What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-14 · 1104 added, 793 removed, 304 unchanged (86% of the section changed)

2 unchanged sentences

CONDENSED BALANCE SHEETS

September 30,

Current assets:

Cash and cash equivalents

$ 2,096,672  

$ 276,464  

Accounts receivable, net

1,388,630  

191,022  

Prepaid expenses

148,452  

137,692  

2,240,670  

1,972,879  

Total current assets

5,874,424  

2,578,057  

Property and equipment:

Construction in progress

721,563  

2,487,673  

Property and equipment

6,147,965  

3,055,579  

Less accumulated depreciation

( 814,349 )  

Total property and equipment, net

6,055,179  

5,034,995  

Security deposit

36,309  

24,000  

Right-of-use asset

1,551,252  

1,261,525  

$ 13,517,164  

$ 8,898,577  

LIABILITIES AND STOCKHOLDERS' EQUITY

1 unchanged sentence

Accounts payable

$ 709,697  

$ 452,606  

Accrued interest

646,382  

226,575  

Accrued expenses

283,723  

158,453  

Current portion of operating lease liabilities

Current maturities of notes payable, related parties,

net of $ 699,297 of debt discounts at June 30, 2023

Current maturities of notes payable,

net of $ 306,498 of debt discounts at June 30, 2023

165,869  

52,543  

Current maturities of notes payable, related parties, net of $ 261,996 of debt discounts as of September 30, 2023

638,004  

Current maturities of notes payable, net of $ 114,959 of debt discounts as of September 30, 2023

285,041  

Total current liabilities

2,728,716  

890,177  

Operating lease liabilities

Notes payable, related parties,

net of $ 3,027,998 and $ 2,692,757 of debt discounts at June 30, 2023 and December 31, 2022, respectively

Notes payable, net of $ 262,705

and $ 336,085 of debt discounts at June 30, 2023 and December 31, 2022, respectively

1,493,001  

1,301,355  

Notes payable, related parties, net of $ 1,851,118 and $ 2,692,757 of debt discounts as of September 30, 2023 and December 31, 2022, respectively

5,843,882  

3,502,243  

Notes payable, net of $ 148,421 and $ 336,085 of debt discounts as of September 30, 2023 and December 31, 2022, respectively

581,579  

393,915  

Total liabilities

10,647,178  

6,087,690  

Commitments and contingencies

Stockholders' equity:

Preferred stock, $ 0.001 par value, 20,000,000 shares

authorized, no shares issued and outstanding

Common stock, $ 0.001 par value,

500,000,000 shares authorized, 4,868,083 shares issued and outstanding

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

Common stock, $ 0.001 par value, 500,000,000 shares authorized, 5,603,083 and 4,847,384 shares issued and outstanding as of September 30, 2023 and December 31, 2022

Additional paid-in capital

62,933,052  

58,485,602  

Accumulated deficit

( 60,401,992 )

( 60,068,008 )  

( 55,679,562 )

Total stockholders' equity

2,869,986  

2,810,887  

Total liabilities and stockholders' equity

$ 13,517,164  

$ 8,898,577  

See accompanying notes to unaudited condensed financial statements.

1 unchanged sentence

CONDENSED STATEMENTS OF OPERATIONS

For the Three Months

For the Six Months

Ended June 30,

For the Three Months Ended

For the Nine Months Ended

September 30,

$ 5,034,203  

$ 87,741  

$ 6,548,479  

$ 381,056  

Cost of goods sold

Gross profit (loss)

( 1,380,473 )

( 1,258,223 )

2,717,254  

65,195  

5,046,434  

263,289  

2,316,949  

22,546  

1,502,045  

117,767  

Operating expenses:

1 unchanged sentence

Salaries and benefits

1,262,332  

788,450  

2,644,087  

2,947,505  

Professional services

294,720  

61,209  

404,256  

177,197  

Other general and administrative expenses

350,082  

403,429  

1,265,056  

1,296,294  

Total general and administrative expenses

1,907,134  

1,253,088  

4,313,399  

4,420,996  

Depreciation and amortization

72,190  

69,127  

227,606  

202,046  

Total operating expenses

Net operating loss

( 2,473,391 )

( 1,757,337 )

( 3,376,585 )

1,979,324  

1,322,215  

4,541,005  

4,623,042  

Net operating income (loss)

337,625  

( 1,299,669 )  

( 3,038,960 )  

( 4,505,275 )

Other expense:

Interest expense, including $ 684,144 and $ 1,054,822 of warrants issued as a debt discount for the three and six months ending June 30, 2023, and $ 262,074 and $ 321,798 for the three and six months ending June 30, 2022, respectively

( 1,345,845 )

Interest expense

( 3,641 )  

( 383,995 )  

( 1,349,486 )  

Gain on disposal of property and equipment

36,392  

Total other expense

( 1,345,845 )

$ ( 3,320,900 )

$ ( 2,112,789 )

$ ( 4,722,430 )

( 3,641 )  

( 347,603 )  

( 1,349,486 )  

Net income (loss)

$ 333,984  

$ ( 1,647,272 )  

$ ( 4,388,446 )  

$ ( 5,312,123 )

Weighted average common shares outstanding - basic and diluted

Net loss per common share - basic and diluted

Weighted average common shares outstanding - basic

5,123,735  

4,845,851  

4,942,182  

4,831,346  

Net income (loss) per common share - basic

$ 0.07  

$ ( 0.34 )  

$ ( 0.89 )  

Weighted average common shares outstanding - diluted

8,066,577  

4,845,851  

4,942,182  

4,831,346  

Net income (loss) per common share - diluted

$ 0.04  

$ ( 0.34 )  

$ ( 0.89 )  

See accompanying notes to unaudited condensed financial statements.

1 unchanged sentence

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Three Months Ended

June 30, 2023

For the Three Months Ended September 30, 2023

Stockholders'

Balance, March 31, 2023

$ ( 57,081,092 )

Common stock issued to officers and directors for services

Common stock warrants granted to

related parties pursuant to debt financing

Common stock warrants granted to

note holders pursuant to debt financing

Common stock options granted to officers

and directors for services

Common stock options granted to employees

and advisors for services

Net loss for the three months ended

June 30, 2023

( 3,320,900 )

Balance, June 30, 2023

4,868,083  

$ 4,868  

$ 59,117,367  

$ ( 60,401,992 )  

$ ( 1,279,757 )

For the Three Months Ended

June 30, 2022

Common stock issued in private placement offering

735,000  

3,674,926  

3,675,000  

Common stock options granted to officers and directors for services

106,215  

Common stock options granted to employees and advisors for services

34,544  

Net loss for the three months ended September 30, 2023

333,984  

Balance, September 30, 2023

5,603,083  

$ 4,942  

$ 62,933,052  

$ ( 60,068,008 )  

$ 2,869,986  

For the Three Months Ended September 30, 2022

Stockholders'

Balance, March 31, 2022

$ ( 45,104,556 )

Balance, June 30, 2022

4,840,974  

$ 4,841  

$ 57,637,706  

$ ( 47,217,345 )  

$ 10,425,202  

Common stock warrants granted to related parties pursuant to debt financing

Common stock warrants granted to note holders pursuant to debt financing

364,512  

Common stock issued to officers and directors for services

Common stock issued to advisory board for services

24,994  

25,000  

Common stock options granted to officers and directors for services

113,166  

Common stock options granted to employees and advisors for services

Net loss for the three months ended June 30, 2022

( 2,112,789 )

Balance, June 30, 2022

17,702  

Net loss for the three months ended September 30, 2022

( 1,647,272 )  

Balance, September 30, 2022

4,847,384  

$ 4,847  

$ 58,158,080  

$ ( 48,864,617 )  

$ 9,298,310  

SOW GOOD INC.

STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

For the Six Months Ended

June 30, 2023

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Nine Months Ended September 30, 2023

Stockholders'

Balance, December 31, 2022

$ ( 55,679,562 )

Common stock issued to officers and

directors for services

Common stock warrants granted to

related parties pursuant to debt financing

Common stock warrants granted to

note holders pursuant to debt financing

Common stock options granted to officers

and directors for services

Common stock options granted to employees

and advisors for services

Net loss for the six months ended

June 30, 2023

( 4,722,430 )

Balance, June 30, 2023

4,847,384  

$ 4,847  

$ 58,485,602  

$ ( 55,679,562 )  

$ 2,810,887  

Common stock issued in private placement offering

735,000  

3,674,926  

3,675,000  

Common stock issued to officers and directors for services

20,699  

125,208  

125,229  

Common stock warrants granted to related parties pursuant to debt financing

197,198  

Common stock warrants granted to note holders pursuant to debt financing

50,682  

Common stock options granted to officers and directors for services

330,922  

Common stock options granted to employees and advisors for services

68,514  

Net loss for the nine months ended September 30, 2023

( 4,388,446 )  

For the Six Months Ended

June 30, 2022

Balance, September 30, 2023

5,603,083  

$ 4,942  

$ 62,933,052  

$ ( 60,068,008 )  

$ 2,869,986  

For the Nine Months Ended September 30, 2022

Stockholders'

Balance, December 31, 2021

$ ( 43,552,494 )

4,809,070  

$ 4,809  

$ 54,342,027  

$ 26,066  

$ ( 43,552,494 )  

$ 10,820,408  

Common stock warrants granted to related parties pursuant to debt financing

2,614,196  

Common stock warrants granted to note holders pursuant to debt financing

444,330  

Common stock issued to officers and directors for services

26,059  

76,038  

( 26,066 )  

49,998  

Common stock issued to advisory board for services

12,255  

29,988  

30,000  

Common stock options granted to officers and directors for services

530,908  

Common stock options granted to employees and advisors for services

Net loss for the six months ended June 30, 2022

( 3,664,851 )

Balance, June 30, 2022

120,593  

Net loss for the nine months ended September 30, 2022

( 5,312,123 )  

Balance, September 30, 2022

4,847,384  

$ 4,847  

$ 58,158,080  

$ ( 48,864,617 )  

$ 9,298,310  

See accompanying notes to unaudited condensed financial statements.

1 unchanged sentence

CONDENSED STATEMENTS OF CASH FLOWS

For the Six Months

Ended June 30,

For the Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

$ ( 4,722,430 )

$ ( 4,388,446 )  

$ ( 5,312,123 )

Adjustments to reconcile net loss to net cash used in operating activities:

Bad debts expense

Depreciation and amortization

306,092  

223,887  

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

15,245  

16,816  

Gain on disposal of property and equipment

Impairment of obsolete inventory

2,075,080  

129,162  

Common stock issued to officers and directors for services

125,229  

49,998  

Common stock awarded to advisors and consultants for services

30,000  

Amortization of stock options

399,436  

651,501  

Amortization of stock warrants issued as a debt discount

900,228  

607,320  

Decrease (increase) in current assets:

Accounts receivable

( 1,197,608 )  

Prepaid expenses

( 10,760 )  

( 2,342,871 )  

Security deposits

Right-of-use asset

( 12,309 )  

Increase (decrease) in current liabilities:

Accounts payable

257,091  

208,486  

Accrued interest

419,807  

Accrued expenses

Lease liabilities

125,270  

124,929  

Net cash used in operating activities

( 2,421,260 )

( 3,328,516 )  

( 4,149,046 )

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds received from disposal of property and equipment

63,957  

Purchase of property and equipment

( 1,326,276 )  

Cash paid for construction in progress

2 unchanged sentences

Net cash used in investing activities

( 1,326,276 )  

( 2,272,066 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from the issuance of common stock

3,675,000  

Proceeds received from notes payable, related parties

2,400,000  

3,870,000  

Proceeds received from notes payable

400,000  

580,000  

Net cash provided by financing activities

6,475,000  

4,450,000  

NET CHANGE IN CASH AND CASH EQUIVALENTS

1,820,208  

( 1,971,112 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

276,464  

3,345,928  

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$ 2,096,672  

$ 1,374,816  

SUPPLEMENTAL INFORMATION:

Interest paid

$ 27,878  

$ 134,444  

Income taxes paid

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Reclassification of construction in progress to property and equipment

$ 1,766,110  

Value of debt discounts attributable to warrants

$ 247,880  

$ 3,058,526  

See accompanying notes to unaudited condensed financial statements.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 1 – Organization and Nature of Business

Effective January 21, 2021, we changed our name

from Black Ridge Oil & Gas, Inc.

to Sow Good Inc.

(“SOWG,” “Sow Good,” or the “Company”) to pursue

the freeze dried fruits and vegetables business as acquired with our October 1, 2020 acquisition of S-FDF, LLC.

Our common stock is traded

on the OTCQB under the trading symbol “SOWG”.

At that time, o ur common stock

started to be quoted on the OTCQB under the trading symbol “SOWG”, from the former trading symbol “ANFC”.

to April 2, 2012, the Company name was Ante5, Inc., which became an independent company in April 2010.

We became a publicly traded company

when our shares began trading on July 1, 2010.

From October 2010 through August 2019, we had been engaged in the business of acquiring

oil and gas leases and participating in the drilling of wells in the Bakken and Three Forks trends in North Dakota and Montana and/or

managing similar assets for third parties.

On October 1, 2020, the

Company completed its acquisition of S-FDF, LLC pursuant to an Asset Purchase Agreement.

In connection with the closing of the Asset Purchase

Agreement, the Company acquired approximately $2.2 million in cash and certain assets and agreements related to the Seller’s

freeze-dried fruits and vegetables business for human consumption and entered into certain employment and registration rights agreements.

On February 5, 2021,

the Company raised over $ 2.5 million of capital from the sale of 631,250 newly issued shares at a share price of $ 4.00 in a private placement.

The proceeds were used to find capital expenditures and working capital investment.

On May 5, 2021, the Company

announced the launch of our direct-to-consumer freeze-dried consumer packaged goods (CPG) food brand, Sow Good.

