Sow Good Inc. 10-Q

Item 1. Financial Statements. SOW GOOD INC. CONDENSED BALANCE SHEETS March 31, December 31, 2026 2025 ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 2,318,848 $ 1,474,445 Accounts receivable, net 2,687 - Accounts receivable - related party, net 505,764 1,651,471 Other receivables 93,491 93,198 Inventory, net 4,911 22,871 Prepaid expenses 30,357 90,460 Current assets of discontinued operations - 60,333 Total current assets 2,956,059 3,392,778 Property and equipment, net 19,167 21,667 Security deposit 26,309 283,972 Right-of-use asset 44,350 76,971 Total assets $ 3,045,885 $ 3,775,388 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 1,025,293 $ 1,297,851 Accrued interest 38,393 96,453 Accrued severance 1,150,000 2,442,500 Accrued expenses 1,307,662 584,186 Current portion of operating lease liabilities 43,772 78,171 Current maturities of convertible notes payable, related parties, net of $ 445,706 and $ 518,530 of debt discounts as of March 31, 2026 and December 31, 2025, respectively 781,559 1,341,420 Current liabilities related to discontinued operations - 346,861 Total current liabilities 4,346,679 6,187,442 Notes payable 150,000 150,000 Total liabilities 4,496,679 6,337,442 Commitments and contingencies - - Stockholders’ deficit: Series AA Preferred Stock, $ 0.001 par value, 20,000,000 shares authorized, 1,090,000 and 1,500,000 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively 1,090 1,500 Series AAA Preferred Stock, $ 0.001 par value, 20,000,000 shares authorized, 377,391 and 0 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively 377 - Common stock, $ 0.001 par value, 500,000,000 shares authorized, 20,120,117 and 814,833 shares issued and outstanding as of March 31, 2026 and December 31, 2025, respectively 20,120 815 Additional paid-in capital 104,101,089 100,519,348 Accumulated deficit ( 105,573,470 ) ( 103,083,717 ) Total stockholders’ deficit ( 1,450,794 ) ( 2,562,054 ) Total liabilities and stockholders’ deficit $ 3,045,885 $ 3,775,388 The accompanying notes are an integral part of these unaudited condensed financial statements. 1 SOW GOOD INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months Ended March 31, 2026 2025 Operating expenses: General and administrative expenses: Salaries and benefits $ 295,592 $ 806,783 Professional services 1,125,140 192,323 Other general and administrative expenses 263,210 578,708 Total general and administrative expenses 1,683,942 1,577,814 Depreciation and amortization 2,500 8,584 Total operating expenses 1,686,442 1,586,398 Net operating loss ( 1,686,442 ) ( 1,586,398 ) Other (expense): Interest expense ( 243,594 ) ( 365,152 ) Total other expense ( 243,594 ) ( 365,152 ) Loss from continuing operations before income tax ( 1,930,036 ) ( 1,951,550 ) Income tax provision - - Net loss from continuing operations ( 1,930,036 ) ( 1,951,550 ) Loss from discontinued operations, net of tax ( 559,717 ) ( 802,080 ) Net loss $ ( 2,489,753 ) ( 2,753,630 ) Weighted average common shares outstanding - basic and diluted 20,120,117 756,611 Continuing loss per common share - basic and diluted $ ( 0.10 ) ( 2.34 ) Discontinued loss, net of tax per common share - basic and diluted $ ( 0.03 ) ( 1.06 ) Net loss per common share - basic and diluted $ ( 0.13 ) ( 3.40 ) The accompanying notes are an integral part of these unaudited condensed financial statements. 2 SOW GOOD INC. STATEMENT OF STOCKHOLDERS’ DEFICIT FOR THE THREE MONTHS ENDED MARCH 31, 2026 AND 2025 (Unaudited) Common Stock Preferred Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Shares Amount Capital Deficit Deficit Balance at December 31, 2025 814,933 $ 815 1,500,000 $ 1,500 $ 100,519,348 $ ( 103,083,717 ) $ ( 2,562,054 ) Issuance of Series AA Preferred Stock - - 1,500,000 1,500 2,998,240 - 2,999,990 Conversion of Preferred AA Preferred Stock 382,667 383 ( 410,000 ) ( 410 ) 27 - - Conversion of Preferred AAA Preferred Stock 18,776,817 18,776 ( 1,122,609 ) ( 1,123 ) ( 17,653 ) - - Capitalized legal costs - - - - ( 156,200 ) - ( 156,200 ) Forfeiture of stock options ( 134,860 ) ( 134,860 ) Common stock issued to directors for services 23,894 24 137,476 137,500 Common stock issued to advisors for services 66,667 67 465,033 465,100 Conversion of convertible notes to common stock 55,140 55 289,428 289,483 Net loss for the three months ended March 31, 2026 - - - - - ( 2,489,753 ) ( 2,489,753 ) Balance at March 31, 2026 20,120,117 $ 20,120 1,467,391 $ 1,467 $ 104,101,089 $ ( 105,573,470 ) $ ( 1,450,794 ) Common Stock Preferred Stock Additional Paid-in Accumulated Total Stockholders’ Shares Amount Shares Amount Capital Deficit Deficit Balance, December 31, 2024 753,375 $ 753 - $ - $ 94,429,519 $ ( 62,442,211 ) $ 31,988,061 Common stock issued to directors for services 5,496 5 - - 229,995 - 230,000 Common stock options granted to directors and advisors - - 6,330 - 6,330 Common stock options granted to officers and employees - - 1,135,773 - 1,135,773 Net loss for the three months ended March 31, 2025 - - - ( 2,571,054 ) ( 2,571,054 ) Balance at March 31, 2025 758,871 $ 759 - $ - $ 95,801,616 $ ( 65,013,265 ) $ 30,789,110 The accompanying notes are an integral part of these unaudited condensed financial statements . 3 SOW GOOD INC. CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) For the Three Months Ended March 31, 2026 2025 Net loss from continuing operations $ ( 1,930,036 ) $ ( 1,768,974 ) Net loss from discontinued operations ( 559,717 ) ( 802,080 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,500 135,857 Amortization of right-of-use asset 32,621 200,710 Stock-based compensation ( 134,860 ) - Capitalized transaction costs ( 156,200 ) Amortization of debt discount 195,610 128,987 Common stock issued to directors for services 602,600 230,000 Changes in operating assets and liabilities: Accounts receivable ( 2,687 ) - Accounts receivable - related party, net 1,145,706 - Other receivables ( 293 ) ( 33,527 ) Inventory 17,960 - Prepaid expenses 60,103 ( 11,540 ) Security deposits 257,663 286,617 Accounts payable ( 272,558 ) ( 156,252 ) Accrued interest ( 58,060 ) 53,589 Accrued severance ( 1,292,500 ) - Accrued expenses 723,476 ( 216,103 ) Operating lease liability ( 34,399 ) ( 205,562 ) Net cash (used in) continuing operations ( 843,354 ) ( 214,095 ) Net cash (used in) discontinued operations ( 846,245 ) ( 1,786,447 ) Net cash (used in) operating activities ( 1,689,599 ) ( 2,000,542 ) CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for construction in progress - ( 107,790 ) Net cash (used in) investing activities - ( 107,790 ) CASH FLOWS FROM FINANCING ACTIVITIES Payments on convertible notes ( 465,988 ) - Proceeds from issuance of preferred stock 2,999,990 - Net cash provided by financing activities 2,534,002 - NET INCREASE (DECREASE) CASH AND CASH EQUIVALENTS 844,403 ( 2,108,332 ) Cash and cash equivalents, beginning of period 1,474,445 3,723,440 Cash and cash equivalents, end of period $ 2,318,848 $ 1,615,108 SUPPLEMENTAL INFORMATION: Interest received - $ 26,710 NON-CASH INVESTING AND FINANCING ACTIVITIES: Reclassification of construction in progress to property and equipment $ - $ 505,355 Conversion of convertible notes payable to equity $ 289,483 $ - The accompanying notes are an integral part of these unaudited condensed financial statements. 4 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 company that, through a third-party distribution arrangement, participates in the commercialization of freeze-dried candy products. The Company historically operated as a manufacturer of freeze-dried consumer packaged goods, including candy, fruits, vegetables, and snack products. Formerly Black Ridge Oil & Gas, Inc. (a business that participated in the acquisition and development of oil and gas leases and was acquired by the Company on October 1, 2020), the Company transitioned its focus to freeze-dried food products following the acquisition. At the 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.” Prior to April 2, 2012, Black Ridge Oil & Gas, Inc. was known as Ante5, Inc., a publicly traded company since July 1, 2010. Effective February 15, 2024 , Sow Good Inc. reincorporated in the State of Delaware from the State of Nevada pursuant to a plan of conversion. On May 2, 2024, trading of the Company’s common stock commenced on the Nasdaq Capital Market. In May 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. In the first quarter of 2023, the Company launched a freeze-dried candy product line and subsequently discontinued its smoothie, snack, and granola products. The Company expanded manufacturing capacity during 2023 and 2024 through the construction and installation of multiple freeze-dryers to support anticipated growth in candy production. During December 2025, the Company completed a strategic shift away from direct manufacturing and product sales and entered into a distribution agreement pursuant to which a third-party distributor serves as the exclusive distributor of the Company’s freeze-dried candy products. Under this arrangement, the distributor is responsible for commercialization, sales, marketing, fulfillment, and customer relationships, and the Company earns a contractual percentage of distributor gross receipts. As a result of this strategic shift, the Company no longer operates a manufacturing business and does not directly sell products to customers. 