net cash used in investing activities

(4,469,287

)

(1,326,276

)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from common stock offerings, net of offering costs of $859,024

15,712,976

3,675,000

Proceeds from the exercise of warrants and options

373,855

-

Proceeds received from notes payable, related parties

-

2,400,000

Proceeds received from notes payable

-

400,000

Repayments of borrowings

(956,250

)

-

Net cash provided by financing activities

15,130,581

6,475,000

NET CHANGE IN CASH AND CASH EQUIVALENTS

4,536,350

1,820,208

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

2,410,037