Sow Good launched with

its first line of non-GMO products including 6 ready-to-make smoothies and 9 snacks.

On July 7, 2021,

the Company raised over $ 3

million of capital from the sale of 714,701

newly issued shares at a share price of $ 4.25

in a private placement.

Investors in the private placement included Sow Good’s Chief Executive Officer, Executive Chairman,

and Chief Financial Officer, in addition to other Sow Good board members and a small group of accredited investors.

were used to invest in inventory ahead of pursuing larger business-to-business relationships, as well as funding incremental capital

expenditures and general operating expenses.

On July 23, 2021, we

launched six new gluten-free granola products under the Sow Good brand.

Sow Good’s granola products are made with health-conscious

ingredients such as freeze-dried fruit, almonds, hemp hearts, and coconut oil.

On December 31, 2021,

we sold an aggregate $ 2,075,000 of promissory notes and warrants to purchase an aggregate 311,250 shares of common stock to related parties,

representing 15,000 warrant shares per $ 100,000 of promissory notes.

The warrants are exercisable at a price of $ 2.21 per share over a

ten-year term.

The proceeds were used for working capital investment and to ramp up our freeze-dried consumer packaged goods business.

April 8, 2022, we sold an aggregate $ 3,700,000 of promissory notes and warrants to purchase an aggregate 925,000 shares of common

stock, including $ 3,120,000 and warrants to purchase an aggregate 780,000 shares of common stock, to related parties .

The warrants are exercisable at a price of $ 2.35 per share over a ten-year term.

These proceeds were used for working capital investment

and to ramp up our freeze dried consumer packaged goods business.

SOW GOOD INC.

Notes to Condensed

Financial Statements

On August 23, 2022, we

closed on an offering to sell up to $ 2,500,000 of promissory notes and warrants to purchase an aggregate 625,000 shares of the Company’s

common stock, exercisable over a ten-year period at a price of $ 2.60 per share, representing 25,000 warrant shares per $100,000 of Notes

The notes mature on August 23, 2025 .

Interest on the notes accrue at a rate of 8 % per annum, payable on January 1, 2025.

Loans may be advanced to the Company from time to time from August 23, 2022 to the Maturity Date.

On various dates from September 29,

2022 through March 7, 2023, the Company received aggregate proceeds of $ 2,250,000 from two of the Company’s Directors on the

sale of these notes and warrants.

In the first quarter

of 2023, the Company launched a freeze-dried candy product line with a 9-SKU offering that is projected to continue being a major driver

And, in the second quarter of 2023, we completed the construction of our second and third freeze driers to facilitate the increased

production demands for our recently launched candy products.

Furthermore, the significant and rising demand for our freeze-dried candy

products has led us to begin construction of our fourth and fifth freeze drier, which we expect to be completed in the first quarter of

April 25, 2023 and May 11, 2023, Sow Good raised an aggregate $ 1.3 million from the sale of Promissory Notes and Warrants,

including $900,000 received from related parties, resulting in approximately $293,000 of cash on hand as of June 30, 2023.

Note 2 – Basis of Presentation and Significant

Accounting Policies

The interim condensed financial statements included

herein, presented in accordance with United States generally accepted accounting principles and stated in US dollars, have been prepared

by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.

Certain information and

footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have

been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to not

make the information presented misleading.

These statements reflect all adjustments,

which in the opinion of management, are necessary for fair presentation of the information contained therein.

Except as otherwise

disclosed, all such adjustments are of a normal recurring nature.

It is suggested that these interim condensed financial statements

be read in conjunction with the audited financial statements for the year ended December 31, 2022, which were included in

our Annual Report on Form 10-K.

Notes to Condensed Financial Statements

Note 1 –

Organization and Nature of Business

Effective January 21, 2021, we changed our name from Black Ridge Oil & Gas, Inc.

(business acquired with our October 1, 2020 acquisition of S-FDF, LLC) to Sow Good Inc.

(“SOWG,”

“Sow Good,”

or the “Company”) to pursue the production of freeze-dried fruits and vegetables, a business we later expanded to include freeze-dried candy. At that time, our 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 was known as 

Ante5, Inc., a publicly traded company since July 1, 2010.

From October 

2010 through August 2019, Ante5, Inc.

and Black Ridge Oil & Gas, Inc.

participated in the acquisition and development of oil and gas leases.

On May 5, 2021, the Company announced the launch of our direct-to-consumer freeze-dried consumer packaged goods (CPG) food brand, Sow Good.

Sow Good launched its first line of non-GMO products including six ready-to-make smoothies and nine snacks.

On July 23, 2021, we launched six new gluten-free granola products under the Sow Good brand. 

In the first quarter of 2023, the Company launched a freeze-dried candy product line with a 9 - nine SKU offering that is projected to continue being a major driver of growth.

After launching our freeze-dried candy product line we discontinued our smoothie, snack and granola products.

During the second quarter of 2023, we completed the construction of our second and third freeze driers to facilitate the increased production demands for our recently launched candy products.

The significant and rising demand for our freeze-dried candy products has led us to begin construction of our fourth, fifth, and sixth  freeze driers, which we expect to be completed in the first quarter of 2024.

Note 2 –

Basis of Presentation and Significant Accounting Policies

The interim condensed financial statements included herein, presented in accordance with United States generally accepted accounting principles ("GAAP") and stated in US dollars, have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to not make the information presented misleading.

These statements reflect all adjustments, which in the opinion of management, are necessary for fair presentation of the information contained therein.

Except as otherwise disclosed, all such adjustments are of a normal recurring nature.

It is suggested that these interim condensed financial statements be read in conjunction with the audited financial statements for the year ended December 31, 2022 , which were included in our Annual Report on Form 

The Company follows the same accounting policies in the preparation of interim reports.

Fair Value of Financial Instruments

The Company discloses the fair value of certain

assets and liabilities in accordance with ASC 820 – Fair Value Measurement (“ASC 820”).

Under FASB ASC 820-10-05,

the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles

and expands disclosures about fair value measurements.

This Statement reaffirms that fair value is the relevant measurement attribute.

The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein.

amounts of cash, accounts payable and accrued expenses reported on the balance sheets are estimated by management to approximate fair

value primarily due to the short-term nature of the instruments.

The Company had no items that required fair value measurement on a recurring

Use of Estimates

The preparation of financial statements in conformity

with generally accepted accounting principles 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.

The preparation of financial statements in conformity with 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.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform with the current period. 

SOW GOOD INC.

Notes to Condensed

Financial Statements

Notes to Condensed Financial Statements

Cash in Excess of FDIC 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)

up to $250,000 under current regulations.

The Company had $ 45,420 of cash in excess of FIDC insured limits at June 30, 2023, and has not

experienced any losses in such accounts.

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) up to $250,000 under current regulations.

The Company had $ 1,745,520  of cash in excess of FIDC insured limits as of 

September 30, 2023 , and has not experienced any losses in such accounts.

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, which are typically carried at amortized cost. For financial instruments or investments that are required to be reported at fair value under GAAP, the applicable guidance for fair value measurement would require 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:

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.

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.

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.

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:

Schedule of estimated useful lives of assets

3 years, or over the life of the agreement

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:

3, or over the life of the agreement

Office equipment

1 unchanged sentence

Machinery and equipment

7 - 10  

Leasehold improvements

Fully extended lease-term

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 was $ 155,416 and $ 148,655 for

the six months ended June 30, 2023 and 2022, respectively.

A total of $ 71,785 and $ 15,736 of the depreciation expense was allocated to

inventory overhead, resulting in $ 83,631 and $ 132,919 of depreciation expense for the six months ended June 30, 2023 and 2022, respectively.

of Long-Lived Assets

Long-lived assets held and used by the Company

are reviewed for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable

or is impaired.

Recoverability is assessed using undiscounted cash flows based upon historical results and current projections of earnings

before interest and taxes.

Impairment is measured using discounted cash flows of future operating results based upon a rate that corresponds

to the cost of capital.

Impairments are recognized in operating results to the extent that carrying value exceeds discounted cash flows

of future operations.

Our intellectual property

is comprised of indefinite-lived brand names acquired and have been assigned an indefinite life as we currently anticipate that these

brand names will contribute cash flows to the Company perpetually.

We evaluate the recoverability of intangible assets periodically by

taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired.

Inventory, consisting of raw materials, material

overhead, labor, and manufacturing overhead, are stated at the average cost or net realizable value and consists of the following:

Schedule of inventory

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 was $ 306,092  and $ 223,887  for the nine months ended September 30, 2023 and 2022 , respectively.

A total of $ 78,486 and $ 21,841 of the depreciation expense was allocated to inventory overhead, resulting in $ 227,606 and $ 202,046 of depreciation expense for the nine months ended September 30, 2023 and 2022 , respectively.

Impairment of Long-Lived Assets

Long-lived assets held and used by the Company are reviewed for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable or is impaired.

Recoverability is assessed using undiscounted cash flows based upon historical results and current projections of earnings before interest and taxes.

Impairment is measured using discounted cash flows of future operating results based upon a rate that corresponds to the cost of capital.

Impairments are recognized in operating results to the extent that carrying value exceeds discounted cash flows of future operations.

Our intellectual property is comprised of indefinite-lived brand names acquired and have been assigned an indefinite life as we currently anticipate that these brand names will contribute cash flows to the Company perpetually.

We evaluate the recoverability of intangible assets periodically by taking into account events or circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired.

Inventory, consisting of raw materials, material overhead, labor, and manufacturing overhead, are stated at the average cost or net realizable value and consists of the following:

September 30,

Finished goods

$ 369,227  

$ 384,241  

Packaging materials

485,840  

416,663  

Work in progress

633,473  

864,460  

Raw materials

752,130  

307,515  

Total inventory

During the six months ending June 30, 2023, the

Company wrote down $ 1,919,686 of non-candy freeze dried inventory to pivot exclusively to its better selling candy products.

for obsolete inventories has been recognized.

$ 2,240,670  

$ 1,972,879  

During the 

nine months ending September 30, 2023 , the Company wrote down $ 2,075,080 of non-candy freeze-dried inventory to pivot exclusively to its better selling candy products.

This write down is included in cost of goods sold in the accompanying condensed statement of operations. 

No reserve for obsolete inventories has been recognized.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Notes to Condensed Financial Statements

Revenue Recognition

The Company recognizes revenue in accordance with

ASC 606 — Revenue from Contracts with Customers (“ASC” 606”).

Under ASC 606, the Company recognizes revenue

from the sale of its freeze-dried food products, in accordance with a five-step model in which the

Company evaluates the transfer of promised goods or services and recognizes revenue when customers obtain control of promised goods or

services in an amount that reflects the consideration which the Company expects to be entitled to receive in exchange for those goods

To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC 606, the Company

performs the following five steps:

(1) identify the contract(s) with a customer, (2) identify the performance obligations in

the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the

contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company has elected, as a practical

expedient, to account for the shipping and handling as fulfillment costs, rather than as a separate performance obligation.

reported net of applicable provisions for discounts, returns and allowances.

Methodologies for determining these provisions are dependent

on customer pricing and promotional practices.

The Company records reductions to revenue for estimated product returns and pricing adjustments

in the same period that the related revenue is recorded.

These estimates are based on industry-based historical data, historical sales

returns, if any, analysis of credit memo data, and other factors known at the time.

The Company recognizes revenue in accordance with ASC 606 —

Revenue from Contracts with Customers (“ASC”

Under ASC 606, the Company recognizes revenue from the sale of its freeze-dried food products, 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 which the Company expects to be entitled to receive in exchange for those goods or services.

To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps:

( 1 ) identify the contract(s) with a customer, ( 2 ) identify the performance obligations in the contract, ( 3 ) determine the transaction price, ( 4 ) allocate the transaction price to the performance obligations in the contract and ( 5 ) recognize revenue when (or as) the entity satisfies a performance obligation.

The Company has elected, as a practical expedient, to account for the shipping and handling as fulfillment costs, rather than as a separate performance obligation.

Revenue is reported net of applicable provisions for discounts, returns and allowances.

Methodologies for determining these provisions are dependent on customer pricing and promotional practices.

The Company records reductions to revenue for estimated product returns and pricing adjustments in the same period that the related revenue is recorded.

These estimates are based on industry-based historical data, historical sales returns, if any, analysis of credit memo data, and other factors known at the time.

Customer Concentration

For the three -month period ended 

September 30, 2023 , one large retail customer accounted for 46 % of our revenues and one food distributor accounted for 

20 % of our revenues. For the three -month period ended September 30, 2022, two  large retail customers accounted for 37 % and 25 % of our revenues and one large food distributor accounted for 

18 % of our revenues.

Our top five customers accounted for 86 % and 91 % of our revenues during the 

nine months ended September 30, 2023 and 2022 .

For the nine -month period ended 

September 30, 2023 , 

one large retail customer accounted for 44 % of our revenues and 

one food distributor accounted for 20 % of our revenues. For the nine -month period ended September 30, 2022, two food distributor customers accounted for 30 % each, of our revenues.

Our top five customers accounted for 82 % of our revenues during both 

nine months ended September 30, 2023 and 2022 .

Accounts Receivable

Accounts receivable are carried at their estimated

collectible amounts.

Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers

and their current financial condition.

The Company had an allowance for doubtful accounts of $ 185,485 at June 30, 2023.

Accounts receivable are carried at their estimated collectible amounts.

Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition.

The Company had an allowance for doubtful accounts of $ 1,894  as of 

September 30, 2023 . 

Supplier Concentration

For the three month period ended 

September 30, 2023 , two large candy suppliers accounted for 

17 % and 10 % each of our purchases from vendors.

The Company considers these vendors to be critical suppliers of candy for our freeze-dried candy production. For the three month period ended September 30, 2022 

no suppliers represented greater than 10% or more of our purchases from vendors. 