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, 2025. 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, 2026 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, 2025. Reverse Stock Split On April 17, 2026 the company effected a 1 for 15 stock split . The impact of this split has been retroactively applied to all periods presented unless stated otherwise. 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. 5 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) 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. 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 $ 250,000 and $ 500,000 , respectively, under current regulations. The Company had cash in excess of FDIC and SIPC insured limits of $ 2,068,848 at March 31, 2026. The Company had cash in excess of FDIC and SIPC insured limits of $ 1,189,975 at December 31, 2025. The Company has not experienced any losses in such accounts. 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 credit losses of $ 12,284 at March 31, 2026 and $ 0 at December 31, 2025. 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. Other Receivables Other accounts receivable was $ 93,491 as of March 31, 2026 and December 31, 2025. Other accounts receivable consisted primarily of a tax refund receivable from the State of Delaware for franchise taxes. Inventory On December 30 and December 31, 2025, the Company entered into an Asset Purchase Agreement and a Distribution Agreement, respectively. As a result of these transactions, the Company transitioned from operating as a manufacturer and omnichannel seller of freeze-dried candy to operating as a commission-based distribution agent, earning a fixed percentage of distributor gross receipts from sales of Sow Good-branded products. In addition, the Company retained certain SKUs to market independently of the Distribution Agreement. Inventory is stated at the lower of average cost or net realizable value, with cost determined using the first-in, first-out (“FIFO”) method. The Company evaluates inventory for potential obsolescence and excess quantities on a periodic basis. In connection with the exit of its manufacturing and omnichannel distribution business, the Company recorded an impairment and write-off of inventory of $ 13,737,675 during the year ended December 31, 2025. Because the impaired inventory related entirely to the former manufacturing and direct-sales business, the impairment expense has been included in loss from discontinued operations for all periods presented. 6 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) As of March 31, 2026 and December 31, 2025, the Company retained approximately $ 4,911 and $ 22,871 of inventory related to certain SKUs that were not transferred in the Asset Purchase Agreement. This inventory has been recorded at the lower of cost or net realizable value. Based on our Distribution Agreement with the Distributor, the net realizable value for units the Company expects to sell through its Distributor is 10 % of the expected selling price of the Distributor. Property and Equipment Property and equipment are stated at the lower of cost or estimated net recoverable amount. The cost of property, plant and equipment is depreciated using the straight-line method based on the lesser of the estimated useful lives of the assets or the lease term based on the following life expectancy: Software 3 years, or over the life of the agreement Website (years) 3 Office equipment (years) 5 Furniture and fixtures (years) 5 Machinery and equipment (years) 7 - 10 Leasehold improvements Lease-term or useful life 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 expense included in continuing operations was $ 2,500 and $ 8,584 , for the three months ended March 31, 2026 and 2025, respectively. Depreciation related to the assets used in the manufacture and sale of freeze-dried candy was reclassified to cost of goods sold, and has been included in the loss on discontinued operations. Revenue Recognition The Company recognizes revenue in accordance with ASC 606 - Revenue from Contracts with Customers (“ASC 606”). Following the Company’s strategic restructuring completed on December 31, 2025, including the sale of substantially all manufacturing and operating assets and the execution of the Distribution Agreement with Trea Grove LLC, the Company transitioned from a manufacturing and direct-sales business model to a commission-based distribution model. Under ASC 606, the Company recognizes revenue in accordance with a five-step 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 to which the Company expects to be entitled in exchange for those goods or services. To determine revenue recognition for arrangements 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. Under the Distribution Agreement, Trea Grove LLC serves as a distributor of Sow Good-branded products and is responsible for invoicing customers, fulfillment activities, and collection of customer payments. The Company is entitled to receive a fixed percentage of gross receipts collected by the distributor from customer sales. The Company evaluated the arrangement under ASC 606 and concluded that it acts as an agent because it does not control the products prior to transfer to end customers, does not have primary responsibility for fulfillment, and does not bear primary inventory or customer credit risk. Accordingly, revenue is recognized on a net basis in an amount equal to the commission to which the Company expects to be entitled. The Company’s performance obligation under the Distribution Agreement consists primarily of providing access to the Sow Good brand and related distribution rights. Revenue is recognized when the distributor completes the underlying customer sale and collects payment, as this represents the point at which the Company’s right to consideration becomes fixed and determinable in accordance with the contractual terms of the arrangement. 7 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) The Company has elected, as a practical expedient, to account for shipping and handling activities as fulfillment costs rather than as separate performance obligations. Because shipping, fulfillment, product handling, returns processing, and customer pricing adjustments are managed by the distributor, the Company does not separately recognize gross product sales revenue, shipping revenue, or related customer allowances associated with distributor sales activity. Revenue is reported net of applicable provisions for discounts, returns, and allowances. Under the current commission-based operating structure, customer returns, promotional programs, discounts, and pricing adjustments are administered by the distributor and do not materially impact the Company’s recognized commission revenue. The Company evaluates the need for reserves related to variable consideration based on known facts and contractual terms at each reporting date. For the three months ended March 31, 2026, the Company recognized approximately $ 18 thousand of commission revenue associated with sales activity under the Distribution Agreement, which is included in discontinued operations. The Company did not recognize revenue from continuing operations under its legacy manufacturing and direct-sales business model, as substantially all such operations were discontinued as of December 31, 2025, and historical results have been reclassified to discontinued operations for all periods presented. Customer Concentration Following the sale of substantially all manufacturing and operating assets and the transition to a capital-light distribution model, the Company earns revenue primarily from a single related party distribution partner pursuant to the Distribution Agreement entered into on December 31, 2025. Trea Grove LLC, a related party, serves as the primary distributor of Sow Good-branded products and is expected to represent substantially all of the Company’s revenue under the current operating structure. The Company may also sell remaining inventory independently from time to time. For the three months ended March 31, 2026, the Company recognized approximately $ 18 thousand of commission revenue associated with sales activity under the Distribution Agreement. Substantially all historical product sales and related operating activity have been classified within discontinued operations as a result of the Company’s restructuring and disposal of substantially all manufacturing operations. Supplier Concentration Following the sale of substantially all manufacturing and operating assets and the transition to a capital light sales through a distributor model, the Company earns revenue mainly from a single related party distribution partner pursuant to a long-term Distribution Agreement. Trea Grove LLC, a related party, is expected to be the Company’s primary distributor of Sow Good-branded products going forward. The Company may also sell inventory independently from time to time. Purchases from vendors relate primarily to corporate overhead, professional services, and other administrative costs. Amounts related to the Company’s former manufacturing and direct-sales business model have been reclassified to loss from discontinued operations for all periods presented. 