For the nine -month period ended 

September 30, 2023 , 

one large candy supplier accounted for 18 % of our purchases from vendors. For the nine -month period ended September 30, 2022 

no vendors accounted for 10% or more of our purchases from vendors. The Company is actively working to diversify its supplier base to mitigate risks associated with vendor concentration.

Efforts are made to establish relationships with new suppliers and explore alternative sourcing options.

Basic and Diluted Earnings (Loss) Per Share

net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding.

loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average

number of common shares outstanding plus potential dilutive securities.

For the periods presented, potential dilutive securities had an

anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

Stock-Based Compensation

The Company accounts for equity instruments issued

to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718) and Equity-Based Payments to Non-employees pursuant

to ASC 2018-07 (ASC 2018-07).

All transactions in which the consideration provided in exchange for the purchase of goods or services consists

of the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the

equity instrument issued, whichever is more reliably measurable.

The measurement date of the fair value of the equity instrument issued

is the earlier of the date on which the counterparty’s performance is complete or the date at which a commitment for performance

by the counterparty to earn the equity instruments is reached because of sufficiently large disincentives for nonperformance.

compensation was $ 383,906 and $ 575,631 , consisting of $ 258,677 and $ 520,633 of stock options expense, using the Black-Scholes options

pricing model and an effective term of 6 to 6.5 years based on the weighted average of the vesting periods and the stated term of the

option grants and the discount rate on 5 to 7 year U.S.

Treasury securities at the grant date, incurred in the six months ended June 30,

2023 and 2022, respectively, and $ 125,229 and $ 54,998 of expense related to shares of common stock issued to officers and consultants

for services rendered in the six months ended June 30, 2023 and 2022, respectively.

In addition, $ 1,054,822 and $ 321,798 of expenses

related to the amortization of warrants in-the-money issued in consideration for debt financing for the six months ended June 30, 2023

and 2022, respectively.

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.

The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding.

Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted”

basis, by the weighted average number of common shares outstanding plus potential dilutive securities.

For the periods presented, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

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.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Notes to Condensed Financial Statements

Stock Based Compensation

The Company accounts for equity instruments issued to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718 ) and Equity-Based Payments to Non-employees pursuant to ASC 2018 - 07 (ASC 2018 - 07 ).

All transactions in which the consideration provided in exchange for the purchase of goods or services consists of the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date at which a commitment for performance by the counterparty to earn the equity instruments is reached because of sufficiently large disincentives for nonperformance.

Stock-based compensation was $ 524,696  and $ 731,499  consisting of $ 399,436 and $ 651,501  of stock options expense, using the Black-Scholes options pricing model and an effective term of 6 to 6.5 years based on the weighted average of the vesting periods and the stated term of the option grants and the discount rate on 5 to 7 year U.S.

Treasury securities at the grant date, incurred in the nine months ended September 30, 2023 and 2022 , respectively, and $ 125,229  and $ 79,998  of expense related to shares of common stock issued to officers and consultants for services rendered in the nine months ended September 30, 2023 and 2022 , respectively.

Recent Accounting Pronouncements

From time to time, new

accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") that are adopted by the Company as

of the specified effective date.

If not discussed, management believes that the impact of recently issued standards, which are not yet

effective, will not have a material impact on the Company's financial statements upon adoption.

In July 2023, the FASB issued Accounting Standards

Update (“ASU”) 2023-03 to amend various SEC paragraphs in the Accounting Standards Codification to primarily reflect the issuance

of SEC Staff Accounting Bulletin No.

2023-03, “ Presentation of Financial Statements (Topic 205), Income Statement—Reporting

Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock

Compensation (Topic 718):

Recently Adopted Accounting Standards Financial Instruments –

Credit Losses.

The Financial Accounting Standards Board ("FASB") issued five Accounting Standards Updates (ASUs) related to financial instruments –

credit losses.

The ASUs issued were:

( 1 ) in June 2016, ASU 2016 - 13, “Financial Instruments –

Credit Losses (“ASC 326”

Measurement of Credit Losses on Financial Instruments,”

( 2 ) in November 2018, ASU 2018 - 19, “Codification Improvements to Topic 326,  Financial Instruments—Credit Losses,”

( 3 ) in April 2019, ASU 2019 - 04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments,”

( 4 ) in May 2019, ASU 2019 - 05, “Financial Instruments –

Credit Losses (Topic 326 ):

Targeted Transition Relief”

and ( 5 ) in November 2019, ASU 2019 - 11, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses.”

Additionally, in February and March 2020, the FASB issued ASU 2020 - 02, “Financial Instruments—Credit Losses (Topic 326 ) and Leases (ASC 842 ):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the

March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation

Income or Loss Applicable to Common Stock.

” ASU 2023-03 amends the ASC for SEC updates pursuant to SEC Staff Accounting

SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force (“EITF”) Meeting;

and Staff Accounting

Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock.

updates were immediately effective and did not have a significant impact on our financial statements.

In October 2021, the FASB issued ASU 2021-08 ,

Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which creates

an exception to the general recognition and measurement principle for contract assets and contract liabilities from contracts with customers

acquired in a business combination.

The new guidance will require companies to apply the definition of a performance obligation under

accounting standard codification (“ASC”) Topic 606 to recognize and measure contract assets and contract liabilities (i.e.,

deferred revenue) relating to contracts with customers that are acquired in a business combination.

Under current GAAP, an acquirer in

a business combination is generally required to recognize and measure the assets it acquires and the liabilities it assumes at fair value

on the acquisition date.

The new guidance will result in the acquirer recording acquired contract assets and liabilities on the same basis

that would have been recorded by the acquiree before the acquisition under ASC Topic 606.

These amendments are effective for fiscal years

beginning after December 15, 2022, with early adoption permitted.

The adoption of ASU 2021-08 is not expected to have a material impact

on the Company’s financial statements or related disclosures.

No other new accounting pronouncements, issued

or effective during the period ended June 30, 2023, have had or are expected to have a significant impact on the Company’s financial

Note 3 – Going Concern

As shown in the accompanying financial statements,

as of June 30, 2023, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $ 60,401,992 , and

had cash on hand of $ 293,024 .

We are too early in our development stage to project revenue with a necessary level of certainty;

we may not have sufficient funds to sustain our operations for the next twelve months and we may need to raise additional cash to fund

our operations.

These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The Company has

commenced sales and continues to develop its operations.

In the event sales do not materialize at the expected

rates, management would seek additional financing or would attempt to conserve cash by further reducing expenses.

There can be no assurance

that we will be successful in achieving these objectives.

The financial statements do not include any adjustments

that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern.

The financial

statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts

and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

Our ability to

scale production and distribution capabilities and further increase the value of our brands, is largely dependent on our success in raising

additional capital.

119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No.

2016 - 02, Leases (ASC 842 )”

and ASU 2020 - 03, “Codification Improvements to Financial Instruments,”

respectively, which include amendments to ASC 326.

ASU 2016 - 13 is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.

ASU 2018 - 19 clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leasing standard.

ASU 2019 - 04 clarifies and improves areas of guidance related to the recently issued standards on financial instruments –

credit losses, derivatives and hedging, and financial instruments.

ASU 2019 - 05 provides entities that have certain instruments within the scope of ASC Subtopic 326 - 20, Financial Instruments—Credit Losses—Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825 - 10, Financial Instruments—Overall.

ASU 2019 - 11 clarifies guidance around how to report expected recoveries among other narrow-scope and technical improvements.

ASU 2020 - 02 adds a SEC paragraph pursuant to the 7 Table of Contents issuance of SEC Staff Accounting Bulletin No.

119 on loan losses to FASB Codification ASC 326 and updates the SEC section of the Codification for the change in the effective date of ASC 842.

ASU 2020 - 03 makes narrow-scope improvements to various aspects of the financial instrument guidance as part of the FASB’s ongoing Codification improvement project aimed at clarifying specific areas of accounting guidance to help avoid unintended application.

The Company adopted the applicable guidance in ASU 2016 - 13, ASU 2018 - 19, ASU 2019 - 04, ASU 2019 - 05, ASU 2019 - 11, ASU 2020 - 02 and ASU 2020 - 03 on January 1, 2023, and the adoption did not have a material impact on its consolidated financial statements and related disclosures.

Our financial assets are limited to trade receivables.

We estimate our reserve based on historical loss information.

We believe 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. 

No new accounting pronouncements, issued or effective during the period ended September 30, 2023 , have had or are expected to have a significant impact on the Company’s financial statements.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 4 – Related Party

Notes to Condensed Financial Statements

Note 3 –

Going Concern

As of September 30, 2023, the Company had an accumulated retained deficit of $ 60,068,008  and net losses for both the quarter and year to date periods ended September 

30, 2023, along with $ 2,096,672 of cash on hand, and working capital of $ 3,145,708 .

We are too early in our development to be able to project operating results with the necessary level of certainty;

our plans for growth include significant capital expenditures, which we may not be able to fund through operating cash flows;

therefore, we may not have sufficient funds to sustain our operations for the next twelve months while also executing our plan for growth.

These factors raise substantial doubt about our Company's ability to continue as a going concern. 

During the current third quarter of 2023, the Company achieved a significant improvement in its operating results.

This improvement was primarily driven by increased sales of our freeze-dried candy to large retail customers, coupled with increased margins in the third quarter of 2023,  related to our pivot away from slower selling products to focus on our customers demand for freeze-dried candy. 

Management has developed and implemented a comprehensive plan to improve the Company's financial position.

In the third quarter of 2023, to support its ongoing operations, the Company secured additional capital of $ 3,675,000 through a share offering.

Management plans to use this additional capital investment to reduce our production constraints through additional freeze-driers and necessary warehouse space. Our ability to scale production and distribution capabilities and further increase the value of our brands is largely dependent on our success in raising additional capital.

The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern.

The financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

Note 4 –

Related Party

Debt Financing

On May 11, 2023, the

Company received proceeds of $ 100,000 from Bradley Berman, one of the Company’s directors, on behalf of the Bradley Berman Irrevocable

Trust, from the sale of notes and warrants pursuant to an offering to sell up to $ 1,500,000 of promissory notes and warrants to purchase

an aggregate 375,000 shares of the Company’s common stock, exercisable over a ten-year period at a price of $ 2.50 per share, representing

25,000 warrant shares per $ 100,000 of Notes purchased.

On May 11, 2023, the Company received proceeds of $ 100,000 from Bradley Berman, one of the Company’s directors, on behalf of the Bradley Berman Irrevocable Trust, from the sale of notes and warrants pursuant to an offering to sell up to $ 1,500,000 of promissory notes and warrants to purchase an aggregate 375,000 shares of the Company’s common stock, exercisable over a ten -year period at a price of $ 2.50 per share, representing 25,000 warrant shares per $100,000 of Notes purchased.

The notes mature on May 11, 2024 .

Interest on the Notes accrue at a rate of 8 %

per annum, payable in cash semi-annually on June 30 and December 31.

On April 25, 2023, we

closed on an offering to sell up to $ 1,500,000 of promissory notes and warrants to purchase an aggregate 375,000 shares of the Company’s

common stock, exercisable over a ten-year period at a price of $ 2.50 per share, representing 25,000 warrant shares per $ 100,000 of Notes

Interest on the Notes accrue at a rate of 8 % per annum, payable in cash semi-annually on June 30 and December 31.

On April 25, 2023, we closed on an offering to sell up to $ 1,500,000 of promissory notes and warrants to purchase an aggregate 375,000 shares of the Company’s common stock, exercisable over a ten -year period at a price of $ 2.50 per share, representing 25,000 warrant shares per $100,000 of Notes purchased.

The notes mature on April 25, 2024 .

Interest on the Notes accrue at a rate of 8 % per annum, payable in cash semi-annually on

June 30 and December 31.

On April 25, 2023, the Company received proceeds of $ 750,000 and $ 50,000 from the Company’s Chairman,

Interest on the Notes accrue at a rate of 8 % per annum, payable in cash semi-annually on June 30 and December 31.

On April 

25, 2023, the Company received proceeds of $ 750,000 and $ 50,000 from the Company’s Chairman, Mr.

Goldfarb, and the Cesar J.

Gutierrez Living Trust, as beneficially controlled by the brother of the Company’s CEO, respectively,

on the sale of these notes and warrants.

On August 23, 2022, we

closed on an offering to sell up to $ 2,500,000 of promissory notes and warrants to purchase an aggregate 625,000 shares of the Company’s

common stock, exercisable over a ten-year period at a price of $ 2.60 per share, representing 25,000 warrant shares per $ 100,000 of Notes

Gutierrez Living Trust, as beneficially controlled by the brother of the Company’s CEO, respectively, on the sale of these notes and warrants.

On August 23, 2022, we closed on an offering to sell up to $ 2,500,000 of promissory notes and warrants to purchase an aggregate 625,000 shares of the Company’s common stock, exercisable over a ten -year period at a price of $ 2.60 per share, representing 25,000 warrant shares per $100,000 of Notes purchased.

The notes mature on August 23, 2025 .

Interest on the Notes accrue at a rate of 8 % per annum, payable on January 1, 2025.

Loans may be advanced to the Company from time to time from August 23, 2022 to the Maturity Date.

On various dates between January 5,

2023 and April 11, 2023, the Company received aggregate proceeds of $ 1,500,000 from two of the Company’s Directors on the sale

of these notes and warrants.

Interest on the Notes accrue at a rate of 8 % per annum, payable on January 

On various dates between January 

5, 2023 and April 

11, 2023, the Company received aggregate proceeds of $ 2,500,000 from two of the Company’s Directors on the sale of these notes and warrants.

Common Stock Issued to Directors for Services

On June 1, 2023,

On June 

2023, the Company issued an aggregate 20,699 shares of common stock amongst its five non-employee Directors for annual services to be rendered.

The aggregate fair value of the common stock was $ 125,229 , based on the closing price of the Company’s common stock on the date

The aggregate fair value of the common stock was $ 125,229 , based on the closing price of the Company’s common stock on the date of grant.

The shares were expensed upon issuance.

Note 5 – Fair Value of Financial Instruments

The Company discloses the fair value of certain

assets and liabilities in accordance with ASC 820 – Fair Value Measurement (“ASC 820”).

Under FASB ASC 820-10-5,

fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between

market participants at the measurement date (an exit price).

The standard outlines a valuation framework and creates a fair value hierarchy

in order to increase the consistency and comparability of fair value measurements and the related disclosures.

Under GAAP, certain assets

and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at

The Company’s financial assets and liabilities

are measured using inputs from the three levels of the fair value hierarchy.

The three levels are as follows:

Level 1 - Inputs are unadjusted quoted

prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs include quoted prices

for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are

not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.),

and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated

Level 3 - Unobservable inputs that

reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

Common Shares Issued Pursuant to Private Placement Offering

On August 30, 2023, the Company raised $ 3,674,926  of capital from the sale of 735,000 newly issued shares at a share price of $ 5.00 in a private placement.

Investors in the private placement included Sow Good’s Chief Executive Officer and Executive Chairman, in addition to certain other Sow Good board members and accredited investors.

The proceeds were used in funding incremental capital expenditures and general operating expenses.

The Company leases a 20,945 square foot facility in Irving, Texas, under which an entity owned entirely by Ira Goldfarb is the landlord.

The lease term is through September 15, 2025, with two five -year options to extend, at a monthly lease rate of $ 10,036 , with approximately 3 % annual escalation of lease payments.

SOW GOOD INC.

Notes to Condensed

Financial Statements

The following schedule summarizes the valuation

of financial instruments at fair value on a recurring basis in the balance sheets as of June 30, 2023 and December 31, 2022:

Valuation of financial instruments at fair value

Fair Value Measurements at June 30, 2023

Cash and cash equivalents

Notes payable, related parties, net of $3,727,295 of debt discounts

Notes payable, net of $569,203 of debt discounts

Total liabilities

Fair Value Measurements at December 31, 2022

Cash and cash equivalents

Notes to Condensed Financial Statements

Note 5 –

Fair Value of Financial Instruments

The fair values of cash and cash equivalents, accounts receivable, accounts payable, and other current liabilities approximate their carrying amounts due to the short maturities of these instruments.

We have financial instruments as of 

September 30, 2023 and 

December 31, 2022 for which the fair value is summarized below: 

September 30, 2023

December 31, 2022

Carrying Value

Estimated Fair Value

Carrying Value

Estimated Fair Value

Notes payable, related parties, net of $ 2,113,114 of debt discounts

6,481,886  

6,160,883  

3,502,243  

4,502,093  

Notes payable, net of $ 263,380 of debt discounts

866,620  

858,041  

393,915  

413,018  

Total liabilities

There were no transfers of financial assets or

liabilities between Level 1 and Level 2 inputs for the three months ended June 30, 2023.

7,348,506  

7,018,924  

3,896,158  

4,915,111  

no transfers of financial assets or liabilities between Level

2 inputs for the

three months ended

September 30, 2023 .

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 6 – Prepaid Expenses

Notes to Condensed Financial Statements

Note 6 –

Prepaid Expenses

Prepaid expenses consist of the following:

Schedule of prepaid expenses

September 30,

Prepaid software licenses

$ 45,424  

$ 36,424  

Prepaid insurance costs

20,437  

16,746  

Trade show advances

24,848  

18,707  

27,043  

Prepaid office and other costs

57,743  

38,772  

Total prepaid expenses

Note 7 – Property and Equipment

Property and equipment at June 30, 2023 and December 31, 2022,

consists of the following:

$ 148,452  

$ 137,692  

Note 7 –

Property and Equipment

Office equipment

Property and equipment as of 

September 30, 2023 and December 31, 2022 , consists of the following:

September 30,

$ 4,578,679  

$ 1,643,010  

Leasehold improvements

1,409,767  

1,257,108  

70,000  

71,589  

Office equipment

17,930  

13,872  

Construction in progress

721,563  

2,487,673  

6,869,528  

5,543,252  

Accumulated depreciation and amortization

( 814,349 )  

Total property and equipment, net

Construction in progress consisted of costs incurred

to build our second and third freeze driers, and to build out our offices within our facility in Irving, Texas.

A total of $ 2,705,524

and $ 135,596 of these costs were capitalized as Machinery and Leasehold Improvements, respectively, when they were placed in service during

the six months ended June 30, 2023.

The Company recognized depreciation of $ 155,416

and $ 148,655 , of which $ 71,785 and $ 15,736 was allocated to inventory overhead, resulting in $ 83,631 and $ 132,919 of depreciation expense

for the six months ended June 30, 2023 and 2022, respectively.

$ 6,055,179  

$ 5,034,995  

Construction in progress consisted of costs incurred to build our second and third freeze driers, and to build out our offices within our facility in Irving, Texas.

A total of $ 2,705,524 and $ 135,596 of these costs were reclassified as Machinery and Leasehold Improvements, respectively, when they were placed in service during the nine months ended September 30, 2023 .

The Company recognized depreciation of $ 306,092 and $ 223,887 , of which $ 78,486 and $ 21,841 was allocated to inventory overhead, resulting in $ 227,606 and $ 202,046 of depreciation expense for the nine months ended September 30, 2023 and 2022 , respectively. Depreciation expense was $ 72,190  and $ 69,127 for the nine months ended September 30, 2023 and 2022 , respectively.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 8 – Leases

The Company leases its 20,945 square foot operating

and office facility under a non-cancelable real property lease agreement that expires on August 31, 2025 , with two five-year options to

extend, at a monthly lease term of $ 10,036 , with approximately a 3% annual escalation of lease payments commencing September 15, 2021,

subject to the ASU 2016-02.

In the locations in which it is economically feasible to continue to operate, management expects to enter

into a new lease upon expiration.

The operating and office facility lease contains provisions requiring payment of property taxes, utilities,

insurance, maintenance and other occupancy costs applicable to the leased premise.

As the Company’s leases do not provide implicit

discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining

the present value of lease payments.

Notes to Condensed Financial Statements

Note 8 –

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 depreciable life of related leasehold improvements is based on the shorter of the useful life or the lease term.  

The Company leases its 20,945 square foot facility under a non-cancelable real property lease agreement that expires on August 31, 2025, with two five -year options to extend, at a monthly lease rate of $ 10,036 , with approximately a 3 % annual escalation of lease payments commencing September 15, 2021. 

The facility lease contains provisions requiring payment of property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise.

As the Company’s leases do not provide implicit discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

The incremental borrowing rate for the lease at the time of commencement was 5.75 %.

On July 1, 2023, the Company leased additional 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 components of lease expense were as follows:

Schedule of components of lease expense

For the Six Months Ended

Operating lease cost:

For the Nine Months Ended

September 30,

Right-of-Use lease cost:

Amortization of right-of-use asset

Interest on lease liability

Total operating lease cost

Supplemental balance sheet information related

to leases was as follows:

Schedule of supplemental balance sheet information

$ 79,213  

$ 16,816  

Total lease cost

$ 79,213  

$ 16,816  

Supplemental balance sheet information related to leases was as follows:

September 30,

Operating lease:

Operating lease assets

$ 1,551,252  

$ 1,261,525  

Current portion of operating lease liability

$ 165,869  

$ 52,543  

Noncurrent operating lease liability

1,493,001  

1,301,355  

Total operating lease liability

$ 1,658,870  

$ 1,353,898  

Weighted average remaining lease term:

Operating leases

Operating leases (in years)

Weighted average discount rate:

Operating lease

Supplemental cash flow and other information

related to operating leases was as follows:

Schedule of supplemental cash flow and other information

For the Six Months Ended

6.20 %  

Supplemental cash flow and other information related to operating leases was as follows:

For the Nine Months Ended

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows used for operating leases

$ 128,840  

$ 33,609  

SOW GOOD INC.

Notes to Condensed

Financial Statements

The future minimum lease payments due under operating leases as of

June 30, 2023 is as follows:

Schedule of future minimum lease payments

Notes to Condensed Financial Statements

The future minimum lease payments due under operating leases as of September 30, 2023 is as follows:

Fiscal Year Ending

Minimum Lease

2023 (for the six months remaining)

2023 (for the three months remaining)

$ 65,595  

265,827  

274,834  

223,171  

2027 and thereafter

1,412,988  

$ 2,242,415  

Less effects of discounting

583,545  

Lease liability recognized

Note 9 – Notes Payable, Related Parties

Notes payable, related parties consists of the

following at June 30, 2023 and December 31, 2022, respectively:

Schedule of Notes payable, related parties

On May 11, 2023, the Company received $ 100,000 pursuant to a note and warrant purchase agreement from Bradley Berman, one of the Company’s Directors, on behalf of the Bradley Berman Irrevocable Trust, as lender.

$ 1,658,870  

SOW GOOD INC.

Notes to Condensed Financial Statements

Note 9 –

Notes Payable, Related Parties

Notes payable, related parties consists of the following as of 

September 30, 2023 and December 31, 2022 , respectively:

September 30,

The unsecured note matures on May 11, 2024 .

2 unchanged sentences

The Company may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

$ 100,000  

On April 25, 2023, the Company received $ 50,000 pursuant to a note and warrant purchase agreement from the Cesar J.

Gutierrez Living Trust, as beneficially controlled by the brother of the Company’s CEO, as lender.

The unsecured note matures on April 25, 2024 .

2 unchanged sentences

SOW GOOD INC.

Notes to Condensed

Financial Statements

On April 25, 2023, the Company received $ 750,000 pursuant to a note and warrant purchase agreement from a trust held by the Company’s Chairman, Mr.

50,000  

On April 25, 2023, the Company received $ 750,000 pursuant to a note and warrant purchase agreement from a trust held by the Company’s Chairman, Mr.

Goldfarb, as lender.

3 unchanged sentences

750,000  

On April 11, 2023, the Company received $ 250,000 pursuant to a note and warrant purchase agreement from the Lyle A.

Berman Revocable Trust, as beneficially controlled by one of the Company’s Directors, as lender.

The unsecured note matures on August 23, 2025 .

1 unchanged sentence

The noteholder also received warrants to purchase 62,500 shares of common stock, exercisable at $ 2.60 per share over a ten -year term.

250,000  

On March 7, 2023, the Company received $ 250,000 pursuant to a note and warrant purchase agreement from the Lyle A.

Berman Revocable Trust, as beneficially controlled by one of the Company’s Directors, as lender.

The unsecured note matures on August 23, 2025 .

1 unchanged sentence

The noteholder also received warrants to purchase 62,500 shares of common stock, exercisable at $ 2.60 per share over a ten -year term.

On March 2, 2023, the Company received $ 250,000 pursuant to a note and warrant purchase agreement from a trust held by the Company’s Chairman, Mr.

250,000  

On March 2, 2023, the Company received $ 250,000 pursuant to a note and warrant purchase agreement from a trust held by the Company’s Chairman, Mr.

Goldfarb, as lender.

2 unchanged sentences

The noteholder also received warrants to purchase 62,500 shares of common stock, exercisable at $ 2.60 per share over a ten -year term.

On February 1, 2023, the Company received $ 500,000 pursuant to a note and warrant purchase agreement from a trust held by the Company’s Chairman, Mr.

250,000  

On February 1, 2023, the Company received $ 500,000 pursuant to a note and warrant purchase agreement from a trust held by the Company’s Chairman, Mr.

Goldfarb, as lender.

2 unchanged sentences

The noteholder also received warrants to purchase 125,000 shares of common stock, exercisable at $ 2.60 per share over a ten -year term.

500,000  

On January 5, 2023, the Company received $ 250,000 pursuant to a note and warrant purchase agreement from the Lyle A.

Berman Revocable Trust, as beneficially controlled by one of the Company’s Directors, as lender.

The unsecured note matures on August 23, 2025 .

1 unchanged sentence

The noteholder also received warrants to purchase 62,500 shares of common stock, exercisable at $ 2.60 per share over a ten -year term.

250,000  

On December 21, 2022, the Company received $ 250,000 pursuant to a note and warrant purchase agreement from the Lyle A.

Berman Revocable Trust, as beneficially controlled by one of the Company’s Directors, as lender.

The unsecured note matures on August 23, 2025 .

1 unchanged sentence

The noteholder also received warrants to purchase 62,500 shares of common stock, exercisable at $ 2.60 per share over a ten -year term.

SOW GOOD INC.

Notes to Condensed

Financial Statements

On September 29, 2022, the Company received $ 500,000 pursuant to a note and warrant purchase agreement from a trust held by the Company’s Chairman, Mr.

250,000  

On September 29, 2022, the Company received $ 500,000 pursuant to a note and warrant purchase agreement from a trust held by the Company’s Chairman, Mr.

Goldfarb, as lender.

2 unchanged sentences

The noteholder also received warrants to purchase 125,000 shares of common stock, exercisable at $ 2.60 per share over a ten -year term.

500,000  

On September 29, 2022, the Company received $ 250,000 pursuant to a note and warrant purchase agreement from the Lyle A.

Berman Revocable Trust, as beneficially controlled by one of the Company’s Directors, as lender.

The unsecured note matures on August 23, 2025 .

1 unchanged sentence

The noteholder also received warrants to purchase 62,500 shares of common stock, exercisable at $ 2.60 per share over a ten -year term.

On April 8, 2022, the Company received $ 2,000,000 pursuant to a note and warrant purchase agreement from a trust held by the Company’s Chairman, Mr.

250,000  

On April 8, 2022, the Company received $ 2,000,000 pursuant to a note and warrant purchase agreement from a trust held by the Company’s Chairman, Mr.