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. There were no dilutive common shares for the periods ended March 31, 2026 and 2025 since the company was in a loss position for both periods. For the three months ended March 31, 2026 and 2025, the Company incurred net losses which cannot be diluted; therefore, basic and diluted loss per share of Common Stock is the same. Each share of Series AA Preferred Stock and Series AAA Preferred Stock is convertible into 0.93 and 16.67 shares of Common Stock, respectively, and are included in the table as if converted. As of March 31, 2026 and 2025, shares issuable which could potentially dilute future earnings were as follows: March 31, 2026 2025 Series AA Preferred Stock 1,017,333 - Series AAA Preferred Stock 6,289,850 - Shares excluded from the calculation of diluted loss per share 7,307,183 - Stock-Based Compensation The Company accounts for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation . Stock-based compensation for equity instruments issued to employees and non-employees is measured at fair value on the grant date and recognized as compensation expense over the requisite service period. 8 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) All transactions in which the consideration for goods or services is settled in equity instruments are accounted for based on the fair value of the equity instruments issued. The measurement date is the date at which the key terms and conditions of the award is reached. The Company accounts for forfeitures as they occur. When an award is forfeited prior to completion of the requisite service period, any previously recognized compensation cost related to the unvested portion of the award is reversed in the period of forfeiture. The fair value of service-based stock options is estimated using the Black-Scholes option-pricing model, with expected terms ranging from 2.3 to 7.3 years, determined based on either the weighted-average vesting period and contractual term or as calculated under the valuation model. The risk-free interest rate is based on U.S. Treasury securities with maturities commensurate with the expected term of the awards at the grant date. The Company uses a Monte Carlo simulation model to estimate the fair value of performance-based and market-based stock options. Stock option expense is recognized on a straight-line basis over the requisite service period or the implied service period, as applicable. Amortization of options granted to members of the Board of Directors is included in other general and administrative expense. Amortization of options granted to officers and employees is included in salaries and benefits. Stock-based compensation costs reversed in respect of forfeitures amounted to $ 134,860 for the three months ended March 31, 2026. Stock-based compensation expense related to the issuance of shares of common stock to members of the Board of Directors for their services was $ 137,500 and $ 230,000 for the three months ended March 31, 2026 and 2025, respectively, and is included in other general and administrative expense. Stock-based compensation expense related to the issuance of shares of common stock to advisors for their services was $ 465,100 and $ 0 for the three months ended March 31, 2026 and 2025, respectively, and is included in other general and administrative expense. 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 (“Topic 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. 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. In evaluating the exposures connected with these tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities. 9 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) 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. Recent Accounting Pronouncements 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 months ended March 31, 2026, have had or are expected to have a significant impact on the Company’s financial statements. Note 3 – Going Concern As of March 31, 2026 , the Company had an accumulated deficit of $ 105,573,470 and incurred net losses from continuing operations of $ 1,930,036 and net losses from discontinued operations of $ 559,717 for the three months ended March 31, 2026. The Company had $ 2,318,848 cash on hand and working capital deficit of $ 1,390,620 as of March 31, 2026. These conditions, combined with the Company’s history of operating losses, indicate that the Company may not have sufficient funds to sustain operations for the twelve months following the issuance of these financial statements. Accordingly, these factors raise substantial doubt about the Company’s ability to continue as a going concern. During December 2025, the Company completed the sale of substantially all manufacturing assets and transitioned to a commission-based, asset-light distribution model under a long-term Distribution Agreement. The transaction generated cash proceeds and significantly reduced the Company’s capital requirements and working capital needs by eliminating manufacturing operations and inventory ownership. While this transition is expected to lower ongoing operating and capital expenditures, the resulting reduction in cash requirements is not expected, by itself, to be sufficient to overcome the Company’s existing liquidity shortfall without additional capital contributions or debt financing. Management has implemented and continues to evaluate plans intended to improve the Company’s financial position and liquidity. These actions include the sale of manufacturing assets to a related party, ongoing strategic cost reductions and headcount rationalization, finalizing exits for leases associated with unused facilities, which were completed as of January 31, 2026, and pursuing additional capital-raising transactions. In addition, management is evaluating potential partnership arrangements and capital-raising transactions, including debt and/or equity financings and sales of shares under the Company’s at-the-market equity program. There can be no assurance that these plans will be successfully implemented or will generate sufficient liquidity to allow the Company to continue operations. The accompanying financial statements have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty. The financial statements do not include any adjustments relating to the recoverability or classification of recorded asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Note 4 – Discontinued Operations On December 30, 2025, the Company sold substantially all of its manufacturing and operating assets to its former Executive Chairman and former Chief Executive Officer and exited its legacy manufacturing and direct-sales business. In connection with this transaction, the Company entered into a long-term Distribution Agreement pursuant to which the Company now operates as a commission-based distribution agent and no longer manufactures products, owns significant inventory, or incurs costs related to product sourcing, production, warehousing, or distribution. The sale of substantially all manufacturing and operating assets and the related exit of the legacy business represent a strategic shift that has a major effect on the Company’s operations and financial results. Accordingly, the results of the former manufacturing and direct-sales business have been classified as discontinued operations for all periods presented. 10 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) The assets and liabilities of the discontinued operations were disposed of or otherwise derecognized as of March 31, 2026, and no assets or liabilities of discontinued operations remain on the Company’s consolidated balance sheet as of that date. Results of Discontinued Operations The following table presents components of discontinued operations, net of tax for the three months ended March 31, 2026 and 2025: For the Three Months Ended March 31, 2026 2025 Revenues $ 17,842 $ 2,476,922 Prior period discounts and refunds ( 15,225 ) - Net revenue 2,617 2,476,922 Cost of goods sold 17,960 1,374,198 Gross profit ( 15,343 ) 1,102,724 Operating expenses: General and administrative expenses: Other general and administrative expenses 623,889 1,931,514 Total general and administrative expenses 623,889 1,931,514 Total operating expenses 623,889 1,931,514 Net operating loss ( 639,232 ) ( 828,790 ) Other income (expense): Interest income - 26,710 Gain on termination of leases 80,697 - Loss on disposition of assets ( 1,182 ) - Total other income 79,515 26,710 Loss of discontinued operations before income tax ( 559,717 ) 802,080 Income tax provision - - Net loss $ ( 559,717 ) $ ( 802,080 ) Cash received $ 1,500,000 Liabilities assumed by Trea Grove LLC 635,380 Less: Assets sold: Assets held for sale ( 713,256 ) Construction in process - freeze dryers ( 2,768,908 ) Freeze dryers, net ( 6,744,473 ) Leasehold improvements, net ( 1,459,067 ) Other property plant and equipment, net ( 1,778,534 ) Accumulated depreciation 2,670,261 Net loss on disposition of assets ( 8,658,598 ) Severance expense ( 2,442,500 ) Deal costs ( 230,742 ) Loss on sale of assets $ ( 11,331,840 ) 11 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) Balance Sheet The asset and related liabilities related to the discontinued operations were disposed or derecognized prior to March 31, 2026, therefore the assets and liabilities for the year ended March 31, 2026 represent those of the ongoing operation. The following table represents the assets and liabilities from