Goldfarb, as lender.

3 unchanged sentences

The noteholder also received warrants to purchase 500,000 shares of common stock, exercisable at $ 2.35 per share over a ten -year term.

On April 8, 2022, the Company received $ 100,000 pursuant to a note and warrant purchase agreement with the Company’s Chairman and CEO, Mr.

2,000,000  

On April 8, 2022, the Company received $ 100,000 pursuant to a note and warrant purchase agreement with the Company’s Chairman and CEO, Mr.

Goldfarb, as lenders.

3 unchanged sentences

The noteholder also received warrants to purchase 25,000 shares of common stock, exercisable at $ 2.35 per share over a ten -year term.

On April 8, 2022, the Company received $ 100,000 pursuant to a note and warrant purchase agreement with IG Union Bower LLC, an entity owned by Ira Goldfarb, the Company’s Chairman, as lender.

100,000  

On April 8, 2022, the Company received $ 100,000 pursuant to a note and warrant purchase agreement with IG Union Bower LLC, an entity owned by Ira Goldfarb, the Company’s Chairman, as lender.

The unsecured note bears interest at 6% per annum, compounded semi-annually, and was payable in cash semi-annually on June 30th and December 31st.

2 unchanged sentences

The noteholder also received warrants to purchase 25,000 shares of common stock, exercisable at $ 2.35 per share over a ten -year term.

100,000  

On April 8, 2022, the Company received $ 920,000 pursuant to a note and warrant purchase agreement from the Lyle A.

Berman Revocable Trust, as beneficially controlled by one of the Company’s Directors, as lender.

The unsecured note bears interest at 6% per annum, compounded semi-annually, and was payable in cash semi-annually on June 30th and December 31st.

2 unchanged sentences

The noteholder also received warrants to purchase 230,000 shares of common stock, exercisable at $ 2.35 per share over a ten -year term.

SOW GOOD INC.

Notes to Condensed

Financial Statements

On December 31, 2021, the Company received $ 1,500,000 pursuant to a note and warrant purchase agreement with the Company’s Chairman and CEO, Mr.

920,000  

On December 31, 2021, the Company received $ 1,500,000 pursuant to a note and warrant purchase agreement with the Company’s Chairman and CEO, Mr.

Goldfarb, as lenders.

2 unchanged sentences

The noteholders also received warrants to purchase 225,000 shares of common stock, exercisable at $ 2.21 per share over a ten -year term.

1,500,000  

On December 31, 2021, the Company received $ 500,000 pursuant to a note and warrant purchase agreement from the Lyle A.

Berman Revocable Trust, as beneficially controlled by one of the Company’s Directors, as lender.

The unsecured note bears interest at 8 % per annum, compounded semi-annually, and shall be payable in cash semi-annually on June 30th and December 31st.

1 unchanged sentence

The noteholder also received warrants to purchase 75,000 shares of common stock, exercisable at $ 2.21 per share over a ten -year term.

On December 31, 2021, the Company received $ 25,000 pursuant to a note and warrant purchase agreement from the Company’s former CFO, Bradley K.

500,000  

On December 31, 2021, the Company received $ 25,000 pursuant to a note and warrant purchase agreement from the Company’s former CFO, Bradley K.

Burke, as lender.

2 unchanged sentences

The noteholder also received warrants to purchase 3,750 shares of common stock, exercisable at $ 2.21 per share over a ten -year term.

25,000  

On December 31, 2021, the Company received $ 50,000 pursuant to a note and warrant purchase agreement from the Cesar J.

Gutierrez Living Trust, as beneficially controlled by the brother of the Company’s CEO, as lender.

The unsecured note bears interest at 8 % per annum, compounded semi-annually, and shall be payable in cash semi-annually on June 30th and December 31st.

1 unchanged sentence

The noteholder also received warrants to purchase 7,500 shares of common stock, exercisable at $ 2.21 per share over a ten -year term.

50,000  

Total notes payable, related parties

8,595,000  

6,195,000  

Less unamortized debt discounts:

2,113,114  

2,692,757  

Notes payable

6,481,886  

3,502,243  

current maturities

638,004  

Notes payable, related parties, less current maturities

The Company recorded total discounts of $ 5,458,686

of debt discounts on warrants granted to the related parties on various dates from December 31, 2021 through May 11, 2023.

discounts are being amortized to interest expense over the term of the notes, until repayment, using the straight-line method, which closely

approximates the effective interest method.

The Company recorded $ 913,787 and $ 288,149 of stock-based interest expense pursuant to the

amortization of discounts during the six months ended June 30, 2023 and 2022, respectively.

The Company recognized $ 270,721 and $ 126,530 of

interest expense for the six months ended June 30, 2023 and 2022, respectively.

$ 5,843,882  

$ 3,502,243  

The Company recorded discounts of $ 3,883,904 of debt discounts on warrants granted to the related parties on various dates from December 

31, 2021 through May 

The discounts are being amortized to interest expense over the term of the notes, until repayment, using the straight-line method, which closely approximates the effective interest method.

The Company recorded a total of $ 900,226  and $ 607,320  of stock-based interest expense pursuant to the amortization of discounts during the nine months ended September 30, 2023 and 2022 , respectively.

The Company recorded a credit to amortized interest of $ 154,596  and amortized interest expense of $ 285,522  during the three months ended September 30, 2023 and 2022, respectively.

The Company recognized a total of $ 1,182,124  and $ 752,257 of interest expense related to related party notes payable for the nine months ended September 30, 2023 and 2022 , respectively.

Interest expense consisted of $ 405,131  of stated interest expense and $ 776,593 of amortized debt discounts related to stock-based warrants and $ 215,884 of stated interest expense and $ 536,373 of amortized debt discounts related to stock-based warrants for the nine months ended September 30, 2023 and 2022 , respectively.

The Company recognized a total of $ 3,007  and $ 383,995  in the three months ended September 30, 2023 and 2022, respectively. 

A credit to amortized interest of $ 154,596  and stated interest of $ 140,014  comprised the three months ended September 30, 2023 related party interest expense, and amortized interest expense of $ 285,522  and stated interest of $ 98,473  comprised the three months ended September 30, 2022 amount.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 10 – Notes Payable

Notes payable consists of the following at June 30,

2023 and December 31, 2022, respectively:

Schedule of notes payable

Notes to Condensed Financial Statements

Note 10 –

Notes Payable

Notes payable consists of the following as of 

September 30, 2023 and December 31, 2022 , respectively:

September 30,

On April 25, 2023, the Company received $ 400,000 pursuant to a note and warrant purchase agreement from an accredited investor, as lender.

3 unchanged sentences

$ 400,000  

On April 8, 2022, the Company received $ 80,000 pursuant to a note and warrant purchase agreement from an accredited investor, as lender.

3 unchanged sentences

The noteholders also received warrants to purchase 20,000 shares of common stock, exercisable at $ 2.35 per share over a ten -year term.

80,000  

On April 8, 2022, the Company received $ 500,000 pursuant to a note and warrant purchase agreement from an accredited investor, as lender.

3 unchanged sentences

The noteholders also received warrants to purchase 125,000 shares of common stock, exercisable at $ 2.35 per share over a ten -year term.

On June 16, 2020, the Company entered into a loan authorization and loan agreement with the United States Small Business Administration (the “SBA”), as lender, pursuant to the SBA’s Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the Company’s business (the “EIDL Loan Agreement”) encompassing a $ 150,000 Promissory Note issued to the SBA (the “EIDL Note”)(together with the EIDL Loan Agreement, the “EIDL Loan”), bearing interest at 3.75 % per annum.

In connection with entering into the EIDL Loan, the Company also executed a security agreement, dated June 16, 2020, between the SBA and the Company (the “EIDL Security Agreement”) pursuant to which the EIDL Loan is secured by a security interest on all of the Company’s assets.

500,000  

Under the EIDL Note, the Company is required to pay principal and interest payments of $ 731 every month beginning June 16, 2022, as extended.

1 unchanged sentence

The EIDL Note may be repaid at any time without penalty.

$ 150,000  

Total notes payable

1,130,000  

730,000  

Less unamortized debt discounts:

439,170  

336,085  

Notes payable

690,830  

393,915  

current maturities

212,546  

Notes payable, less current maturities

The Company recorded total discounts of $ 818,483 ,

consisting of debt discounts on warrants granted to accredited investors on between April 8, 2022 and April 25, 2023.

The discounts

are being amortized to interest expense over the term of the notes, until repayment, using the straight-line method, which closely approximates

the effective interest method.

The Company recorded $ 141,035 and $ 33,649 of stock-based interest expense pursuant to the amortization

of discounts during the six months ended June 30, 2023 and 2022, respectively.

The Company recognized $ 20,302 and $ 10,917 of

interest expense on notes payable for the six months ended June 30, 2023 and 2022, respectively.

$ 478,284  

$ 393,915  

The Company recorded discounts of $ 317,860 , consisting of debt discounts on warrants granted to accredited investors between April 

8, 2022 and April 25, 2023.

The discounts are being amortized to interest expense over the term of the notes, until repayment, using the straight-line method, which closely approximates the effective interest method. 

The Company recognized a total of $ 162,741  and $ 90,983 of interest expense related to notes payable (non-related party) for the nine months ended September 30, 2023 and 2022 , respectively.

Interest expense consisted of $ 39,507  of stated interest expense and $ 123,234 of amortized debt discounts related to stock-based warrants and $ 20,036 of stated interest expense and $ 70,947 of amortized debt discounts related to stock-based warrants for the nine months ended September 30, 2023 and 2022 , respectively.

For interest expense on non-related party debt, the Company recognized a credit of $ 942 and interest expense of $ 46,070  in the three month periods ended September 30, 2023 and 2022, respectively. 

A credit to amortized interest of $ 17,589 and stated interest of $ 16,647 comprised the three months ended September 30, 2023 non-related party interest expense, while the three months ended September 30, 2022 amount was comprised of amortized interest of $ 37,298 , and stated interest of $ 8,772 .

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 11 – Changes in Stockholders’

Notes to Condensed Financial Statements

Note 11 –

Changes in Stockholders ’

Preferred Stock

The Company has 20,000,000 authorized shares of

$ 0.001 par value preferred stock.

The Company has 20,000,000 authorized shares of $ 0.001 par value preferred stock.

No shares have been issued to date.

The Company has 500,000,000 authorized shares

of $ 0.001 par value common stock.

As of June 30, 2023, a total of 4,868,083 shares of common stock have been issued.

The Company has 500,000,000 authorized shares of $ 0.001 par value common stock.

As of September 30, 2023 , a total of 

5,603,083 shares of common stock have been issued. 

Common Stock Issued to Directors for Services

On June 1, 2023,

On June 

2023, the Company issued an aggregate 20,699 shares of common stock amongst its five non-employee Directors for annual services to be rendered.

The aggregate fair value of the common stock was $ 125,229 , based on the closing price of the Company’s common stock on the date

The aggregate fair value of the common stock was $ 125,229 , based on the closing price of the Company’s common stock on the date of grant.

The shares were expensed upon issuance.

Note 12 – Options

The 2020 Equity Plan was approved by written consent

of a majority of shareholders of record as of November 12, 2019 and adopted by the Board on December 5, 2019, as provided in the definitive

information statement filed with Securities and Exchange Commission on January 10, 2020 (the “DEF 14C”).

The description of

the 2020 Equity Plan is qualified in its entirety by the text of the 2020 Equity Plan, a copy of which was attached as Annex C to the

On September 29, 2020, January 4, 2021, and March 19, 2021, the Board of Directors adopted and approved amendments that

in aggregate increase the number of shares reserved for issuance under the 2020 Equity Plan to an aggregate total of 814,150 shares and

such amendments were approved by a majority of shareholders of record on September 3, 2021.

Common Shares Issued Pursuant to Private Placement Offering

On August 30, 2023, the Company raised $ 3,675,000  of capital from the sale of 735,000 newly issued shares at a share price of $ 5.00 in a private placement.

Investors in the private placement included Sow Good’s Chief Executive Officer and Executive Chairman, in addition to certain other Sow Good board members and accredited investors.

The proceeds were used in funding incremental capital expenditures and general operating expenses.

Note 12 –

The 2020 Equity Plan was approved by written consent of a majority of shareholders of record as of November 12, 2019 and adopted by the Board on December 5, 2019, as provided in the definitive information statement filed with Securities and Exchange Commission on January 10, 2020 ( the “DEF 14C”

The description of the 2020 Equity Plan is qualified in its entirety by the text of the 2020 Equity Plan, a copy of which was attached as Annex C to the DEF 14C.

On September 29, 2020, January 4, 2021, and March 

19, 2021, the Board of Directors adopted and approved amendments that in aggregate increase the number of shares reserved for issuance under the 2020 Equity Plan to an aggregate total of 814,150 shares and such amendments were approved by a majority of shareholders of record on September 3, 2021.

Outstanding Options

Options to purchase an aggregate total of 637,396

shares of common stock at a weighted average strike price of $ 4.64 , exercisable over a weighted average life of 7.8 years were outstanding

as of June 30, 2023.

The Company recognized a total of $ 258,677 and

$ 520,633 of compensation expense during the six months ended June 30, 2023 and 2022, respectively, related to common stock options

issued to Officers, Directors, Employees and Advisors that are being amortized over the implied service term, or vesting period, of the

The remaining unamortized balance of these options is $ 1,207,685 as of June 30, 2023.

Options to purchase an aggregate total of 650,708 shares of common stock at a weighted average strike price of $ 4.64 , exercisable over a weighted average life of 7.6 years were outstanding as of September 30, 2023 .

The Company recognized a total of $ 399,436 and $ 651,501 of compensation expense during the nine months ended September 30, 2023 and 2022 , respectively, related to common stock options issued to Officers, Directors, Employees and Advisors that are being amortized over the implied service term, or vesting period, of the options.

The remaining unamortized balance of these options is $ 995,525 as of September 30, 2023 .

Options Granted

On June 5, 2023, a total of nineteen employees

and consultants were granted options to purchase an aggregate 46,405 shares of the Company’s common stock, having an exercise price

of $ 6.05 per share, exercisable over a 10 -year term.

The options will vest 60% on the third anniversary, and 20% each anniversary thereafter

until fully vested.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 138 % and a call option value

of $ 5.66 , was $ 262,851 .

The options are being expensed over the vesting period, resulting in $ 3,598 of stock-based compensation expense

during the six months ended June 30, 2023.

As of June 30, 2023, a total of $ 259,253 of unamortized expenses are expected to

be expensed over the vesting period.

On June 5, 2023, a total of nineteen employees and consultants were granted options to purchase an aggregate 46,405 shares of the Company’s common stock, having an exercise price of $ 3.66 per share, exercisable over a 10 -year term.

The options will vest 60 % on the third anniversary, and 20 % each anniversary thereafter until fully vested.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 84.2 % and a call option value of $3.66, was $ 170,028 .

The options are being expensed over the vesting period, resulting in $ 12,143 of stock-based compensation expense during the nine months ended September 30, 2023 . 

During July 2023, three employees were granted options to purchase an aggregate of 16,000 shares of the Company's common stock, having a weighted average exercise price of $ 4.61 , exercisable over a 10 -year term. The options will vest 60 % on the third anniversary, and 20 % each anniversary thereafter until fully vested.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 90 % and a call option value of $2.95, was $ 47,182 .

The options are being expensed over the vesting period, resulting in $ 2,103 of stock-based compensation expense during the nine months ended September 30, 2023 .

As of September 30, 2023 , a total of $ 45,079 of unamortized expenses are expected to be expensed over the vesting period.

Options Exercised

No options were exercised during the six months

ended June 30, 2023 and 2022.

No options were exercised during the nine months ended September 30, 2023 and 2022 .

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 13 – Warrants

Notes to Condensed Financial Statements

Note 13 –

Outstanding Warrants

Warrants to purchase an aggregate total of 2,291,250

shares of common stock at a weighted average strike price of $ 2.50 , exercisable over a weighted average life of 9 years were outstanding

as of June 30, 2023.

Warrants to purchase an aggregate total of 2,291,250 shares of common stock at a weighted average strike price of $ 2.50 , exercisable over a weighted average life of 8.7 years were outstanding as of September 30, 2023 . As of September 30, 2023, the unamortized debt discounts related to these warrants were $ 1,999,540 , which will be expensed over the life of the outstanding debts, which mature from April 24, 2024 to August 23, 2025.

Amortization of warrants included in interest expense was $ 900,226  and $ 536,373 for the 

nine months ended September 30, 2023 and 2022  The warrants are being expensed over the life of the loans.

Warrants Granted

On May 11, 2023 ,

warrants to purchase an aggregate 25,000 shares of common stock were issued to the Bradley Berman, one of the Company’s Directors,

pursuant to a private placement debt offering in which aggregate proceeds of $ 100,000 were received

in exchange for promissory notes and warrants to purchase an aggregate 25,000 shares of common stock, representing 25,000 warrant shares

per $ 100,000 of promissory notes.

The warrants were issued in-the-money and are fully vested and exercisable over a period of 10

years at a price of $ 2.50 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share,

provided that the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for thirty (30) consecutive

trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated value using the Black-Scholes

Pricing Model, based on a volatility rate of 138 % and a weighted average call option value of $ 4,469 , was $ 112,371 , of which $ 100,000

was recognized as a debt discount.

The debt discount portion of the warrants are being expensed over the life of the loans, resulting

in $ 13,699 of stock-based compensation expense during the six months ended June 30, 2023.

As of June 30, 2023, a total of $ 86,301

of unamortized expenses are expected to be expensed over the remaining life of the outstanding debts.

On April 25, 2023 ,

warrants to purchase an aggregate 12,500 shares of common stock were issued to the Cesar J.

Gutierrez Living Trust, as beneficially

controlled by the brother of the Company’s CEO, pursuant to a private placement debt offering

in which aggregate proceeds of $ 50,000 were received in exchange for promissory notes and warrants to purchase an aggregate 12,500 shares

of common stock, representing 25,000 warrant shares per $ 100,000 of promissory notes.

The warrants were issued in-the-money and

are fully vested and exercisable over a period of 10 years at a price of $ 2.50 per share.

The Company may redeem outstanding warrants

prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock

equals or exceeds $ 9.00 per share for thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice

of such redemption.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 138 % and a weighted average

call option value of $ 3.74 , was $ 46,769 .

The warrants are being expensed over the life of the loans, resulting in $ 8,457 of stock-based

compensation expense during the six months ended June 30, 2023.

As of June 30, 2023, a total of $ 38,312 of unamortized expenses

are expected to be expensed over the remaining life of the outstanding debts.

On April 25, 2023 ,

warrants to purchase an aggregate 187,500 shares of common stock were issued to a trust held by the Company’s Chairman, Mr.

Goldfarb, pursuant to a private placement debt offering in which aggregate proceeds of $ 750,000

were received in exchange for promissory notes and warrants to purchase an aggregate 187,500 shares of common stock, representing 25,000

warrant shares per $ 100,000 of promissory notes.

The warrants were issued in-the-money and are fully vested and exercisable over

a period of 10 years at a price of $ 2.50 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price

of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for

thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated

value using the Black-Scholes Pricing Model, based on a volatility rate of 138 % and a weighted average call option value of $ 3.74 , was

The warrants are being expensed over the life of the loans, resulting in $ 126,853 of stock-based compensation expense during

the six months ended June 30, 2023.

As of June 30, 2023, a total of $ 574,684 of unamortized expenses are expected to be expensed

over the remaining life of the outstanding debts.

The notes mature on August 23, 2025. 

Loans may be advanced to the Company from time to time from August 

23, 2022 to the Maturity Date.

On various dates from September 

29, 2022 through March 

7, 2023, the Company received aggregate proceeds of $ 2,250,000 from two of the Company’s Directors on the sale of these notes and warrants.

On May 11, 2023, warrants to purchase an aggregate 25,000 shares of common stock were issued to the Bradley Berman, one of the Company’s Directors, pursuant to a private placement debt offering in which aggregate proceeds of $ 100,000 were received in exchange for promissory notes and warrants to purchase an aggregate 25,000 shares of common stock, representing 25,000 warrant shares per $100,000 of promissory notes.

The warrants were issued in-the-money and are fully vested and exercisable over a period of 10 years at a price of $ 2.50 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for thirty ( 30 ) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 138 % and a weighted average call option value of $ 4.69 , was $ 112,371 .

On April 25, 2023, warrants to purchase an aggregate 12,500 shares of common stock were issued to the Cesar J.

Gutierrez Living Trust, as beneficially controlled by the brother of the Company’s CEO, pursuant to a private placement debt offering in which aggregate proceeds of $ 50,000 were received in exchange for promissory notes and warrants to purchase an aggregate 12,500 shares of common stock, representing 25,000 warrant shares per $100,000 of promissory notes.

The warrants were issued in-the-money and are fully vested and exercisable over a period of 10 years at a price of $ 2.50 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for thirty ( 30 ) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 138 % and a weighted average call option value of $ 3.74 , was $ 46,769 . 

On April 25, 2023, warrants to purchase an aggregate 187,500 shares of common stock were issued to a trust held by the Company’s Chairman, Mr.

Goldfarb, pursuant to a private placement debt offering in which aggregate proceeds of $ 750,000 were received in exchange for promissory notes and warrants to purchase an aggregate 187,500 shares of common stock, representing 25,000 warrant shares per $100,000 of promissory notes.

The warrants were issued in-the-money and are fully vested and exercisable over a period of 10 years at a price of $ 2.50 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for thirty ( 30 ) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 138 % and a weighted average call option value of $ 3.74 , was $ 701,537 . 

SOW GOOD INC.

Notes to Condensed

Financial Statements

On April 25, 2023 ,

warrants to purchase an aggregate 100,000 shares of common stock were issued to an accredited investor , pursuant

to a private placement debt offering in which aggregate proceeds of $ 400,000 were received in exchange for promissory notes and warrants

to purchase an aggregate 100,000 shares of common stock, representing 25,000 warrant shares per $ 100,000 of promissory notes.

warrants were issued in-the-money and are fully vested and exercisable over a period of 10 years at a price of $ 2.50 per share.

may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale

price per share of Common Stock equals or exceeds $ 9.00 per share for thirty (30) consecutive trading days ending on the third business

day prior to the mailing of notice of such redemption.

The estimated value using the Black-Scholes Pricing Model, based on a volatility

rate of 138 % and a weighted average call option value of $ 3.74 , was $ 374,153 .

The warrants are being expensed over the life of the loans,

resulting in $ 67,655 of stock-based compensation expense during the six months ended June 30, 2023.

As of June 30, 2023, a total

of $ 306,498 of unamortized expenses are expected to be expensed over the remaining life of the outstanding debts.

On April 11, 2023 ,

warrants to purchase an aggregate 62,500 shares of common stock were issued to the Lyle A.

Berman Revocable Trust, as beneficially

controlled by one of the Company’s Directors, pursuant to a private placement debt offering

in which aggregate proceeds of $ 250,000 were received in exchange for promissory notes and warrants to purchase an aggregate 62,500 shares

of common stock, representing 25,000 warrant shares per $ 100,000 of promissory notes.

The warrants were issued in-the-money and

are fully vested and exercisable over a period of 10 years at a price of $ 2.60 per share.

The Company may redeem outstanding warrants

prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock

equals or exceeds $ 9.00 per share for thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice

of such redemption.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 138 % and a weighted average

call option value of $ 3.64 , was $ 227,598 .

The warrants are being expensed over the life of the loans, resulting in $ 49,884 of stock-based

compensation expense during the six months ended June 30, 2023.

As of June 30, 2023, a total of $ 177,714 of unamortized expenses

are expected to be expensed over the remaining life of the outstanding debts.

On March 7, 2023 ,

warrants to purchase an aggregate 62,500

shares of common stock were issued to the Lyle A.

Berman Revocable Trust,

as beneficially controlled by one of the Company’s Directors, pursuant to a private placement

debt offering in which aggregate proceeds of $ 250,000

were received in exchange for promissory notes and warrants to purchase an aggregate

62,500 shares of common stock, representing 25,000 warrant shares per $ 100,000 of promissory notes.

The warrants were issued in-the-money

and are fully vested and exercisable over a period of 10 years at a price of $ 2.60 per share.

The Company may redeem outstanding warrants

prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock

equals or exceeds $ 9.00 per share for thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice

of such redemption.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 138 % and a weighted average

call option value of $ 3.65 , was $ 228,154 .

The warrants are being expensed over the life of the loans, resulting in $ 29,153 of stock-based

compensation expense during the six months ended June 30, 2023.

As of June 30, 2023, a total of $ 199,001 of unamortized expenses

are expected to be expensed over the remaining life of the outstanding debts.

On March 2, 2023 ,

warrants to purchase an aggregate 62,500 shares of common stock were issued to a trust held by the Company’s Chairman, Mr.

Goldfarb, pursuant to a private placement debt offering in which aggregate proceeds of $ 250,000

were received in exchange for promissory notes and warrants to purchase an aggregate 62,500 shares of common stock, representing 25,000

warrant shares per $ 100,000 of promissory notes.

The warrants were issued in-the-money and are fully vested and exercisable over

a period of 10 years at a price of $ 2.60 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price

of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for

thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated

value using the Black-Scholes Pricing Model, based on a volatility rate of 139 % and a weighted average call option value of $ 3.66 , was

The warrants are being expensed over the life of the loans, resulting in $ 30,294 of stock-based compensation expense during

the six months ended June 30, 2023.

As of June 30, 2023, a total of $ 198,170 of unamortized expenses are expected to be expensed

over the remaining life of the outstanding debts.

Notes to Condensed Financial Statements

On April 25, 2023, warrants to purchase an aggregate 100,000 shares of common stock were issued to an accredited investor, pursuant to a private placement debt offering in which aggregate proceeds of $ 400,000 were received in exchange for promissory notes and warrants to purchase an aggregate 100,000 shares of common stock, representing 25,000 warrant shares per $100,000 of promissory notes.

The warrants were issued in-the-money and are fully vested and exercisable over a period of 10 years at a price of $ 2.50 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for thirty ( 30 ) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 138 % and a weighted average call option value of $ 3.74 , was $ 374,153 . 

On April 11, 2023, warrants to purchase an aggregate 62,500 shares of common stock were issued to the Lyle A.

Berman Revocable Trust, as beneficially controlled by one of the Company’s Directors, pursuant to a private placement debt offering in which aggregate proceeds of $ 250,000 were received in exchange for promissory notes and warrants to purchase an aggregate 62,500 shares of common stock, representing 25,000 warrant shares per $100,000 of promissory notes.

The warrants were issued in-the-money and are fully vested and exercisable over a period of 10 years at a price of $ 2.60 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for thirty ( 30 ) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 138 % and a weighted average call option value of $ 3.64 , was $ 227,598 . 

On March 7, 2023, warrants to purchase an aggregate 62,500 shares of common stock were issued to the Lyle A.

The warrants were issued in-the-money and are fully vested and exercisable over a period of 10 years at a price of $ 2.60 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for thirty ( 30 ) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 138 % and a weighted average call option value of $ 3.65 , was $ 228,154 . 

On March 2, 2023, warrants to purchase an aggregate 62,500 shares of common stock were issued to a trust held by the Company’s Chairman, Mr.

Goldfarb, pursuant to a private placement debt offering in which aggregate proceeds of $ 250,000 were received in exchange for promissory notes and warrants to purchase an aggregate 62,500 shares of common stock, representing 25,000 warrant shares per $100,000 of promissory notes.