discontinued operations as of March 31, 2026 and December 31, 2025. March 31, December 31, 2026 2025 Assets of discontinued operation Accounts receivable, net $ - $ 60,333 Current assets of discontinued operation - 60,333 Total assets of discontinued operation $ - $ 60,333 March 31, 2026 December 31, 2025 Liabilities of discontinued operation Current portion of operating lease liabilities $ - $ 2,599,102 Total liabilities of discontinued operation $ - $ 2,599,102 Revenue Reclassification Revenue recognized in prior periods under the Company’s former manufacturing and direct-sales business model has been reclassified to discontinued operations for all periods presented as a result of the Company’s strategic restructuring and disposal of substantially all manufacturing operations. For the three months ended March 31, 2026, the Company recognized approximately $ 18 thousand of commission revenue associated with sales activity under the Distribution Agreement. Total revenues for the three months ended March 31, 2026 is $ 18 thousand, compared to $ 2.5 million for the three months ended March 31, 2025. The decrease reflects the Company’s transition from a direct manufacturing and sales model to a commission-based distribution arrangement following the completion of the restructuring in December 2025. Cost of goods sold for the three months ended March 31, 2026 was $ 18 thousand, compared to $ 1.4 million for the three months ended March 31, 2025, reflecting the cessation of manufacturing activity and the shift to a third-party distribution model. As a result, the Company recorded a gross loss of $ 15 thousand for the three months ended March 31, 2026, compared to gross profit of $ 1.1 million for the three months ended March 31, 2025. The change is primarily attributable to the disposal of substantially all manufacturing operations and the resulting transition to an asset-light, commission-based operating structure. Continuing Involvement Following the disposition, the Company’s continuing involvement with the former business is limited to our role as an agent who receives commissions from Trea Grove in their role as a Distributor under the Distribution Agreement. Note 5 – Related Party During the year ended March 31, 2026, the Company entered into a series of transactions with related parties in connection with a strategic restructuring of its operations and capitalization. Severance Payment to Related Party On December 31, 2025, the Company entered into a settlement agreement and general and mutual release (the “Officer Settlement Agreement”) with Ira Goldfarb, the Company’s former executive chairman. Pursuant to the terms of the Officer Settlement Agreement, Mr. Goldfarb was entitled to receive from the Company a cash settlement payment, upon the Stockholder Meeting, of $ 1,250,000 , less all applicable taxes and withholdings (the “Officer Settlement Payment”), in exchange for waiving his rights to contractual severance pursuant to his employment agreement. Payment of $ 1,250,000 was made to Mr. Goldfarb on January 5, 2026. On December 31, 2025, the Company entered into a settlement agreement and general and mutual release (the “Officer Settlement Agreement”) with Claudia Goldfarb, the Company’s former chief executive officer. Pursuant to the terms of the Officer Settlement Agreement, Mrs. Goldfarb is entitled to receive from the Company a cash settlement payment, upon the Stockholder Meeting, of $ 1,150,000 , less all applicable taxes and withholdings (the “Officer Settlement Payment”), in exchange for waiving her rights to contractual severance pursuant to her employment agreement. Mrs. Goldfarb continued to be employed by the Company as its Chief Operations Officer until March 31, 2026, after which she transitioned to a consulting arrangement. 12 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) Asset Sale to Related Party On December 30, 2025, the Company entered into an Asset Purchase Agreement with Trea Grove, LLC (“Trea Grove”), a related party, pursuant to which the Company sold a significant portion of the assets related to its freeze-dried snacks and candy business, including real property improvements, proprietary and intellectual property rights, transferable governmental licenses and permits, and other specified assets. Trea Grove also assumed certain specified liabilities. Total cash consideration for the transaction was $ 1,500,000 , payable in installments through March 31, 2026, the entire amount was recorded as a related party receivable at December 31, 2025. Subsequently, on January 5, 2026, $ 900,000 was netted from Mr. Goldfarb’s severance payment of $ 1,250,000 . During the quarter ended March 31, 2026 the Company received cash payments of $ 200,000 resulting in a receivable balance of $ 400,000 as of March 31, 2026. Distribution Agreement with Related Party On December 31, 2025, the Company entered into a Distribution Agreement with Trea Grove, LLC (“Trea Grove”), an entity owned by Ira Goldfarb and Claudia Goldfarb, pursuant to which Trea Grove was appointed the primary distributor of certain Company products, including fruits, snacks, and candy, through July 31, 2026, unless extended. Under the Distribution Agreement, Trea Grove is responsible for customer communications, order management, billing, collections, shipping, logistics, and fulfillment. Trea Grove will remit to the Company ten percent ( 10 %) of gross receipts from product sales. The agreement provides Trea Grove with a limited license to use the Company’s trademarks for distribution and marketing purposes. Based on the terms of this Distribution Agreement, the Company has determined that it acts as an agent for purposes of revenue recognition under ASC 606, as the Company does not control the underlying products prior to transfer to end customers, does not have primary responsibility for fulfillment, and does not bear inventory or credit risk. Accordingly, the Company recognizes revenues related to the Distribution Agreement with Trea Gove on a net basis equal to the commission to which it is entitled. Subsequently, on March 18, 2026, the Company amended the Distribution Agreement to allow Sow Good to sell inventory independently as long as Trea Grove remained as the sole distributor. Private Placement of Preferred Stock On December 31, 2025, the Company entered into a Securities Purchase Agreement with David Lazar pursuant to which the Company agreed to issue and sell, in a private placement, shares of Series AA Convertible Non-Redeemable Preferred Stock and Series AAA Convertible Non-Redeemable Preferred Stock in two closings for aggregate gross proceeds of $ 6,000,000 . The first closing consisted of the issuance and sale of 1,500,000 shares of Series AA Convertible Non-Redeemable Preferred Stock and occurred on December 31, 2025 for gross proceeds of $ 3,000,000 . Mr. Lazar was appointed Chief Executive Officer and Chairman of the Board in connection with the transaction. The second closing consisted of the issuance and sale of 1,500,000 shares of Series AAA Convertible Redeemable Preferred Stock and occurred on March 31, 2026 for gross proceeds of $ 3,000,000 . Mr Yisroel Goldberg was appointed Chief Executive Officer. Convertible Notes Held by Related Parties Amended During 2025, Claudia Goldfarb and Ira Goldfarb (the “Goldfarbs”) held Convertible Notes issued by the Company. In connection with the Securities Purchase Agreement executed on December 31, 2025, the Company and the Goldfarbs agreed to amend the conversion terms of the notes to provide for a conversion price of $ 0.35 per share, replacing prior conversion price ranges of approximately $ 0.62 to $ 0.63 per share. An aggregate principal amount of $ 1,404,914 of notes held by the Ira and Claudia Goldfarb will remain outstanding as a backstop for the Company’s operations (the “Backstop Loan”). The Backstop Loan remains a bona fide debt obligation of the Company and is not reduced or otherwise affected by operating losses, restructuring costs, or transaction expenses. During the second quarter of 2026, the Company and the Goldfarbs are required to determine, in good faith, what portion of the outstanding balance, if any, will be repaid in cash and what portion, if any, will convert into shares of common stock at the agreed conversion price of $ 0.35 per share. On February 12, 2026, the Goldfarbs exercised the option to convert $ 289,483 of the outstanding Convertible Notes to 55,140 shares. Use of Proceeds to Pay Related Party Debt and Settlement with an Officer A portion of the net proceeds from the Series AA Preferred Stock issuance was used to repay $ 943,868 of principal and $ 70,365 in interest outstanding under notes payable to Lyle Berman, a related party. A portion of the net proceeds from the Series AAA preferred stock issuance was used to repay $ 344,838 , including accrued interest, to Lyle Berman, a related party, on March 31, 2026. A portion of the net proceeds from the Series AAA preferred stock issuance was used to repay $ 128,515 of principal and $ 96,485 in interest outstanding under notes payable to Ira and Claudia Goldfarb, who are related parties. On December 31, 2025, the Company entered into a settlement agreement and mutual release with Ira Goldfarb, the Company’s former Executive Chairman, pursuant to which Mr. Goldfarb is entitled to receive a cash settlement payment of $ 1,250,000 , less applicable taxes and withholdings, upon the Company’s stockholder meeting, in exchange for waiving his contractual severance rights. Of this amount, $ 900,000 was retained by the Company and applied as Mr. Goldfarb’s down payment toward the purchase price of the manufacturing assets acquired by Trea Grove, LLC, an entity owned by Mr. Goldfarb. Mr. Goldfarb received the remaining $ 350,000 in cash. 13 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) Settlement Agreements with Directors On December 31, 2025, the Company entered into settlement agreements and mutual releases with Ira Goldfarb, Claudia Goldfarb, Lyle Berman, Jeff Rubin, Edward Shensky, Joe Mueller and Chris Ludeman, each former members of the Board of Directors, and such settlement agreements became effective in each case upon such director’s resignation. Voting Agreements On December 31, 2025, the Company entered into voting agreements with Ira Goldfarb, Claudia Goldfarb, and Lyle Berman, pursuant to which such parties agreed, for a two-year period, to vote their shares in favor of proposals recommended by the Company’s Board of Directors. All related-party transactions were approved and authorized by a special committee consisting of disinterested members of the Company’s Board of Directors. 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 $ 2,500,000 , maturing August 23, 2025 at an interest rate of 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 $ 2,563,890 , the aggregate principal amount of the Outstanding Notes, plus accrued and unpaid interest thereunder. In addition, the Company issued Convertible Notes of $ 239,928 at an interest rate of 6 %, for the repayment of the Notes which matured on April 8, 2025 . The combined $ 2,803,818 of 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 Notes 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. The entry into the Exchange Agreement, and the transactions contemplated therein, including entering into the Convertible Notes, was approved unanimously by the disinterested members of the Company’s board of directors, as well as the disinterested members of the Company’s audit committee, pursuant to the Company’s related party transaction policy. On December 31, 2025, as part of the Securities Purchase Agreement, Ira and Claudia Goldfarb’s Convertible Notes were amended to change the conversion price to $ 0.35 per share, and Mr. Berman was repaid $ 943,868 of principal and $ 70,365 in interest outstanding related to his Convertible Notes. The remaining outstanding balance of approximately $ 344,838 , including accrued quarterly interest, was repaid in full on March 31, 2026. Ira and Claudia Goldfarb converted 55,140 shares at a price of $ 0.35 per share on February 12, 2026. Common Stock Issued Common Stock Issued to Officers and Directors for Services On March 30, 2026, 26,876 shares were issued to each of Edward Shensky, David Natan and Jeffery Rubin for quarterly director compensation with a fair value of $ 12,500 . On January 15, 2026, the Company issued 9,259 shares of common stock to each of Lyle Berman and Ira Goldfarb for annual Director services to be rendered. The aggregate fair value of the common stock was $ 100,000 , based on the closing price of the Company’s common stock on the date of grant. The shares were expensed upon issuance. On August 1, 2025, the Company issued an aggregate 3,831 shares of common stock to Jeffery Rubin for annual Director services to be rendered. The aggregate fair value of the common stock was $ 50,000 , based on the closing price of the Company’s common stock on the date of grant. The shares were expensed upon issuance. On February 6, 2025, the Company issued an aggregate 5,496 shares of common stock amongst its four non-employee Directors and two advisory Directors for annual services to be rendered. The aggregate fair value of the common stock was $ 230,000 , based on the closing price of the Company’s common stock on the date of grant. The shares were expensed upon issuance. On June 5, 2025, the Board of Directors unanimously approved a revision to the annual compensation of Claudia Goldfarb, as Company’s Chief Executive Officer, and Ira Goldfarb, the Company’s former Executive Chairman, whereby Ms. Goldfarb and Mr. Goldfarb would receive approximately 28 % and 32 %, respectively, of their annual cash salary in shares of the Company’s common stock under the Sow Good 2024 Stock Incentive Plan in lieu of cash payments. The number of shares issued in each case is calculated with a stock price equal to the most recent closing price of the Company’s common stock, on June 4, 2025. Ms. Goldfarb received 11,157 shares valued at $ 128,869 . Mr. Goldfarb received 17,271 shares valued at $ 199,638 . Mrs. Goldfarb continues to be employed by the Company as its Chief Operations Officer. 14 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) On March 31, 2025, the Board of Directors unanimously approved a revision to the annual compensation of Claudia Goldfarb, the former Company’s Chief Executive Officer, and Ira Goldfarb, the Company’s former Executive Chairman, whereby Ms. Goldfarb and Mr. Goldfarb would receive approximately 28 % and 32 %, respectively, of their annual cash salary in shares of the Company’s common stock under the Sow Good 2024 Stock Incentive Plan in lieu of cash payments. The number of shares issued in each case is calculated with a stock price equal to the most recent closing price of the Company’s common stock, on March 31, 2025. Ms. Goldfarb received 3,894 shares valued at $ 160,000 . Mr. Goldfarb received 12,813 shares valued at $ 200,000 . Mrs. Goldfarb continues to be employed by the Company as its Chief Operations Officer. During the quarter ended March 31, 2026, the Company issued 23,894 shares to directors for director services rendered valued at $ 137,500 . In addition, the Company issued 66,667 shares to advisors for services rendered valued at $ 465,100 . Common Stock Options Awarded to Officers and Directors On June 3, 2025, the Company granted Donna Guy, Chief Financial Officer, options to purchase 500 shares of the Company’s stock at an exercise price of $ 0.77 per share. Options vest 60 % on the third anniversary of the grant, and 20 % on each anniversary thereafter. Related Party Balances The components of the related party balances are as follows: March 31, 2026 December 31, 2025 Asset Purchase Agreement balance with Trea Grove $ 400,000 $ 1,500,000 Tax withholdings receivable relating to Ira Goldfarb severance payment 351,514 151,471 Operating and employee related expenses paid on behalf of Trea Grove 206,834 - Total receivable balance, related parties 792,394 1,651,471 Distribution Agreement payable to Trea Grove ( 286,629 ) - Total payable balance, related parties ( 286,629 ) - Net receivable balance, related parties $ 505,764 $ 1,651,471 Note 6 – 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. 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. 15 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) 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 $ 2,500,000 , maturing August 23, 2025 at an interest rates of 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 $ 2,563,890 , the aggregate principal amount of the Outstanding Notes, plus accrued and unpaid interest thereunder. In addition, the Company issued Convertible Notes of $ 239,928 at an interest rate of 6 %, for the repayment of the Notes which matured on April 8, 2025 . 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 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. On December 31, 2025, a portion of the net proceeds from the preferred stock issuance was used to repay $943,868 of principal and $70,365 in interest outstanding under notes payable to Lyle Berman, a related party. The remaining outstanding balance of approximately $344,838, including accrued quarterly interest, was repaid in full on March 31, 2026. 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 balance sheet as of March 31, 2026 and December 31, 2025: March 31, 2026 December 31, 2025 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Liabilities Convertible notes payable, related parties, net of discounts 781,559 781,559 1,341,420 1,341,420 Notes payable 150,000 150,000 150,000 150,000 Total liabilities $ 931,559 931,559 $ 1,491,420 $ 1,491,420 Note 7 – Inventory Inventory On December 30 and December 31, 2025, the Company entered into an Asset Purchase Agreement and a Distribution Agreement, respectively. As a result of these transactions, the Company transitioned from operating as a manufacturer and omnichannel seller of freeze-dried candy to operating as a commission-based distribution agent, earning a fixed percentage of distributor gross receipts from sales of Sow Good-branded products. Pursuant to the Asset Purchase Agreement, the Company retained certain SKUs to market independently of the Distribution Agreement. 16 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) Inventory is stated at the lower of average cost or net realizable value, with cost determined using the first-in, first-out (“FIFO”) method. The Company evaluates inventory for potential obsolescence and excess quantities on a periodic basis. In connection with the exit of its manufacturing and omnichannel distribution business, the Company recorded an impairment and write-off of finished goods and work in process materials of $ 13,737,675 during the fourth quarter of 2025. The impaired inventory related entirely to the former manufacturing and direct-sales business. As of March 31, 2026 and December 31, 2025, the Company retained approximately $ 4,911 and $ 22,871 of inventory related to certain SKUs that were not transferred in the Asset Purchase Agreement, respectively. Inventory at respective period ends is as follows: March 31, 2026 December 31, 2025 Finished goods $ 4,911 $ 22,871 Total inventory from continuing operations 4,911 22,871 Total inventory from discontinuing operations - - Note 8 – Property and Equipment Following the sale of substantially all manufacturing and operating assets and the transition to a commission-based distribution model, the Company no longer owns manufacturing facilities, production equipment, or construction-in-progress assets. Property and equipment as of March 31, 2026 and December 31, 2025 consists primarily of office equipment and software. For the three months ended March 31, 2026 and the year ended December 31, 2025, substantially all depreciation expense related to assets of the former manufacturing and direct-sales business has been reclassified to loss from discontinued operations. Depreciation expense related to continuing operations, consisting primarily of office equipment and remaining corporate-use assets, was approximately $ 2,500 and $ 33,101 for the three months ended March 31, 2026 and the year ended December 31, 2025, respectively, and is included in depreciation and amortization expense within operating expenses. Depreciation related to disposed assets is included in net gain or loss on discontinued operations. Property and equipment at consist of the following at March 31, 2026 and December 31, 2025: March 31, 2026 December 31, 2025 Software $ 70,000 $ 70,000 70,000 70,000 Less: Accumulated depreciation and amortization ( 50,833 ) ( 48,333 ) Total property and equipment, net $ 19,167 $ 21,667 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 previously leased a 20,945 square foot facility under a non-cancelable real property lease agreement with an entity owned entirely by Ira Goldfarb, the Company’s former Executive Chairman. The lease required monthly base rent of $ 11,296 , subject to annual escalations of approximately 3 %, and included payment of property taxes, utilities, insurance, maintenance, and other occupancy costs. The lease expired on August 31, 2025 , and was not renewed. The incremental borrowing rate at commencement was 5.75 %. The lease was derecognized as of December 31, 2025, and as a result during the fourth quarter of 2025 the Company recognized a $ 120,773 gain upon exit of the lease. On May 22, 2024, the Company entered into an industrial lease with USCIF Pinnacle Building B LLC. The Company leased approximately 324,000 rentable square feet from the Lessor at 4024 Rock Quarry Road, Dallas, Texas for a term of approximately 62 months. The term of the lease commenced on May 22, 2024. The incremental borrowing rate for the lease at the time of commencement was 10.84 %. Effective December 31, 2025, the Company agreed with Pinnacle to exit the facility on January 31, 2026. As a result of reducing the lease term by 42 months, the Company reduced the related right-of-use asset by $ 10,397,922 and the lease liability by $ 11,829,536 , resulting in a noncash gain $ 1,427,649 , this amount is included in net gain or loss on discontinued operations. 17 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) On October 26, 2023, the Company entered into a lease agreement with Prologis, Inc., a Maryland corporation. The Company leased approximately 51,264 square feet in Dallas, Texas for an initial term of approximately five years and two months. The lease commenced on November 1, 2023. The base rent payments started at approximately $ 42,500 per month in the first year, and increase each year, up to approximately $ 51,700 per month during the last year of the initial term. Effective September 30, 2025, the Company agreed with Prologis to exit the lease as of September 31, 2025. As a result of reducing the lease term by 39 months, the company derecognized the related right-of-use asset $ 2,325,675 and the lease liability of $ 2,673,619 , resulting in a noncash gain of $ 347,853 , this amount is included in net gain or loss on discontinued operations. On July 1, 2023, the Company entered into a lease for a warehouse space in Irving, Texas, of approximately 9,000 feet under a 37 -month lease at a rate of $ 8,456 per month, with approximately a 4 % annual escalation of lease payments. The facility lease contains provisions requiring payment of property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise. The incremental borrowing rate for the lease at the time of commencement was 8 %. The lease expires July 31, 2026. this is the Company’s only remaining lease obligation. The components of lease expense were as follows: For the Three Months Ended March 31, 2026 2025 Right-of-Use lease cost: Amortization of right-of-use asset related to continuing operations $ 32,621 $ 1,116,304 Supplemental balance sheet information related to leases was as follows: March 31, 2026 December 31, 2025 Operating lease: Operating lease assets $ 44,350 $ 76,971 Current portion of operating lease liability $ 43,772 $ 78,171 Noncurrent operating lease liability related to discontinued operations - 346,861 Total operating lease liability $ 43,772 $ 425,032 Weighted average remaining lease term: Operating leases (in years) 0.3 0.6 Weighted average discount rate: Operating lease 8.04 % 8.00 % Supplemental cash flow and other information related to operating leases was as follows: For the Three Months Ended March, 31, 2026 2025 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used for operating leases - continuing operations $ 385,211 $ 445,727 Operating cash flows used for operating leases - discontinued operations - - The future minimum lease payments due under operating leases as of March 31, 2026 is as follows: Minimum Lease Fiscal Year Ending December 31, Commitments 2026 $ 46,948 Total $ 46,948 Less effects of discounting ( 3,176 ) Lease liability recognized $ 43,772 18 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 $ 2,500,000 , maturing August 23, 2025 and bearing interest at 8 % per annum. Pursuant to the Exchange Agreement, the holders exchanged their Outstanding Notes for new senior convertible promissory notes (the “Convertible Notes”) in an aggregate principal amount of $ 2,563,890 , representing the principal amount of the Outstanding Notes plus accrued and unpaid interest thereon. In addition, the Company issued Convertible Notes with an aggregate principal amount of $ 239,928 bearing interest at 6 % per annum in connection with notes that matured on April 8, 2025 . Convertible Notes were convertible, at the election of the holders, in whole or in part, into shares of the Company’s common stock at the fixed conversion prices specified in the applicable notes (ranging from $ 0.62 to $ 0.63 per share), subject to customary anti-dilution adjustments. The combined $ 2,803,818 of Convertible Notes mature on April 30, 2030 and accrue simple interest at rates ranging from 6 % to 8 % per annum, payable semi-annually in arrears on May 1 and November 1, beginning November 1, 2025. At the Company’s election, accrued and unpaid interest on an interest payment date may be added to the principal amount of the applicable Convertible Note in lieu of cash payment. The Convertible Notes are senior in right of payment to all existing and future indebtedness of the Company and are secured by a security interest in all existing and future assets of the Company. The Convertible Notes may be prepaid by the Company at any time upon ten days’ prior written notice. The entry into the Exchange Agreement and the transactions contemplated thereby, including the issuance of the Convertible Notes, were approved unanimously by the disinterested members of the Company’s board of directors and the disinterested members of the Company’s audit committee in accordance with the Company’s related-party transaction policy. Pursuant to Appendix C of the Securities Purchase Agreement entered into on December 31, 2025, $ 1,404,914 aggregate principal amount of notes held by the Goldfarbs will remain outstanding as a backstop for the Company’s operations (the “Backstop Loan”). The Backstop Loan will remain outstanding as a bona fide debt obligation of the Company and will not be reduced, impaired or otherwise affected by operating losses, restructuring costs or transaction expenses. During the second quarter of 2026, the Company and the Golfarbs will determine, in good faith, what portion of the outstanding Backstop Loan balance, if any, will be repaid in cash and what portion, if any, will convert into shares of the Company’s common stock at an agreed conversion price of $ 0.35 per share. On February 12, 2026, the Ira and Claudia exercised the option to convert $ 289,483 of the outstanding Convertible Notes to 55,140 shares. On December 31, 2025, a portion of the net proceeds from the preferred stock issuance was used to repay $ 943,868 of principal and $ 70,365 in interest outstanding under notes payable to Lyle Berman, a related party. The remaining outstanding balance of approximately $ 344,838 , including accrued quarterly interest, was repaid in full on March 31, 2026. Notes payable, related parties consists of the following at March 31, 2026 and December 31, 2025, respectively: March 31, 2026 December 31, 2025 Convertible Notes payable, bearing interest at 8 % per annum, maturing on April 30, 2030 $ 897,041 $ 1,620,022 Convertible Notes payable, bearing interest at 6 % per annum, maturing on April 30, 2030 206,834 239,928 Total notes payable, related parties 1,103,875 1,859,950 Less unamortized debt discounts: 445,706 518,530 Notes payable 658,169 1,341,420 Less current maturities ( 658,169 ) ( 1,341,420 ) Notes payable, related parties, less current maturities $ - $ - 19 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) Note 11 – Notes Payable Notes payable consists of the following at March 31, 2026 and December 31, 2025, respectively: March 31, 2026 December 31, 2025 Notes payable, bearing interest of 6 % per annum, matured April 8, 2025 $ - $ - EIDL Note 150,000 150,000 Total notes payable 150,000 150,000 Less unamortized debt discounts: - - Notes payable 150,000 150,000 Less: current maturities - - Notes payable, less current maturities $ 150,000 $ 150,000 The Company used proceeds from the sale of manufacturing assets to pay down certain notes payable. Interest related to notes payable which were paid down as part of the sale of assets and discontinued operations were reclassified to loss from discontinued operations. Interest expenses related to notes payable, related parties, which were retained as part of the continued operations of the company for the three months ended March 31, 2026 and 2025, are as follows: For the Year Ended March 31, 2026 2025 Interest on notes payable, related parties $ - $ 50,000 Amortization of debt discounts on notes payable, related parties - 116,617 Interest on notes payable 47,984 3,589 Amortization of debt discounts on notes payable 195,610 12,370 Total interest expense $ 243,594 $ 182,576 Note 12 – Stockholders ’ Equity Preferred Stock The Company has 20,000,000 authorized shares of $ 0.001 par value preferred stock. The Company is authorized to issue shares of preferred stock, par value $ 0.001 per share, in one or more series, with such rights, preferences, privileges and restrictions as may be determined by the Company’s Board of Directors. On December 31, 2025, in connection with a Securities Purchase Agreement with an investor, the Company filed a Certificate of Designations, Preferences and Rights creating 1,500,000 shares of Series AA Convertible Non-Redeemable Preferred Stock (the “Series AA Preferred Stock”) and issued 1,500,000 shares of Series AA Preferred Stock at a stated value of $ 2.00 per share for aggregate gross proceeds of $ 3,000,000 . A second closing for the issuance of 1,500,000 shares of Series AAA Convertible Redeemable Preferred Stock (the “Series AAA Preferred Stock” and together with the Series AA Preferred Stock, the “Preferred Stock”) at a stated value of $ 2.00 per share for aggregate gross proceeds of $ 3,000,000 occurred on March 31, 2026. The terms of the Series AAA Preferred Stock are substantially similar to those of the Series AA Preferred Stock, except that (i) each share of Series AAA Preferred Stock is initially convertible into a greater number of shares of common stock (ii) the Series AAA Preferred Stock are redeemable, and (iii) there is an ownership limitation upon conversion. The Preferred Stock ranks senior to the Company’s common stock and any junior securities with respect to dividends and distributions upon liquidation, dissolution or winding up of the Company, and on parity with any series of preferred stock expressly designated as ranking on parity with the Preferred Stock. The Preferred Stock does not bear a stated dividend rate. However, if the Company declares a dividend on its common stock, holders of Preferred Stock are entitled to receive dividends on an as-converted basis in the same form and manner as holders of common stock. Subject to receipt of stockholder approvals and the filing of an amendment to the Company’s certificate of incorporation, each share of Series AA Preferred Stock is initially convertible, at the option of the holder, into 14 shares of common stock, and each share of Series AAA Preferred Stock is initially convertible into 250 shares of common stock, subject to customary anti-dilution adjustments for stock splits, stock dividends, combinations, and similar events. On May 31, 2026, upon the issuance of the Series AAA Preferred Stock, holders of 1,122,609 shares of the Series AAA Preferred Stock converted their shares into 280,652,250 shares of common stock (or 18,710,150 shares of common stock after giving effect to the 15-to-1 reverse stock split). On the same date, Mr. David Lazar converted 410,000 shares of Series AA Preferred Stock into 5,740,000 shares of common stock (or 382,666 shares of common stock after giving effect to the 15-to-1 reverse stock split). 20 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) In the event of a liquidation, dissolution or winding up of the Company, holders of Preferred Stock are entitled to receive, prior and in preference to any distributions to holders of common stock, an amount per share equal to the greater of (i) the stated value of $ 2.00 per share plus any declared but unpaid dividends or (ii) the amount per share that would have been payable had such shares been converted into common stock immediately prior to such event. The Preferred Stock generally has no voting rights, except as required by Delaware law and for certain protective provisions requiring the consent of holders of a majority of the applicable series of the outstanding Preferred Stock. The Company has 20,000,000 authorized shares of $ 0.001 par value preferred stock. On December 31, 2025, the Company issued 1,500,000 shares of Series AA Convertible Non-Redeemable Preferred Stock pursuant to the Securities Purchase Agreement for gross proceeds of $ 3,000,000 . During the three months ended March 31, 2026, the Company issued 1,500,000 shares of Series AAA Convertible Non-Redeemable Preferred Stock for gross proceeds of $ 2,999,990 . During the period ended March 31, 2026, 410,000 shares of Series AA Convertible Non-Redeemable Preferred Stock were converted into 382,667 shares of Common Stock. During the period ended March 31, 2026, 1,122,609 shares of Series AAA Convertible Non-Redeemable Preferred Stock were converted into 18,776,817 shares of Common Stock. As of March 31, 2026 and December 31, 2025, 1,090,000 and 1,500,000 shares of Series AA Preferred Stock were issued and outstanding, respectively. As of March 31, 2026 and December 31, 2025, 377,391 and 0 shares of Series AAA Preferred Stock were issued and outstanding, respectively. Common Stock Sold for Cash On December 31, 2024, Ira and Claudia Goldfarb purchased 825 shares of common stock jointly, at a share price of $ 30.75 pursuant to a Stock Purchase Agreement. 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 March 31, 2026, 888,591 shares of our common stock have been issued under the at-the-market program. On May 2, 2024, the Company priced its registered underwritten public offering of 80,000 shares of the Company’s common stock, par value $ 0.001 at a price of $ 150.00 per share. In addition, the Company granted the underwriters a 30 -day overallotment option to purchase up to 12,000 additional shares of common stock and issued to the underwriters warrants to purchase 8,000 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 March 28, 2024, the Company raised $ 3,738,000 of capital from the sale of 34,373 newly issued shares of common stock at a share price of $ 108.75 in a private placement exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof. A total of 10,580 of these shares, or proceeds of $ 1,150,500 were purchased by officers, directors, and related parties. 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 28 % and 32 %, respectively, of their annual cash salary in shares of the Company’s common stock under the Sow Good 2024 Stock Incentive Plan in lieu of cash payments. The number of shares issued in each case is calculated with a stock price equal to the most recent closing price of the Company’s common stock, on June 4, 2025. Ms. Goldfarb received 11,157 shares valued at $ 128,869 . Mr. Goldfarb received 13,213 shares valued at $ 199,638 . 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 28 % and 32 %, respectively, of their annual cash salary in shares of the Company’s common stock under the Sow Good 2024 Stock Incentive Plan in lieu of cash payments. The number of shares issued in each case is calculated with a stock price equal to the most recent closing price of the Company’s common stock, on March 31, 2025. Ms. Goldfarb received 10,561 shares valued at $ 160,000 . Mr. Goldfarb received 13,213 shares valued at $ 200,000 . 21 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) Common Stock Issued to Directors for Services On March 30, 2026, 26,876 shares were issued to each of Edward Shensky, David Natan and Jeffery Rubin for quarterly director compensation with a fair value of $ 12,500 . On January 15, 2026, the Company issued 9,259 shares of common stock to each of Lyle Berman and Ira Goldfarb for annual Director services to be rendered. The aggregate fair value of the common stock was $ 100,000 , based on the closing price of the Company’s common stock on the date of grant. The shares were expensed upon issuance. On August 1, 2025, the Company issued an aggregate 4,308 shares of common stock to Jeffery Rubin for annual Director services to be rendered. The aggregate fair value of the common stock was $ 57,471 , based on the closing price of the Company’s common stock on the date of grant. The shares were expensed upon issuance. On February 6, 2025, the Company issued an aggregate 5,496 shares of common stock amongst its four non-employee Directors and two advisory Directors for annual services to be rendered. The aggregate fair value of the common stock was $ 230,000 , based on the closing price of the Company’s common stock on the date of grant. The shares were expensed upon issuance. Sow Good Inc. Reverse Stock Split On April 17, 2026, the board of directors of Sow Good Inc. determined to effect a reverse stock split of the Company’s common stock at a ratio of 1-for-15 (the “Reverse Stock Split”) and approved an amendment to the Company’s Certificate of Incorporation to effect the Reverse Stock Split. The impact of the reverse split was retroactively applied to all periods presented in the financial statements unless stated otherwise. Effective April 23, 2026, the Company amended its Certificate of Incorporation to implement the Reverse Stock Split. The Company’s common stock began trading on a split-adjusted basis when the market opened on April 24, 2026 (the “Effective Date”). As a result of the Reverse Stock Split on the Effective Date, every 15 shares of common stock then issued and outstanding automatically were combined into one share of common stock, with no change in par value per share. No fractional shares were issued in connection with the Reverse Stock Split, and shareholders who otherwise would have been entitled to receive fractional shares received cash payments in lieu thereof. The Reverse Stock Split reduced the number of shares of common stock outstanding from approximately 300.8 million shares to approximately 20.05 million shares. The Reverse Stock Split was implemented for the purpose of regaining compliance with Nasdaq’s minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2). 22 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) Note 13 – Options During the three months ended March 31, 2026, all outstanding options were forfeited and the Company recorded an expense reversal in the amount of $ 134,860 . There were no outstanding options at March 31, 2026. Note 14 – Warrants Outstanding Warrants Warrants to purchase an aggregate total of 12,700 shares of common stock at a weighted average strike price of $ 9.80 , exercisable over a weighted average life of approximately 5 years, were outstanding as of March 31, 2026. These warrants had no intrinsic value as of March 31, 2026. No warrants were granted, exercised, cancelled, or expired during the three months ended March 31, 2026. Note 15 – Segment Reporting The Company operates as one reportable segment, reflecting its capital-light business model under which it earns proceeds from the sale of freeze-dried candy products. The Chief Operating Decision Maker (“CODM”), the Company’s Chief Executive Officer , evaluates performance and allocates resources based on the consolidated Statement of Operations. The CODM does not review asset-level information in assessing segment performance; accordingly, such information is not presented. The accounting policies for this segment are consistent with those described in Note 2 – Summary of Significant Accounting Policies. On December 30, 2025, the Company sold substantially all of its manufacturing assets to Trea Grove, a related party. In connection with this transaction, the Company entered into a Distribution Agreement under which Trea Grove serves as the primary distributor of the Company’s finished goods inventory, and the Company receives 10 % of gross receipts from customer sales. Following these transactions, the Company continues to operate as a single reportable segment. As a result, the Company no longer operates manufacturing facilities and has transitioned to a capital-light model for the term of the Distribution Agreement. The results of the former manufacturing and omnichannel sales operations have been reclassified to net income (loss) from discontinued operations in the consolidated Statement of Operations for all periods presented. The segment information presented below reflects only continuing operations. The following table provides the operating financial results of our freeze-dried candy segment for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, 2026 2025 Salaries and benefits $ 295,592 806,783 Professional services 1,125,140 192,323 Other general and administrative expenses 263,210 578,708 Depreciation and amortization 2,500 8,584 Interest expense, net 243,594 182,576 Segment net income (loss) $ ( 1,930,036 ) $ ( 1,768,974 ) 23 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) Note 16 - Earnings Per Share Basic and diluted earnings per share for the three months ended March 31, 2026 and 2025: Period Ended March 31, 2026 2025 Net loss from continuing operations $ ( 1,930,036 ) $ ( 1,768,974 ) Loss of discontinued operations, net of tax ( 559,717 ) ( 802,080 ) Net loss $ ( 2,489,753 ) $ ( 2,571,054 ) Basic weighted average shares 20,120,117 756,611 Basic and dilutive loss per share - continuing operations $ ( 0.10 ) $ ( 2.34 ) Basic and dilutive income (loss) per share - discontinued operations $ ( 0.03 ) $ ( 1.06 ) The table below includes information related to stock options and warrants that were outstanding at the end the three months ended March 31, 2026 and 2025 . There were 120,146 shares underlying senior convertible notes payable exerciseable at the option of the holder in whole or in part at any time prior to maturity on April 30, 2030 at the end of the three month period ended March 31, 2026. For periods in which the Company incurred a net loss, these amounts are not included in weighted average dilutive shares because their impact would be anti-dilutive. Year Ended March 31, 2026 2025 Weighted average stock options 1,802,184 2,646,484 Weighted average price of exercisable stock options $ 7.02 $ 20.11 Weighted average warrants 190,500 190,500 Weighted average price of warrants $ 9.08 $ 9.80 Average price of common stock $ 7.83 $ 2.13 Note 17 – Income Taxes The Company recognized income $0 and $0 of tax expense in the periods ended March 31, 2026 and 2025, respectively. The Company’s effective tax rates for the three months ended March 31, 2026 and 2025 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. 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 March 31, 2026 was appropriate. 24 SOW GOOD INC. Notes to Condensed Financial Statements (Unaudited) 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. Subsequent to March 31, 2026, the Company evaluated various financing alternatives in connection with its proposed strategic expansion into the critical minerals and battery materials sector, including potential equity-based financing transactions, private placements, and other capital raising initiatives to fund the development and advancement of the Nachu Graphite Project in Tanzania and related corporate initiatives. Such potential financing structures may include the issuance of common stock, preferred stock, convertible securities, warrants, or other equity-linked instruments, whether issued in one or more tranches and with or without registration rights. Nachu Graphite Project – Tanzania On April 29, 2026, the Company issued a press release announcing its proposed acquisition and development of the Nachu Graphite Project located in Tanzania. The Company disclosed that the Nachu Graphite Project is an advanced-stage graphite development asset intended to support the Company’s strategic expansion into the critical minerals and battery anode materials sector. The Company further disclosed that the proposed transaction remains subject to the execution of definitive agreements, completion of due diligence, receipt of regulatory approvals, financing arrangements and other customary closing conditions. As of the filing date of these financial statements, the proposed acquisition had not been consummated and no amounts related to the proposed transaction had been recorded in the accompanying financial statements. Sagol Advisors Credit Facility On May 5, 2026, the Company issued a press release announcing that it had entered into a non-convertible private placement credit facility with Sagol Advisors providing for borrowings of up to $ 20 million (the “Sagol Credit Facility”). The Company disclosed that the Sagol Credit Facility does not contain any conversion features, warrants or other equity participation rights. The Company further disclosed that proceeds from the Sagol Credit Facility are intended to support the proposed acquisition and development of the Nachu Graphite Project and the Company’s broader strategic expansion into the critical minerals sector. The Company disclosed the Sagol Credit Facility in a Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2026. As of the filing date of these financial statements, no amounts had been drawn under the Sagol Credit Facility. 25