The warrants were issued in-the-money and are fully vested and exercisable over a period of 10 years at a price of $ 2.60 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for thirty ( 30 ) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 139 % and a weighted average call option value of $ 3.66 , was $ 228,464 . 

SOW GOOD INC.

Notes to Condensed

Financial Statements

On February 1, 2023 ,

warrants to purchase an aggregate 125,000 shares of common stock were issued to a trust held by the Company’s Chairman, Mr.

Goldfarb, pursuant to a private placement debt offering in which aggregate proceeds of $ 500,000

were received in exchange for promissory notes and warrants to purchase an aggregate 125,000 shares of common stock, representing 25,000

warrant shares per $ 100,000 of promissory notes.

The warrants are fully vested and exercisable over a period of 10 years at a price

of $ 2.60 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share, provided that

the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for thirty (30) consecutive trading

days ending on the third business day prior to the mailing of notice of such redemption.

The estimated value using the Black-Scholes Pricing

Model, based on a volatility rate of 138 % and a weighted average call option value of $ 2.21 , was $ 276,462 .

The warrants are being expensed

over the life of the loans, resulting in $ 44,104 of stock-based compensation expense during the six months ended June 30, 2023.

of June 30, 2023, a total of $ 232,358 of unamortized expenses are expected to be expensed over the remaining life of the outstanding

On January 5, 2023 ,

warrants to purchase an aggregate 62,500 shares of common stock were issued to the Lyle A.

Berman Revocable Trust, as beneficially

controlled by one of the Company’s Directors, pursuant to a private placement debt offering

in which aggregate proceeds of $ 250,000 were received in exchange for promissory notes and warrants to purchase an aggregate 62,500 shares

of common stock, representing 25,000 warrant shares per $ 100,000 of promissory notes.

The warrants are fully vested and exercisable

over a period of 10 years at a price of $ 2.60 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price

of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for

thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated

value using the Black-Scholes Pricing Model, based on a volatility rate of 140 % and a weighted average call option value of $ 2.23 , was

The warrants are being expensed over the life of the loans, resulting in $ 25,520 of stock-based compensation expense during

the six months ended June 30, 2023.

As of June 30, 2023, a total of $ 113,821 of unamortized expenses are expected to be expensed

over the remaining life of the outstanding debts.

Note 14 – Income Taxes

The Company accounts for income taxes under ASC

Topic 740, Income Taxes, which provides for an asset and liability approach of accounting for income taxes.

Under this approach,

deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed

to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated

for income tax purposes.

Losses incurred during the period from April 9,

2011 (inception) to June 30, 2023 could be used to offset future tax liabilities.

Accounting standards require the consideration

of a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all of the benefits

of deferred tax assets will not be realized.

As of June 30, 2023, net deferred tax assets were $ 9,384,000 , with no deferred tax liability,

primarily related to net operating loss carryforwards.

A valuation allowance of approximately $ 9,384,000 was applied to the net deferred

Therefore, the Company has no tax expense for 2023 to date.

In accordance with FASB ASC 740, the Company has

evaluated its tax positions and determined there are no significant uncertain tax positions as of any date on or before June 30,

Notes to Condensed Financial Statements

On February 1, 2023, warrants to purchase an aggregate 125,000 shares of common stock were issued to a trust held by the Company’s Chairman, Mr.

Goldfarb, pursuant to a private placement debt offering in which aggregate proceeds of $ 500,000 were received in exchange for promissory notes and warrants to purchase an aggregate 125,000 shares of common stock, representing 25,000 warrant shares per $100,000 of promissory notes.

The warrants are fully vested and exercisable over a period of 10 years at a price of $ 2.60 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for thirty ( 30 ) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 138 % and a weighted average call option value of $ 2.21 , was $ 276,462 . 

On January 5, 2023, warrants to purchase an aggregate 62,500 shares of common stock were issued to the Lyle A.

The warrants are fully vested and exercisable over a period of 10 years at a price of $ 2.60 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $ 9.00 per share for thirty ( 30 ) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 140 % and a weighted average call option value of $ 2.23 , was $ 139,341 .

The warrants are being expensed over the life of the loans.

Note 14 –

Earnings per Share

Basic and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022:

Three Months Ended

Nine Months Ended

September 30,

Net income (loss) attributable to common shareholders

$ (1,647,272)

$ (4,388,446)

$ (5,312,123)

Basic weighted average shares

5,123,735  

4,845,851  

4,942,182  

4,831,346  

Basic income (loss) per share

$ 0.07  

$ ( 0.34 )  

$ ( 0.89 )  

Diluted weighted average shares

$ 6,481,158  

$ 4,845,851  

$ 4,942,182  

$ 4,831,346  

Diluted income (loss) per share

$ 0.05  

$ ( 0.34 )  

$ ( 0.89 )  

The table below includes information related to stock options and warrants that were outstanding at the end of each respective three and nine -month period ended September 30 2023, and 2022.

For periods in which we incurred a net loss, these amounts are not included in weighted average dilutive shares because their impact would be anti-dilutive.

During the three months ended September 30, 2023, using the Treasury Stock method to convert potentially dilutive shares added an additional 1,359,310  shares to our diluted weighted average shares. 

Three Months Ended

Nine Months Ended

September 30,

Weighted average stock options

Weighted average price of stock options

$ 4.64  

$ 4.81  

$ 4.64  

$ 4.81  

Weighted average warrants

2,291,250  

1,357,866  

2,084,994  

1,010,337  

Weighted average price of warrants

$ 2.50  

$ 2.47  

$ 2.50  

$ 2.47  

Average price of common stock

$ 5.52  

$ 2.92  

$ 4.56  

$ 2.76  

Note 15 –

The provision for income taxes for the three and nine months ended September 30, 2023 and 2022 was $ 0 , resulting in an effective income tax rate of 0 % for each period.

The Company’s effective tax rate for the three and nine months ended September 30, 2023 and 2022 is primarily due to the full valuation allowance against the Company’s net deferred tax assets.

The Company regularly evaluates the realizability of its deferred tax assets and establishes a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be utilized.

Because of our cumulative losses, substantially all of the deferred tax assets have been fully offset by a valuation allowance as of September 30, 2023 and December 31, 2022. 

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 15 – Commitments

Legal Proceedings

The Company may be subject from time to time to

various inquiries, administrative proceedings and litigation relating to matters arising in the normal course of business.

is not currently a defendant in any material litigation and is not aware of any threatened litigation that could have a material effect

on the Company.

Management is not able to estimate the minimum loss to be incurred, if any, as a result of the final outcome of the matters

arising in the normal course of business but believes they are not likely to have a material adverse effect upon the Company’s financial

position or results of operations and, accordingly, no provision for loss has been recorded.

Cash in Excess of FDIC Limits

The Company periodically maintains cash balances

at banks in excess of federally insured amounts.

The extent of loss, if any, to be sustained as a result of any future failure of a bank

or other financial institution is not subject to estimation at this time.

Lease Commitments

Upon closing of the Asset Purchase Agreement,

the Company assumed the Seller’s obligations under a real property lease for its 20,945 square foot facility in Irving, Texas, under

which an entity owned entirely by Ira Goldfarb is the landlord.

The lease term is through September 15, 2025 , with two five-year options

to extend, at a monthly lease term of $ 10,036 , with approximately a 3% annual escalation of lease payments commencing September 15, 2021.

Note 16 – Subsequent Events

The Company evaluates events that have occurred

after the balance sheet date through the date these financial statements were issued.

No events occurred of a material nature that would

have required adjustments to or disclosures in these financial statements except as follows:

Escrowed Cash

As of August 14, 2023, the Company is holding

$1,100,000 in escrow related to a financing that will need to be returned if terms and conditions of the financing are not completed on

or before August 31, 2023.

Options Granted

On July 13, 2023, an employee was granted options

to purchase an aggregate 10,000 shares of the Company’s common stock, having an exercise price of $4.87 per share, exercisable over

a 10-year term.

The options will vest 60% on the third anniversary, and 20% each anniversary thereafter until fully vested.

The estimated

value using the Black-Scholes Pricing Model, based on a volatility rate of 134% and a call option value of $4.53, was $45,296.

On July 6, 2023, two employees were granted options

to purchase an aggregate 6,000 shares of the Company’s common stock, having an exercise price of $4.18 per share, exercisable over

a 10-year term.

The options will vest 60% on the third anniversary, and 20% each anniversary thereafter until fully vested.

The estimated

value using the Black-Scholes Pricing Model, based on a volatility rate of 134% and a call option value of $3.89, was $23,353.

Notes to Condensed Financial Statements

Note 16 –

Subsequent Events

On October 26, 2023, the Company entered into a lease agreement with Prologis, Inc., a Maryland corporation.

Pursuant to the terms of the lease agreement, the Company will lease approximately 51,264 rentable square feet in Dallas, Texas, for a term of approximately five years and two months, which the Company intends to use as production space.

The initial term of the lease agreement will commence on November 1, 2023.

The lease agreement provides for base rent payments starting at approximately $ 42,500 per month (taking into consideration an initial phase-in of the base rent obligation) in the first year of the initial term, and increase each year, up to approximately $ 51,700 per month during the last year of the initial term.

The Company is also responsible for operating expenses of the premises.

The Company is required to provide a letter of credit to the Landlord in the amount of $ 300,000 in connection with the lease agreement.

The lease agreement may be extended for a period of five years, at the option of the Company, at a rate to be based on a fair market rent rate determined at the time of the extension.

The Company evaluates events that have occurred after the balance sheet date through the date these financial statements were issued.

No events occurred of a material nature that would have required adjustments to or disclosures in these financial statements.

MANAGEMENT ’

S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Cautionary Statements

This Form 10-Q contains forward-looking statements.

We also provide forward-looking statements in other materials we release to the public, as well as public oral statements.

We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect our company and to take advantage of the “safe harbor”

protection for forward-looking statements that applicable federal securities law affords.

From time to time, our management or persons acting on our behalf may make forward-looking statements to inform existing and potential security holders about our company.

All statements other than statements of historical facts included in this report regarding our financial position, business strategy, plans and objectives of management for future operations and industry conditions are forward-looking statements.

When used in this report, forward-looking statements are generally accompanied by terms or phrases such as “estimate,”

“project,”

“forecast,”

“predict,”

“believe,”

“expect,”

“anticipate,”

“target,”

“plan,”

“ongoing,”

“intend,”

“seek,”

“goal,”

“will,”

“should,”

“could,”

“may”

or other words and similar expressions that convey the uncertainty of future events or outcomes.

Items making assumptions regarding actual or potential future sales, market size, collaborations, trends or operating results also constitute such forward-looking statements.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements include the following:

volatility or decline of our stock price;

low trading volume and illiquidity of our common stock;

potential fluctuation in quarterly results;

inability to maintain adequate liquidity to meet our financial obligations;

failure to obtain sufficient sales and distributions for our freeze-dried product offerings;

supply chain disruption and delay;

transportation, labor, and raw material cost increases;

litigation, disputes and legal claims involving outside parties;

risks related to our ability to be traded on the OTCQB and meeting trading requirements

We have based these forward-looking statements on our current expectations and assumptions about future events.

While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, most of which are difficult to predict and many of which are beyond our control.

Accordingly, actual results may differ materially from expected results in these statements.

Forward-looking statements speak only as of the date they are made.

Therefore, readers are urged not to place undue reliance on these forward-looking statements.

We assume no obligation to update any forward-looking statements to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation.

Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the SEC which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows.

If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.

These forward-looking statements may be affected by underlying assumptions that may prove inaccurate or incomplete, or by known or unknown risks and uncertainties, including those described in this section and in the Item 1A.

Risk Factors section in our 2022 Form 10-K.

Overview and Outlook

Sow Good is a trailblazing U.S.-based freeze-dried candy and snack manufacturer dedicated to providing consumers with innovative and explosively flavorful freeze-dried treats.

Sow Good has harnessed the power of our proprietary freeze drying technology and product-specialized manufacturing facility to transform traditional candy into a novel and exciting everyday confectionaries subcategory that we call freeze-dried candy.

We began commercializing our freeze-dried candy products in the first quarter of 2023, and as of September 30, 2023, we have twelve stock keeping units (“SKUs”) in our Sow Good Candy line of treats and eight SKUs in our Sow Good Crunch Cream line.

We sell our treats across retail, wholesale distributors, and online e-commerce channels, which comprise 57%, 24%, and 9% of our sales through the second quarter of 2023, respectively.

As of September 30, 2023, our treats are offered for sale in over 5,857 brick-and-mortar retail outlets in the United States, Canada, and Israel.

The rapid demand growth for our delectable treats since their retail debut in March 2023 highlights our consumers’

excitement for our novel and explosively flavorful treats that “satisfy your sweet tooth in fewer bites.”

Sow Good is led by co-founders Claudia and Ira Goldfarb, who have over a decade of manufacturing experience with an extensive freeze-drying background, dedication to job creation, and proven track record of identifying and growing niche trends into everyday categories.

Under their leadership, revenues have grown from $428,132 during the year ended December 31, 2022 to $5,034,203 for the nine-month period ended September 30, 2023.

We believe the candy category is stale, repetitive, and in need of revitalization to reengage and captivate consumers seeking innovative ways to satisfy their sweet cravings.

We see our market opportunity as existing at the intersection of two burgeoning categories:

freeze-dried candy and non-chocolate confections.

According to the NCA, the non-chocolate confections market grew 13.8% in sales in 2022, exceeding $15 billion, and according to Grand View Research is forecasted to grow at a compounded annual growth rate of 5.8% from 2023 to 2030.

We believe the nascent freeze-dried candy market is poised for exponential growth given increasing consumer preferences for novel and distinctive candy products.

According to the NCA, approximately 61% of shoppers occasionally or frequently seek out products they have never purchased before.

Given our exceptional performance in retail launches, surging customer demand, and increasing production capacity, we are confident that we can catapult freeze-dried candy from a trendy spark on social media to a stable, top-performing consumer confectionary in retail.

Our products have launched in retailers nationwide from convenience and grocery stores to big-box retailers, such as Five Below, Target, Hy-Vee, FYE, Big Lots, Snackmagic, and Misfits Market/Imperfect Foods.

In addition, we sell a substantial portion of our products through distributors such as Redstone Foods, C.B.

Distributors and Alpine Foods.

Video reviews of Sow Good’s products that are organically generated by TikTok users have amassed over 4 million views as of September 30, 2023.

Many of our existing customers launched with a limited number of SKUs, which are now significantly outpacing initial sales projections.

We believe there is a significant growth opportunity in increasing our shelf presence, SKU portfolio, and number of stores with our existing customers. 

As we scale production, we will be able to increase the availability of our products to existing customers in current locations and add distribution to more of their stores, while also broadening our SKU portfolio offerings.

Bolstering our distribution will be a key growth driver for Sow Good, so more of our products are available wherever our consumers choose to shop, whether it be a retail store, convenience store, or directly online.

To further enhance our visibility in current stores and support our retail launches with existing customers, while strengthening our brand name, we are introducing our product displays with distinctive designs and product highlights to educate new consumers on the advantages of freeze-dried treats.

We believe this strategy will capture the attention of new consumers, further educate and attract current consumers, and ultimately increase sales for our retailers.

Our highly differentiated omnichannel distribution strategy has three key components:

retailers, e-commerce, and distributors.

In aggregate, this omnichannel strategy provides us with a diverse set of consumers and customer partners, leading to a larger TAM opportunity than is normally available to products sold only in grocery stores, along with an opportunity to develop a direct relationship with our customers at our website, www.thisissowgood.com.

This platform is already set up but with some items set as out of stock until we have additional production capacity.

Going Concern Uncertainty

As of September 30, 2023, the Company had an accumulated retained deficit of $60,068,008 and net losses for both the quarter and year to date periods ended September 30, 2023, along with $2,096,672 of cash on hand, and working capital of $ 3,145,708.

We are too early in our development to be able to project operating results with the necessary level of certainty;

our plans for growth include significant capital expenditures, which we may not be able to fund through operating cash flows;

therefore, we may not have sufficient funds to sustain our operations for the next twelve months while also executing our plan for growth.

These factors raise substantial doubt about our Company's ability to continue as a going concern. 

During the current third quarter of 2023, the Company achieved a significant improvement in its operating results.

This improvement was primarily driven by increased sales of our freeze-dried candy to large retail customers, coupled with increased margins in the third quarter of 2023, related to our pivot away from slower selling products to focus on our customers demand for freeze-dried candy. 

Management has developed and implemented a comprehensive plan to improve the Company's financial position.

In the third quarter of 2023, to support its ongoing operations, the Company secured additional capital of $3,675,000 through a share offering.

The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern.

Results of Operations for the Three Months Ended September 30, 2023 and 2022

The following table summarizes selected items from the statement of operations for the three months ended September 30, 2023 and 2022, respectively.

Three Months Ended

September 30,

Cost of goods sold

Gross profit (loss)

Operating expenses:

General and administrative expenses:

Salaries and benefits

Professional services

Other general and administrative expenses

Total general and administrative expenses

Depreciation and amortization

Total operating expenses

Net operating loss

Other expense:

Interest expense

Gain on disposal of property and equipment

Total other expense

Revenues of $ 5,034,203 for the three months ended September 30, 2023, consist primarily of online freeze-dried candy product sales, compared with $ 87,741 for the three months ended September 30, 2022, an increase of $ 4,946,462, or 5,638%.

This growth is attributed to our pivot to sales of our freeze-dried candy and the expansion of our business-to-business sales during the current period, compared to the same period in the prior year, and the additional capacity for production after the addition of two new freeze driers in the second quarter of 2023.

Cost of Goods Sold

Cost of goods sold for the three months ended September 30, 2023 were $2,717,254, compared to $65,195 for the three months ended September 30, 2022, an increase of $2,652,059, or 4,068%.

Cost of goods sold, in the third quarter of 2023 primarily consisted of material costs and labor on the sales of freeze-dried candy products, while the third quarter of 2022 mainly consisted of costs and labor related to our food product lines.

Our gross profit margin was 49% during the quarter, compared to 26% during the comparative period of 2022.

The increased profit margin is due to higher margins on candy versus our food product lines, which are now discontinued.

General and administrative expenses

Salaries and benefits

Salaries and benefits for the three months ended September 30, 2023 were $1,262,332, compared to $788,450 for the three months ended September 30, 2022, an increase of $473,882 or 60%.

Salaries and benefits included stock-based compensation expense for the three months ended September 30, 2023 of $140,759 compared to $130,868 for the three months ended September 30, 2022, a decrease of $15,109, or 9.7%.

Stock-based compensation consists of stock options expense of $140,759 and $130,868 incurred in the three months ended September 30, 2023 and 2022, respectively, and $25,000 of expense related to shares of common stock issued to officers and consultants for services rendered in the three months ended September 30, 2022.

The increase in salaries and benefits was primarily due to increased personnel necessitated by our rapid growth.

Professional services

Professional services were $294,720 for the 2023 period, compared to $61,209 for the 2022 period, an increase of $233,511 or 381%.

The increase was primarily due to advisory fees related to raising capital for future expansion plans.

Other general and administrative expenses

Other general and administrative expenses for the three months ended September 30, 2023 was $350,082, compared to $403,429 for the three months ended September 30, 2022, a decrease of $53,347, or 13%.

The increase is primarily attributable to increased administrative infrastructure as we continue to grow.

Depreciation expense for the three months ended September 30, 2023 was $72,190 compared to $69,127 for the three months ended September 30, 2022, an increase of $3,063, or 4.4%. 

Other expense

In the three months ended September 30, 2023, other expense was $3,641, consisting of interest expense.

During the comparative three months ended September 30, 2022, other expense was $347,603, which included $98,473 of interest expense, including interest on our EIDL loan with the SBA and loans from our officers and directors, and $285,522 related to the amortization of warrants issued as a debt discount on the loans from our officers and directors, partially offset by a gain in asset of disposal of $36,392.

Interest expense decreased by $380,354.0, or 99.1%, primarily due to the decreased amortization of warrants issued in-the-money on loans from our officers and directors in the current period.

Net income for the three months ended September 30, 2023 was $333,984, compared to net loss $1,647,272 during the three months ended September 30, 2022, a positive change of $1,981,256, or 120%.

The positive change was due primarily to increased gross profit of $2,294,403 and decreased interest expense of $380,354, related to the amortization of warrants issued as a debt discount, partially offset by increased operating expenses of $657,109.

Results of Operations for the Nine Months Ended September 30, 2023 and 2022

The following table summarizes selected items from the statement of operations for the nine months ended September 30, 2023 and 2022, respectively.

Nine Months Ended

September 30,

Cost of goods sold

Gross profit (loss)

Operating expenses:

General and administrative expenses:

Salaries and benefits

Professional services

Other general and administrative expenses

Total general and administrative expenses

Depreciation and amortization

Total operating expenses

Net operating loss

Other expense:

Interest expense

Gain on disposal of property and equipment

Total other expense

Revenues were $6,548,479 for the nine months ended September 30, 2023, compared to $381,056 for the nine months ended September 30, 2022, an increase of $6,167,423, or 1,619%.

Nine-month revenues consist primarily of $5,034,203 in the third quarter of 2023, of freeze-dried candy sales.

Revenues increased as we pivoted to sales of our freeze-dried candy, put additional freezers into production, and expanded our business-to-business sales during the current period, compared to the same period in the prior year.

Cost of Goods Sold

Cost of goods sold for the nine months ended September 30, 2023 were $5,046,434, compared to $263,289 for the nine months ended September 30, 2022, an increase of $4,783,145, or 1,817%.

Cost of goods sold, primarily consisting of material costs and labor on the sales of freeze-dried candy products and a one-time inventory write down of $2,075,080 as we disposed of non-candy freeze-dried products to pivot exclusively to our better selling candy products.

Our gross profit margin was approximately 23% during the current period, compared to 31% during the comparative period. 

General and administrative expenses

Salaries and benefits

Salaries and benefits for the nine months ended September 30, 2023 were $2,644,087, compared to $2,947,505 for the nine months ended September 30, 2022, a decrease of $303,418, or 10%.

Salaries and benefits included stock-based compensation expense for the nine months ended September 30, 2023 of $524,696, compared to $731,499 for the nine months ended September 30, 2022, a decrease of $206,803, or 28%.

Stock-based compensation consists of $399,436 and $651,501of stock options expense incurred in the nine months ended September 30, 2023 and 2022, respectively, and $125,229 and $79,998 of expense related to shares of common stock issued to officers and consultants for services rendered in the nine months ended September 30, 2023 and 2022, respectively.

The decrease in salaries and benefits was primarily due to accelerated vesting and severance paid to an executive in the nine months ended September 30, 2022, partially offset by increases in headcount to support operations in the current nine-month period.

Professional services

Professional services were $404,256 for the 2023 period, compared to $177,197 for the 2022 period, an increase of $227,059, or 128%.

The increase was primarily due to advisory fees related to capital raises for expansion plans and other costs related to rapid growth compared to the prior year period. 

Other general and administrative expenses

Other general and administrative expenses for the nine months ended September 30, 2023 was $1,265,056, compared to $1,296,294 for the nine months ended September 30, 2022, a decrease of $31,238, or 2%.

The increase is primarily attributable to increased administrative infrastructure as we continue to scale the production and sales of our freeze-dried products.

Depreciation expense for the nine months ended September 30, 2023 was $306,092, compared to $223,887 for the nine months ended September 30, 2022, an increase of $82,205, or 37%.

The increase is due to the addition of two new freeze driers which were put into production during the nine months ended September 30, 2023.

Other expense

In the nine months ended September 30, 2023, other expense was $1,349,486, consisting of $444,639 of interest expense, including interest on our EIDL loan with the SBA and loans from our officers and directors, and $900,226 related to the amortization of warrants issued as a debt discount on the loans from our officers and directors.

During the comparative nine months ended September 30, 2022, other expense was $806,848, consisting of $235,920 of interest expense on our EIDL loan with the SBA and loans from our officers and directors, and $607,320 related to the amortization of warrants issued as a debt discount on the loans from our officers and directors, partially offset by a gain on disposal of property of $36,392.

Interest expense increased by $506,246 or 60%, primarily due to the increased amortization of warrants issued in-the-money on loans from our officers and directors in the current period.

Net loss for the nine months ended September 30, 2023 was $4,388,446, compared to $5,312,123 during the nine months ended September 30, 2022, an increased net loss of $923,677, or 17%.

Included in the nine months ended September 30, 2023 net loss was $2,075,080 of inventory impairment and of $292,906 increased interest expense on debt financing issued with in-the-money warrants during the current period, as offset by increased gross profit of $1,384,278.

Liquidity and Capital Resources

The following table summarizes our total current assets, liabilities and working capital as of September 30, 2023 and December 31, 2022, respectively.

September 30,

Current Assets

Current Liabilities

Working Capital

As of September 30, 2023, we had working capital of $ 3,145,708.

The following table summarizes our cash flows during the nine months ended September 30, 2023 and 2022, respectively.

Nine Months Ended

September 30,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net change in cash and cash equivalents

Net cash used in operating activities was $3,328,516 and $4,149,046 for the nine months ended September 30, 2023 and 2022, respectively, a period over period decrease of $820,530.

Cash used in operations during the current nine month period included $1,197,608 of increases in accounts receivable, all of which were due within 30 days, and $2,342,871 of increases in cash paid for inventory, partially offset by increases in accounts payable and accrued expenses. The decrease in cash used in operating activities is due to increased gross margins, partially offset by increased non-cash items impacting our net operating loss.

Net cash used in investing activities were $1,326,276 and $2,272,066 for the nine months ended September 30, 2023 and 2022, respectively, a period over period decrease of $945,790.

Cash used in investing activities were comprised of $1,326,276 of fixed asset additions, as we completed our 2 nd and 3 rd  freezers and finalized our office leasehold improvements during the nine months ended September 30, 2023, compared to $2,266,137 of fixed asset purchases during the nine months ended September 30, 2022.

Net cash provided by financing activities were $6,475,000 for the nine months ended September 30, 2023, which was comprised of cash proceeds from the issuance of 735,000 shares of common stock of $3,675,000 and $2,400,000 of debt financing received from our officers and directors and $400,000 received from others under the same terms, compared to $4,450,000, comprised of $3,870,000 of debt financing received from our officers and directors and $580,000 received from others under the same terms, for the nine months ended September 30, 2022.

Satisfaction of our cash obligations for the next 12 months

As of September 30, 2023, our balance of cash was $ 2,096,672 and we had total working capital of $ 3,145,708.

Based on projections of cash expenditures in the Company’s current business plan, the cash on hand as of September 30, 2023 would be sufficient to sustain operations over the next year.

We expect to incur significant costs related to the development and operation of our freeze-dried candy business.

Our plan for satisfying our cash requirements for the next twelve months is through cash on hand and additional financing in the form of equity or debt as needed.

Our ability to scale production and distribution capabilities and further increase the value of our brands is largely dependent on our success in raising additional capital. 

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of financial conditions and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP.

The preparation of these financial statements required us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses.

On an ongoing basis, we evaluate these estimates and judgments.

We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances.

These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results and experiences may differ materially from these estimates.

Our critical accounting policies are more fully described in Note 2 of the footnotes to our financial statements appearing elsewhere in this Form 10-Q, and Note 2 of the footnotes to the financial statements provided in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .

As a “smaller reporting company”

as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements