What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-22 compared with 2023-04-14 · 865 added, 1204 removed, 392 unchanged (84% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY

DATA OF SOW GOOD INC.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA OF SOW GOOD INC.

SOW GOOD INC.

7 unchanged sentences

Notes to the Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors

Sow Good, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheet of SOW Good, Inc.

(“the Company”) as of December 31, 2023, the related statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also includes evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Stock Based Compensation — Measurement of fair value of stock options with market and performance conditions — Refer to Notes 2 and 13 to the Financial Statements

Critical Audit Matter Description

As described in Notes 2 and 13 to the financial statements, the Company granted certain stock-based awards that will vest based on various service conditions and certain stock-based awards that will vest based on the achievement of a market-based and performance-based goal.

The Company estimated the fair value of stock awards using a Black-Scholes option pricing formula for service conditions and a Monte-Carlo simulation for market-based and performance-based goal.

We identified the fair value measurement of the Company’s stock-based awards based on the achievement of a market-based and performance-based condition as a critical audit matter.

Specifically, there was a high degree of subjective auditor judgment due to the complex valuation methodology used and assumption of the expected price volatility of the Company’s common stock.

How the Critical Audit Matter Was Addressed in the Audit

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and understood the controls related to the valuation of stock-based awards based on the achievement of a market-based and performance-based condition process, including management’s method, use of a specialist, assumptions and data.

We involved valuation professionals with specialized skill and knowledge who assisted in:

evaluating the appropriateness of the valuation methodology utilized by the Company

recalculated the volatility assumptions used in the model

/s/ Urish Popeck & Co., LLC

We have served as the Company's auditor since 2023.

Pittsburgh, Pennsylvania

March 22, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

1 unchanged sentence

Opinion on the Financial Statements

We have audited the accompanying balance sheets

of SOW GOOD INC.

(the Company) as of December 31, 2022 and 2021, and the related statements of operations, stockholders’ equity,

and cash flows for the two-year period then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles

generally accepted in the United States of America.

We have audited the accompanying balance sheet of SOW GOOD INC.

(the Company) as of December 31, 2022, and the related statements of operations, stockholders’ equity, and cash flows for year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been

prepared assuming that the Company will continue as a going concern.

As discussed in Note 3 to the financial statements, the Company has

suffered net losses from operations, which raises substantial doubt about its ability to continue as a going concern.

plans regarding those matters are discussed in Note 3.

The financial statements do not include any adjustments that might result from

the outcome of this uncertainty.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 3 to the financial statements, the Company has suffered net losses from operations, which raises substantial doubt about its ability to continue as a going concern.

Management’s plans regarding those matters are discussed in Note 3.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are

required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding

of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe our audits provide a reasonable basis for our opinion.

Our audits also included evaluating the accounting principles used and the significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is

a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the

audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially

challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the

financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on

the critical audit matter or on the accounts or disclosures to which they relate.

As discussed in Note 1 to the

financial statements, the Company issues stock-based compensation in accordance with ASC 718, Compensation.

Auditing management’s calculation

of the fair value of stock-based compensation can be a significant judgment given the fact that the Company uses management estimates

on various inputs to the calculation.

To evaluate the appropriateness

of the fair value determined by management, we examined and evaluated the inputs management used in calculating the fair value of the

stock-based compensation.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which they relate.

As discussed in Note 1 to the financial statements, the Company issues stock-based compensation in accordance with ASC 718, Compensation.

Auditing management’s calculation of the fair value of stock-based compensation can be a significant judgment given the fact that the Company uses management estimates on various inputs to the calculation.

To evaluate the appropriateness of the fair value determined by management, we examined and evaluated the inputs management used in calculating the fair value of the stock-based compensation.

/s/ M&K CPAS, PLLC

M&K CPAS, PLLC

We have served as the Company’s auditor since 2010.

We served as the Company’s auditor from 2010 to 2023.

April 14, 2023

3 unchanged sentences

Cash and cash equivalents

Accounts receivable

$ 2,410,037 $ 276,464

Accounts receivable, net

2,578,259 191,022

4,123,246 1,874,949

Prepaid inventory

563,131 97,930

Prepaid expenses

563,164 137,692

Total current assets

10,237,837 2,578,057

Property and equipment:

Construction in progress

1,522,465 2,487,673

Property and equipment

6,287,422 3,055,579

Less accumulated depreciation

( 967,602 ) ( 508,257 )

Total property and equipment, net

6,842,285 5,034,995

Security deposit

346,616 24,000

Right-of-use asset

Intangible assets

4,061,820 1,261,525

$ 21,488,558 $ 8,898,577

LIABILITIES AND STOCKHOLDERS' EQUITY

1 unchanged sentence

Accounts payable

$ 853,535 $ 392,691

Accrued interest

860,693 226,575

Accrued expenses

648,947 218,368

Current portion of operating lease liabilities

550,941 52,543

Current maturities of notes payable, related parties, net of $ 431,854 and $ 0 of debt discounts at December 31, 2023 and 2022, respectively

Current maturities of notes payable, net of $ 86,062 and $ 0 of debt discounts at December 31, 2023 and 2022, respectively

Total current liabilities

5,771,200 890,177

Operating lease liabilities

3,671,729 1,301,355

Notes payable, related parties, net of $ 1,448,858 and $ 2,692,757 of debt discounts at December 31, 2023 and 2022, respectively

Notes payable, net of $ 336,085 of debt discounts at December 31, 2022

4,171,142 3,502,243

Notes payable, net of $ 135,962 and 336,082 of debt discounts at December 31, 2023 and 2022, respectively

594,038 393,915

Total liabilities

14,208,109 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, 4,847,384 and

4,809,070 shares issued and outstanding at December 31, 2022 and 2021, respectively

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, 6,029,371 and 4,847,384 shares issued and outstanding at December 31, 2023 and 2022, respectively

Additional paid-in capital

Common stock payable, consisting of 11,585 shares at December 31, 2021

Accumulated deficit

66,014,415 58,485,602

Accumulated deficit

( 58,739,995 ) ( 55,679,562 )

Total stockholders' equity

7,280,449 2,810,887

Total liabilities and stockholders' equity

$ 21,488,558 $ 8,898,577

The accompanying notes are an integral part of these financial statements.

3 unchanged sentences

Ended December 31,

$ 16,070,924 $ 428,132

Cost of goods sold

11,189,360 308,293

4,881,564 119,839

Operating expenses:

1 unchanged sentence

Salaries and benefits

3,391,798 3,662,313

Professional services

688,023 245,546

Other general and administrative expenses

1,854,156 1,625,952

Intangible asset impairment

1 unchanged sentence

Total general and administrative expenses

5,933,977 10,731,281

Depreciation and amortization

168,271 274,053

Total operating expenses

Net operating loss

6,102,248 11,005,334

Net operating loss

( 1,220,684 ) ( 10,885,495 )

Other income (expense):

Interest expense, including $ 925,839 and $ 607,320 of warrants issued as a debt

discount for the years ended December 31, 2022 and 2021, respectively

Interest expense, including $ 1,173,986 and $ 925,839 of warrants issued as a debt discount for the years ended December 31, 2023 and 2022, respectively

( 1,839,749 ) ( 1,277,965 )

Gain (loss) on disposal of property and equipment

Gain on early extinguishment of debt

Gain on investment in Allied Esports Entertainment, Inc.

Total other income (expense)

Gain on disposal of property and equipment

Total other expense

( 1,839,749 ) ( 1,241,573 )

Loss before income tax

( 3,060,433 ) ( 12,127,068 )

Provision (benefit) for income taxes

$ ( 3,060,433 ) $ ( 12,127,068 )

Weighted average common shares outstanding - basic and diluted

5,168,339 4,835,389

Net loss per common share - basic and diluted

$ ( 0.59 ) $ ( 2.51 )

The accompanying notes are an integral part of these financial statements.

3 unchanged sentences

Balance, December 31, 2021

$ ( 36,678,338 )

Common stock issued on subscriptions payable for the purchase of S-FDF, LLC assets

( 1,853,600 )

Common stock sales for cash to officers and directors

Common stock sales for cash

Common stock issued to officers and directors for services

Common stock issued to employees and consultants for services

Common stock issued to advisory panel for services

Common stock options granted to officers and directors for services

Common stock options granted to employees for services

Common stock warrants granted to related parties as a debt discount

( 6,874,156 )

Balance, December 31, 2021

$ ( 43,552,494 )

Common stock options granted to employees and advisors for services

Common stock warrants granted to related parties pursuant to debt financing

Common stock warrants granted to note holders pursuant to debt financing

Balance, December 31, 2022

Common stock issued in private placement offering

Common stock issued to officers and directors for services

Common stock issued to advisory board for services

Common stock issued to advisory panel for services

Common stock options granted to officers and directors for services

Common stock options granted to employees and advisors for services

( 12,127,068 )

Common stock warrants granted to related parties pursuant to debt financing

Common stock warrants granted to note holders pursuant to debt financing

Balance, December 31, 2023

$ ( 55,679,562 )

The accompanying notes are an integral part of these financial statements.

4 unchanged sentences

CASH FLOWS FROM OPERATING ACTIVITIES

$ ( 12,127,068 )

$ ( 6,874,156 )

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

1 unchanged sentence

Depreciation and amortization

(Gain) loss on disposal of property and equipment

Loss on impairment of intangible assets

Loss on impairment of goodwill

Gain on investment in Allied Esports Entertainment, Inc.

Gain on early extinguishment of debt

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

Gain on disposal of property and equipment

Inventory write-downs

Impairment of intangible assets

Impairment of goodwill

Common stock issued to officers and directors for services

5 unchanged sentences

Prepaid expenses

( 1,310,526 )

Prepaid inventory

Security deposits

Right-of-use asset

Increase (decrease) in current liabilities:

Accounts payable

Accrued interest

Accrued expenses

Lease liabilities

Net cash used in operating activities

( 5,146,635 )

( 5,551,261 )

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds received from disposal of property and equipment

Proceeds received from sale of investment in Allied Esports Entertainment, Inc.

Purchase of property and equipment

Cash paid for construction in progress

( 2,487,673 )

Cash paid for intangible assets

Net cash used in investing activities

( 2,622,829 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds received from the sale of common stock

Proceeds received from notes payable, related parties

Proceeds received from notes payable

Proceeds received from the sale of common stock

Net cash provided by financing activities

NET CHANGE IN CASH AND CASH EQUIVALENTS

( 3,069,464 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

4 unchanged sentences

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Reclassification of construction in progress to property and equipment

Value of debt discounts attributable to warrants

2 unchanged sentences

NOTES TO THE FINANCIAL STATEMENTS

Note 1 – Organization and Nature of

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”.

Prior 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 September 26, 2017, the Company finalized an

equity raise utilizing a rights offering and backstop agreement, raising net proceeds of $5,051,675 and issuing 1,439,400 shares.

proceeds were used to sponsor a special purpose acquisition company, discussed below, with the remainder for general corporate purposes.

On October 10, 2017, the Company’s sponsored

special purpose acquisition company, Black Ridge Acquisition Corp.

(“BRAC”), completed an IPO raising $138,000,000 of gross

proceeds (including proceeds from the exercise of an over-allotment option by the underwriters on October 18, 2017).

In addition, the

Company purchased 445,000 BRAC units at $10.00 per unit in a private placement transaction for a total contribution of $4,450,000 in order

to fulfill its obligations in sponsoring BRAC, a blank check company formed for the purpose of entering into a merger, share exchange,

asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses

BRAC’s efforts to identify a prospective target business were not limited to a particular industry or geographic region.

Following the IPO and over-allotment, BROG owned 22% of the outstanding common stock of BRAC and managed BRAC’s operations via a

management services agreement.

On December 19, 2018, BRAC entered into a business combination agreement, which subsequently closed on

August 9, 2019.

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.

The proceeds are being used to invest in inventory

ahead of pursuing larger business-to-business relationships, as well as funding incremental capital expenditures and general operating

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.

Granola products are initially being sold direct-to-consumer

and will later be targeted to the business-to-business segment.

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

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 will be 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.

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, 2023 to the Maturity Date.

On December 21, 2022 and September 29,

2022, the Company received aggregate proceeds of $ 250,000 and $ 750,000 from two of the Company’s Directors on the sale of these

notes and warrants.

Note 2 – Summary

of Significant Accounting Policies

Basis of Accounting

The accompanying financial statements have been

prepared in conformity with accounting principles generally accepted in the United States of America and the rules of the Securities and

Exchange Commission (SEC).

All references to Generally Accepted Accounting Principles (“GAAP”) are in accordance with The

FASB Accounting Standards Codification (“ASC”) and the Hierarchy of Generally Accepted Accounting Principles.

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 fourteen SKU offering as of December 31, 2023, 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 and 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 add a fourth freeze drier in the first quarter of 2024 and begin construction of our fifth, and sixth freeze driers, which we expect to be completed in the third quarter of 2024.

Note 2 – Summary of Significant Accounting Policies

These financial statements are presented in accordance with United States generally accepted accounting principles (“GAAP”) and stated in US dollars, have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

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.

Segment Reporting

FASB ASC 280-10-50 requires annual and interim

reporting for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major

An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn

revenues and expenses, and about which separate financial information is regularly evaluated by the chief operating decision maker in

deciding how to allocate resources.

The Company operates as a single segment and will evaluate additional segment disclosure requirements

as it expands its operations.

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.

FASB ASC 280 - 10 - 50 requires annual and interim reporting for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers.

An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and expenses, and about which separate financial information is regularly evaluated by the chief operating decision maker in deciding how to allocate resources.

The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.

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.

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.

Environmental Liabilities

The Company was formerly a direct owner of assets

in the oil and gas industry.

The Company was formerly a direct owner of assets in the oil and gas industry.

The oil and gas industry is subject, by its nature, to environmental hazards and clean-up costs.

time, management knows of no substantial losses from environmental accidents or events which would have a material effect on the Company.

At this time, management knows of no substantial losses from environmental accidents or events which would have a material effect on the Company.

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

Fair Value of Financial Instruments

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.

The carrying amounts of cash, accounts

receivable, prepaid expenses, inventory, 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 basis.

Cash and Cash Equivalents

Cash equivalents include money market accounts

which have maturities of three months or less.

For the purpose of the statements of cash flows, all highly liquid investments with an

original maturity of three months or less are considered to be cash equivalents.

Cash equivalents are stated at cost plus accrued interest,

which approximates market value.

There were no cash equivalents on hand at December 31, 2022 and 2021.

Cash equivalents include money market accounts which have maturities of three months or less.

Cash equivalents are stated at cost plus accrued interest, which approximates market value.

Cash in Excess of FDIC Insured Limits

The Company maintains its cash in bank deposit

accounts which, at times, may exceed federally insured limits.

Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC)

and the Securities Investor Protection Corporation (SIPC) up to $250,000 and $500,000, respectively, under current regulations.

didn’t have any cash in excess of FDIC and SIPC insured limits at December 31, 2022.

The Company had approximately $ 2,813,000 in

excess of FDIC and SIPC insured limits at December 31, 2021.

The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.

Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) and the Securities Investor Protection Corporation (SIPC) up to $250,000 and $500,000, respectively, under current regulations.

The Company had cash in excess of FDIC and SIPC insured limits of $ 1,837,840 at December 31, 2023 .

The Company did not have cash in excess of FDIC and SIPC insured limits at December 31, 2022 .

The Company has not experienced any losses in such accounts.

Accounts Receivable

Accounts receivable are carried at their estimated

collectible amounts.

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

and their current financial condition.

The Company had no allowance for doubtful accounts for either of the periods presented, as all

accounts receivable had been subsequently collected.

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 no allowance for doubtful accounts for either of the periods presented, as all accounts receivable had been subsequently collected.

Inventory is valued at the lower of average cost or net realizable value.

The cost of substantially all of the Company’s inventory has been determined by the first -in, first -out (FIFO) method.

Property and Equipment

Property and equipment are stated at the lower

of cost or estimated net recoverable amount.

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

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 years, or over the life of the agreement

Office equipment

Furniture and fixtures

Machinery and equipment

Website (years)

Office equipment (years)

Furniture and fixtures (years)

Machinery and equipment (years)

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 expense was $ 299,553 , including

$ 25,500 capitalized as inventory overhead and expensed to cost of goods sold, and $ 208,448 for the years ended December 31, 2022

and 2021, respectively.

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

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.

Impairment analysis on intangible assets resulted in a loss of $ 310,173 for the year ended December 31, 2022.

Inventory, consisting of raw materials, material

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

Schedule of inventory

Finished goods

Packaging materials

Work in progress

Raw materials

Total inventory

No reserve for obsolete inventories has been recognized.

We have not yet commenced significant production.

The Company evaluates goodwill on an annual basis

in the fourth quarter or more frequently if management believes indicators of impairment exist.

Such indicators could include, but are

not limited to (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse

action or assessment by a regulator.

The Company first assesses qualitative factors to determine whether it is more likely than not that

the fair value of a reporting unit is less than its carrying amount, management conducts a quantitative goodwill impairment test.

impairment test involves comparing the fair value of the applicable reporting unit with its carrying value.

The Company estimates the

fair values of its reporting units using a combination of the income, or discounted cash flows, approach and the market approach, which

utilizes comparable companies’ data.

If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, an

impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

The Company’s evaluation of goodwill completed at year-end resulted in an impairment loss of $ 4,887,297 and $ 1,524,030 for the years

ended December 31, 2022 and 2021, respectively.

Repairs and maintenance expenditures are charged to operations as incurred.

Major improvements and replacements, which extend the useful life of an asset, are capitalized and depreciated over the remaining estimated useful life of the asset.

When assets are retired or sold, the cost and related accumulated depreciation and amortization are eliminated and any resulting gain or loss is reflected in operations.

Depreciation expense was $ 459,345 and $ 299,553 including $ 291,074 and $ 25,500 which was allocated to cost of goods sold, for the years ended December 31, 2023 and 2022 , respectively.

Construction in progress is stated at cost, which predominately relates to the cost of freezers and equipment not yet placed into service.

No depreciation expense is recorded on construction-in-progress until such time as the relevant assets are completed and put into use.

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.

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

The Company evaluates 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.

Impairment analysis on intangible assets resulted in a loss of $ 310,173 for the year ended December 31, 2022 which represented a complete impairment of our intangible assets.

As of December 31, 2023 and 2022, the carrying value of long-lived intangibles was $0.

The Company evaluates goodwill on an annual basis in the fourth quarter or more frequently if management believes indicators of impairment exist.

Such indicators could include, but are not limited to ( 1 ) a significant adverse change in legal factors or in business climate, ( 2 ) unanticipated competition, or ( 3 ) an adverse action or assessment by a regulator.

The Company first assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, management conducts a quantitative goodwill impairment test.

The impairment test involves comparing the fair value of the applicable reporting unit with its carrying value.

The Company estimates the fair values of its reporting units using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies’ data.

If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, an impairment loss is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.

The Company’s evaluation of goodwill completed at year-end resulted in an impairment loss of $ 4,887,297 for the year ended December 31, 2022 which represented a complete impairment of our goodwill.

As of December 31, 2023 and 2022, the carrying value of goodwill was $0.

SOW GOOD INC.

1 unchanged sentence

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 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.

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 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 or services.

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

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

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

For the years ended December 31, 2023 and 2022, shipping and handling costs of $ 129,412 and $ 59,756 , respectively, are included in cost of goods sold.

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 year ended December 31, 2023 , one retail customer accounted for 43.3 % of our revenues and one food distributor accounted for 25.2 % of our revenues during the year ended December 31, 2023 .

For the year ended December 31, 2022 two large retail customers accounted for 43.1 % and 42.5 % of our revenues and one large food distributor accounted for 12.9 % of our revenues.

Our top five customers accounted for 83 % and 99 % of our revenues during the years ended December 31, 2023 and 2022 , respectively.

Supplier Concentration

For the year ended December 31, 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 year ended December 31, 2022 no suppliers represented greater than 10% or more of our purchases from vendors.

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.

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

Diluted net income (loss) per common share is computed by dividing the net income (loss) adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities.

For the periods where potential dilutive securities would have an anti-dilutive effect and they were not included in the calculation of diluted net loss per common share.

Stock-Based Compensation

The Company accounts for equity instruments

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

Non-employees pursuant to ASC 2018-07 (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 $ 862,079

and $ 1,377,379

for the years ended December 31, 2022 and 2021, respectively.

Stock-based compensation consisted of $ 79,998

and $ 834,047

related to the issuance of shares of common stock for services for the years ended December 31, 2022 and 2021,

respectively.

Amortization of the fair values of stock options issued for services and compensation totaled $ 782,081

and $ 543,332

for the years ended December 31, 2022 and 2021, respectively.

The fair values of stock options were determined 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, and are

being amortized over the related implied service term, or vesting period.

In addition, $ 925,839

of expenses related to the amortization of warrants issued in consideration of personal guarantees provided for debt financing,

using the Black-Scholes options pricing model and an effective term of 5 years based on the weighted average of the vesting periods

and the stated term of the warrant grants and the discount rate on 5 year U.S.

Treasury securities at the grant date were

recognized as interest expense for the year ended December 31, 2022.

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

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

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

Stock-based compensation was $ 836,267 and $ 888,107 for the years ended December 31, 2023 and 2022 , respectively.

Stock-based compensation consisted of $ 125,230 and $ 106,026 related to the issuance of shares of common stock for services for the years ended December 31, 2023 and 2022 , respectively.

Amortization of the fair values of stock options issued for services and compensation totaled $ 711,037 and $ 782,081 for the years ended December 31, 2023 and 2022 , respectively.

The Company uses a Monte Carlo simulation to value its performance-based and market-based stock options.

The fair values of service based stock options are determined using the Black-Scholes options pricing model and an effective term of 2.3 to 7.3 years based on either the weighted average of the vesting periods and the stated term of the option grants or as calculated under the options valuation model, the discount rate on 5 to 7 year U.S.

Treasury securities at the grant date, and are being amortized over the related implied service term, or vesting period.

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

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.

On December 22, 2017 the U.S.

Tax Cuts and Jobs

Act of 2017 (“Tax Reform”) was signed into law.

As a result of Tax Reform, the U.S.

statutory rate was lowered from 35% to

21% effective January 1, 2018, among other changes.

ASC Topic 740 requires companies to recognize the effect of tax law changes in the

period of enactment;

therefore, the Company was required to value its deferred tax assets and liabilities at the new rate.

The SEC issued

Staff Accounting Bulletin No.

118 (“SAB 108”) to address the application of GAAP in situations when a registrant does not

have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting

for certain effects of Tax Reform.

The ultimate impact may differ from the provisional amount, possibly materially, as a result of additional

analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued and actions

the Company may take as a result of Tax Reform.

The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered.

The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.

Uncertain Tax Positions

In accordance with ASC 740, “Income Taxes”

(“ASC 740”), the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that

the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position.

These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of

a tax position taken or expected to be taken in a tax return.

These standards also provide guidance on de-recognition, classification,

interest and penalties, accounting in interim periods, disclosure, and transition.

Various taxing authorities can periodically audit

the Company’s income tax returns.

These audits include questions regarding the Company’s tax filing positions, including the

timing and amount of deductions and the allocation of income to various tax jurisdictions.

In evaluating the exposures connected with

these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures.

years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved.

The Company has

not yet undergone an examination by any taxing authorities.

The assessment of the Company’s tax position

relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.

In accordance with ASC 740 – Income Taxes (“ASC 740” ), the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position.

These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.

Various taxing authorities can periodically audit the Company’s income tax returns.

These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions.

In evaluating the exposures connected with these various tax filing positions, including state and local taxes, the Company records allowances for probable exposures.

A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved.

The Company has not yet undergone an examination by any taxing authorities.

The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.

Recent Accounting Pronouncements

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 October 2021, the FASB issued Accounting Standards

Update (“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

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

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.

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.

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.

In November 2023, the FASB issued ASU 2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosure, to require a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.

Public entities with a single reportable segment are required to provide the new disclosures and all the disclosures required under ASC 280.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis.

Early adoption is permitted.

The Company is currently evaluating the impact of adopting this new ASU on its interim and annual financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures, to enhance the transparency and decision-usefulness of income tax disclosures, particularly in the rate reconciliation table and disclosures about income taxes paid.

The ASU’s amendments are effective for annual periods beginning after December 15, 2024 on a prospective basis.

Early adoption is permitted.

The Company is currently evaluating the impact of adopting this ASU on its financial statements and related disclosures.

No other new accounting pronouncements, issued or effective during the year ended December 31, 2023 , have had or are expected to have a significant impact on the Company’s financial statements.

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

In May 2021, the FASB issued ASU No.

Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation (Topic

718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting

for Certain Modifications or Exchanges of Freestanding Equity Classified Written Call Options .

ASU 2021-04 addresses issuer’s

accounting for certain modifications or exchanges of freestanding equity-classified written call options.

ASU 2021-04 is effective for

fiscal years beginning after December 15, 2021 and interim periods within those fiscal years, with early adoption permitted.

of ASU 2021-04 has not had a material impact on the Company’s financial statements or related disclosures.

In March 2020, the FASB issued ASU 2020-04 establishing

Topic 848, Reference Rate Reform .

ASU 2020-04 contains practical expedients for reference rate reform related activities that impact

debt, leases, derivatives and other contracts.

The guidance is optional and is effective between March 12, 2020 and December 31, 2022.

The guidance may be elected over time as reference rate reform activities occur.

We are currently evaluating the impact that the expected

market transition from the London Interbank Offered Rate, commonly referred to as LIBOR, to alternative references rates will have on

our financial statements as well as the applicability of the aforementioned expedients and exceptions provided in ASU 2020-04.

No other new accounting pronouncements, issued

or effective during the year ended December 31, 2022, have had or are expected to have a significant impact on the Company’s

financial statements.

Note 3 – Going Concern

As shown in the accompanying financial statements,

as of December 31, 2022, the Company had a cash balance of $ 276,464 and working capital of $ 1,687,880 .

We are too early in our development

stage to project revenue with a necessary level of certainty;

therefore, 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.

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 Company continues to pursue sources of additional

capital through debt and financing transactions or arrangements, including equity financing or other means.

We may not be successful in

identifying suitable funding transactions in a sufficient time period or at all, and we may not obtain the capital we require by other

If we do not succeed in raising additional capital, our resources may not be sufficient to fund our business.

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.

These 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.

4 – Related Party

Debt Financing

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, 2023 to the Maturity Date.

On December 21, 2022 and September 29,

2022, the Company received aggregate proceeds of $ 250,000 and $ 750,000 from two of the Company’s Directors on the sale of these

notes and warrants.

In the prior reporting period, there was significant doubt regarding Sow Good's ability to continue as a going concern.

This concern stemmed from our status as an early-stage development company, characterized by significant capital requirements and uncertain financial projections, largely due to a lack of historical sales data.

The turnaround can be attributed to two successful capital raises that totaled $ 6,445,848 .

These infusions of capital have significantly bolstered our financial stability and capacity for sustained operations.

The Company has experienced excellent sales growth in the last two quarters, exceeding initial projections and establishing a more predictable revenue stream.

This positive trend in sales performance is indicative of a growing market acceptance of our products/services and a clearer path to long-term viability.

Based on these developments, management no longer has significant doubt about Sow Good's ability to continue as a going concern.

The Company realized a net loss of $ 3,060,433 for the year ended December 31, 2023 compared to a net loss of $ 12,127,068 for the year ended December 31, 2022.

As of December 31, 2023 , the Company had an accumulated retained deficit of $ 58,739,995 .

As of December 31, 2023, the Company had $ 2,410,037 cash on hand, and working capital of $ 4,466,637 , compared to $ 276,464 of cash on hand and $ 1,687,880 working capital as of December 31, 2022.

As a result of the capital infusion during the year ended December 31, 2023 , improved results, and improved cash and working capital at year end, the Company will be able to meet obligations as they become due for the twelve -month period following the filing of this report, and the Company believes any doubts existing in prior periods have been substantially alleviated.

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.

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

8, 2022 , the Company closed a private placement and concurrently entered into a Note and Warrant

Purchase Agreement (the “Purchase Agreement”) to sell an aggregate $3,700,000

of Promissory Notes (the “Notes”) and warrants (the “Warrants”)

to purchase an aggregate 925,000 shares of common stock, representing 25,000 warrant shares per

$100,000 of promissory notes.

Accrued interest on the Notes was payable semi-annually beginning September 30, 2022 at the rate

of 6 % per annum, but on August 23, 2022, the notes were amended to update the terms of the interest payment to be payable at the

earlier of the maturity date or January 1, 2025, rather than being paid semi-annually.

The principal amount of the Notes mature and become

due and payable on April 8, 2025 .

The Warrants are exercisable immediately and for a period of 10 years at a price of $ 2.35 per share.

Proceeds to the Company from the sale of the Securities were $ 3,700,000 .

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.

Assuming full exercise thereof, further proceeds to the Company from the exercise of the Warrant Shares is calculated as $ 2,173,750 .

Offering closed simultaneously with execution of the Purchase Agreement.

Of the aggregate $3,700,000 of Notes, a total of $ 3,120,000 of

Notes were sold to officers or directors, along with 780,000 of the Warrants.

Note 4 – Related Party

Common Stock Sold for Cash

O n July 2, 2021, the

Company entered into a Stock Purchase Agreement with multiple accredited investors to sell and issue to the purchasers, thereunder, an

aggregate of 714,701

shares of the Company’s common stock at a price of $4.25 per Share, resulting in total

proceeds received of $ 3,037,511 .

On November 20, 2023, the Company entered into a Stock Purchase Agreement with multiple accredited investors to sell and issue to the purchasers, thereunder, an aggregate of 426,288 shares of the Company’s common stock at a price of $ 6.50 per share, resulting in total proceeds received of $ 2,770,872 .

The stock sales included purchases by the following related parties:

of stock sales by related parties

Ira and Claudia Goldfarb JTWRO, Chairman and CEO, respectively

Brad Burke, former CFO

Berman Roevocable Trust, Director

Ira and Claudia Goldfarb, Executive Chairman and CEO, respectively

Bradley Berman, Director

Christopher R.

Ludeman JTWROS, Director

Greg Creed Trustee FBO Creed Revocable Living Trust, former Director

On February 5, 2021, the Company entered

into a Stock Purchase Agreement with multiple accredited investors to sell and issue to the purchasers an aggregate 631,250

shares of the Company’s common stock at a price of $4.00 per share for total proceeds of $ 2,525,000 .

Joe Mueller, Director

Alexandria Gutierrez

Gutierrez Living Trust

On August 25, 2023, the Company entered into a Stock Purchase Agreement with multiple accredited investors to sell and issue to the purchasers, thereunder, an aggregate of 735,000 shares of the Company’s common stock at a price of $ 5.00 per Share, resulting in total proceeds received of $ 3,675,000 .

The stock sales included purchases by the following related parties:

of stock sales by related parties

Brad Burke, former CFO

Lyle Berman Trustee FBO Lyle A.

Ira and Claudia Goldfarb, Executive Chairman and CEO, respectively

Ira Goldfarb Irrevocable Trust

Berman Revocable Trust, Director

Bradley Berman, Director

Christopher R.

Ludeman JTWROS, Director

Greg Creed Trustee FBO Creed Revocable Living Trust, former Director

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

Common Stock Issued to Officers for Services,

Common Stock Payable

On December 31, 2021,

the Company awarded 5,541 and 6,044 shares of common stock to Claudia and Ira Goldfarb , respectively, for services earned during

December 31, 2021.

The aggregate fair value of the shares was $ 12,467 and $ 13,599 for Claudia and

Ira, respectively, based on the closing price of the Company’s common stock on the date of grant .

The shares were subsequently

issued on March 25, 2022, in satisfaction of the outstanding common stock payable.

Common Stock and Options Awarded to Officers

and Directors

On July 22, 2022, the

Company accepted Mr.

Alexandria Gutierrez

Common Stock Issued to Officers and Directors for Services

On June 1, 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 $ 125,230 , based on the closing price of the Company’s common stock on the date of grant.

The shares were expensed upon issuance.

On July 22, 2022, the Company accepted Mr.

Joseph Lahti’s resignation from the Board of Directors and appointed Tim Creed as a member of the Board.

to the Company’s Non-Employee Director Compensation Plan, Mr.

Pursuant to the Company’s Non-Employee Director Compensation Plan, Mr.

Creed received 6,410 shares of common stock as compensation.

to the Company’s 2020 Stock Incentive Plan (the “2020 Equity Plan”), Mr.

Creed was also granted options to purchase

24,151 shares of the Company’s common stock at an exercise price of $ 3.90 per share.

These options will vest 20 % as of July 22,

2023 and 20% each anniversary thereafter until fully vested.

On April 11, 2022, the

Company appointed Joe Mueller as a member of the Board of Directors and Audit Committee.

Pursuant to the Company’s Non-Employee

Director Compensation Plan, Mr.

The shares were expensed upon issuance.

On April 11, 2022, the Company appointed Joe Mueller as a member of the Board of Directors and Audit Committee.

Pursuant to the Company’s Non-Employee Director Compensation Plan, Mr.

Mueller received 8,064 shares of common stock as compensation.

Pursuant to the Company’s 2020 Equity

Mueller was also granted options to purchase 24,151 shares of the Company’s common stock at an exercise price of $ 3.10

These options will vest 20 % as of April 11, 2023 and 20% each anniversary thereafter until fully vested.

On April 1, 2022, the Company granted options

to purchase 27,500 shares of the Company’s common stock, having an exercise price of $ 2.75 per share, exercisable over a 10 -year

term, to the Company’s then Chief Financial Officer.

The options were to 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 406 % and a call

option value of $2.6433, was $ 72,692 .

The options were being expensed over the vesting period, however, pursuant to a Separation

Agreement and Release, dated May 3, 2022 , the vesting terms of the options were accelerated to be fully vested, resulting

in $ 72,692 of stock-based compensation expense during the year ended December 31, 2022.

Pursuant to the Separation

Agreement and Release, the vesting of an aggregate 47,500 , with a weighted average exercise price of $ 4.87 , of Mr.

Burke’s previously

awarded options were also accelerated to be fully vested .

dates between January 31, 2021 and December 31, 2021, the Company issued an aggregate 60,951 and 66,484 shares in

monthly increments of 5,541 and 6,044 shares to Claudia and Ira Goldfarb , respectively ,

for their services.

The aggregate fair value of the shares was $ 290,792 and $ 317,188 for Claudia and Ira, respectively, based on the closing

price of the Company’s common stock on the dates of grant.

On May 25, 2021,

the Company issued 2,000 shares to each of two advisory board members for their services.

The total aggregate fair value of the shares was $ 20,000 , based on the closing price of the Company’s common stock on the date of

On January 27, 2021,

upon Benjamin Oehler’s resignation, the Company a ppointed Chris Ludeman as a member of the Board of Directors of the Company,

and appointed him to the Company’s Audit Committee as Chairperson.

Pursuant to his appointment, Mr.

Ludeman was issued

6,400 shares of common stock for his services to be rendered.

The aggregate fair value of the common stock was $ 40,000 , based on the closing

price of the Company’s common stock on the date of grant.

January 7, 2021, the Company issued an aggregate 16,623 and 18,133 shares of common stock to Claudia and Ira Goldfarb ,

respectively, for services from October 2020 through December 31, 2020 in satisfaction of the outstanding common

stock payable at December 31, 2020.

The aggregate fair value of the shares was $ 61,505 and $ 67,092 for Claudia and Ira, respectively,

based on the closing price of the Company’s common stock on the date of grant , was presented as Common Stock Payable

as of December 31, 2020 .

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

On December 8, 2021,

the Company issued an aggregate 41,665 shares of common stock amongst its five Directors for annual services to be rendered.

The aggregate

fair value of the common stock was $ 125,000 , based on the closing price of the Company’s common stock on the date of grant.

shares were expensed upon issuance.

On December 8, 2021,

the Company issued an additional 5,000 shares to Mr.

Chris Ludeman, for Audit Committee Chair services.

fair value of the common stock was $ 15,000 , based on the closing price of the Company’s common stock on the date of grant.

were expensed upon issuance.

On April 22, 2021, Brad Burke was granted options

to purchase 27,500 shares of the Company’s common stock, having an exercise price of $ 5.50 per share, exercisable over a 10 -year

Common Stock Options Awarded to Officers and Directors

On December 15, 2023, pursuant to the respective A&R Employment Agreements of Ira Goldfarb and Claudia Goldfarb, and the terms of the 2020 Equity Incentive Plan, Mr.

Goldfarb was granted stock options entitling him to purchase up to 500,000 shares of common stock, and Mrs.

Goldfarb was granted stock options entitling her to purchase 450,000 shares of common stock, at an exercise price of $ 9.75 per share.

The shares will vest equally over a five -year period from grant date.

In the case of a Change of Control (as defined in their respective A&R Employment Agreements) all shares granted in the Initial Option Grant will vest immediately.

Additionally, on December 15, 2023, pursuant to their respective A&R Employment Agreements, Mr.

Goldfarb was granted additional stock options entitling him to purchase up to 500,000 shares of common stock, and Mrs.

Goldfarb was granted an additional 450,000 options to purchase shares of common stock, at an exercise price of $40.00.

The shares will vest upon the Company’s stock price trading on a national securities exchange operated by Nasdaq or the New York Stock Exchange with a closing transaction price above $40.00 per share for a period of twenty consecutive trading days.

In the case of a Change of Control (as defined in the A&R Employment Agreements) all shares granted in the additional option grant will vest immediately.

On November 13, 2023, the Company appointed Keith Terreri as Chief Financial Officer, and granted options to purchase 27,000 shares of common stock having an exercise price of $ 6.19 per share.

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

On July 22, 2022, pursuant to the Company’s 2020 Stock Incentive Plan, Mr.

Creed was also granted options to purchase 24,151 shares of the Company’s common stock at an exercise price of $ 3.90 per share.

These options will vest 20 % as of July 22, 2023 and 20% each anniversary thereafter until fully vested.

On April 11, 2022, pursuant to the Company’s 2020 Equity Plan, Mr.

Mueller was granted options to purchase 24,151 shares of the Company’s common stock at an exercise price of $ 3.10 per share.

These options will vest 20 % as of April 11, 2023 and 20% each anniversary thereafter until fully vested.

On April 1, 2022, the Company granted options to purchase 27,500 shares of the Company’s common stock, having an exercise price of $ 2.75 per share, exercisable over a 10 -year term, to the Company’s then Chief Financial Officer.

The options were to 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 193 % and a call option value of $ 5.4381 , was $ 149,547 .

were being expensed over the vesting period, however, pursuant to a Separation Agreement and Release,

dated May 3, 2022 , the vesting terms of the options were accelerated to be fully vested, resulting in $ 128,733 and $ 20,814

of stock-based compensation expense during the years ended December 31, 2022 and 2021, respectively.

On January 27, 2021, Chris Ludeman was granted

options to purchase 24,151 shares of the Company’s common stock, having an exercise price of $ 6.25 per share, exercisable over a

10-year term.

The options will vest in three equal annual installments beginning of January 27, 2022 and continuing on each of the two

anniversaries thereafter until fully vested.

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

198 % and a call option value of $6.1794, was $ 149,239 .

On January 4, 2021, Claudia and Ira Goldfarb were

each granted options to purchase 75,000 shares of the Company’s common stock, having an exercise price of $ 3.70 per share, exercisable

over a 10-year term.

The options will vest in three equal installments beginning of January 4, 2022 and continuing on each of the two

anniversaries thereafter until fully vested.

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

rate of 198 % and a call option value of $3.9412, was $ 591,178 .

Warrants Granted

December 31, 2021, the Company closed a private placement and concurrently entered into a Note and Warrant Purchase Agreement with related

parties to sell an aggregate $ 2,075,000

of promissory notes, bearing 8 %

interest, and warrants to purchase an aggregate 311,250

shares of common stock, 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 estimated value using the

Black-Scholes Pricing Model, based on a volatility rate of 198% and a call option value of $2.25, was $ 699,213 .

The warrants will be expensed as a debt discount over the life of the loans.

The officers, directors and related

parties receiving grants and the amounts of such grants were as follows:

Schedule of warrants granted to related parties

Stock Warrant

Name and Title at Time of Grant

Shares Granted

Ira and Claudia Goldfarb, Chairman and Chief Executive Officer

Brad Burke, Chief Financial Officer

Lyle Berman, Director

Gutierrez, brother of the Company’s Chief Executive Officer

Lease Agreement

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, from

IG Union Bower, LLC (“Union Bower”), an entity owned entirely by Ira Goldfarb, under which Union Bower is the landlord.

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.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 406 % and a call option value of $2.64, was $ 72,692 .

The options were being expensed over the vesting period, however, pursuant to a Separation Agreement and Release, dated May 3, 2022, the vesting terms of the options were accelerated to be fully vested, resulting in $ 72,692 of stock-based compensation expense during the year ended December 31, 2023 .

Pursuant to the Separation Agreement and Release, the vesting of an aggregate 47,500 , with a weighted average exercise price of $ 4.87 , of Mr.

Burke’s previously awarded options were also accelerated to be fully vested.

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

Departure of CFO

30, 2022, Mr.

Brad Burke resigned as the Company’s Chief Financial Officer, and the Company’s Chief Executive Officer, Claudia

Goldfarb, was appointed as the interim Chief Financial Officer.

On May 3, 3022, the Company entered into a Separation Agreement and Release,

which entitled Mr.

Burke to receive an amount equal to the base salary that he would have received for a three-month period (“Severance

Pay”), and the accelerated vesting of options to purchase an aggregate 75,000 shares of common stock with a weighted average exercise

price of $ 4.09 per share, along with an extension of the time period to exercise such stock option agreements to the fifth anniversary

of the separation.

Debt Financing and Related Warrants Granted

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.

This term loan was 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 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 Executive 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 April 11, 2023, warrants to purchase an aggregate 62,500 shares of common stock were issued to a director 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.

On December 21, 2022, the Company closed a private placement and concurrently entered into a note and warrant purchase agreement with related parties to sell an aggregate $ 2.075 million of promissory notes and warrants to purchase an aggregate 311,250 shares of common stock, 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.

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, 2023 to the maturity date.

On December 21, 2022 and September 29, 2022, the Company received aggregate proceeds of $ 250,000 and $ 750,000 from two of the Company’s directors on the sale of these notes and warrants.

On April 8, 2022, the Company closed a private placement and concurrently entered into a note and warrant purchase agreement to sell an aggregate $3,700,000 of promissory notes and warrants to purchase an aggregate 925,000 shares of common stock, representing 25,000 warrant shares per $100,000 of promissory notes.

Accrued interest on the notes was payable semi-annually beginning September 30, 2022 at the rate of 6 % per annum, but on August 23, 2022, the notes were amended to update the terms of the interest payment to be payable at the earlier of the maturity date or January 1, 2025, rather than being paid semi-annually.

The principal amount of the notes mature and become due and payable on April 8, 2025.

The warrants are exercisable immediately and for a period of 10 years at a price of $ 2.35 per share.

Proceeds to the Company from the sale of the securities were $ 3,700,000 .

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.

Assuming full exercise thereof, further proceeds to the Company from the exercise of the warrant shares is calculated as $ 2,173,750 .

The offering closed simultaneously with execution of the purchase agreement.

Of the aggregate $3,700,000 of notes, a total of $ 3,120,000 of notes were sold to officers or directors, along with 780,000 of the warrants.

The value of the related party warrants are classified as debt discounts and are amortized to interest expense over the life of the notes.

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 THE FINANCIAL STATEMENTS

Note 5 – Fair Value of Financial Instruments

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 fair value.

The Company has cash and cash equivalents and

a revolving credit facility that must be measured under the fair value standard.

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.

The following schedule summarizes the valuation

of financial instruments at fair value on a recurring basis in the balances sheet as of December 31, 2022 and 2021:

Valuation of financial instruments at fair value

The Company's financial statements are prepared in accordance with ASC 820, “Fair Value Measurement,” which requires the measurement of certain financial instruments at fair value.

The Company's financial instruments primarily consist of cash and cash equivalents, and accounts receivable, which approximate fair value due to their short-term nature, and Term Loans issued in connection with detachable warrants, which are carried on the balance sheet net of the unamortized portion of the related discounts.

For financial instruments or investments that are required to be reported at fair value on a recurring or nonrecurring basis under GAAP, the applicable guidance for fair value measurement requires the Company to include the determination of the appropriate fair value hierarchy level for each instrument.

The fair value hierarchy levels consist of the following:

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.

Detachable common stock warrants issued in connection with debt may be recorded as either liabilities or equity depending on the applicable accounting guidance.

The Company determined that warrants issued in connection with our notes payable met the definition of a freestanding financial instrument and qualified for treatment as permanent equity.

Warrants recorded as equity are recorded at the fair market value determined at issuance date, and are not remeasured after that.

We utilized the Black-Scholes valuation model to estimate the fair value of warrants granted at issuance date.

The initial measurement of the fair value of the notes considers the present value of future cash flows, discounted at the current market rate of interest at the issuance date, and time to liquidity.

The Company allocated the value of warrants between the relative fair value of the notes payable without the warrants, and the warrants themselves at the time of issuance.

The allocated portion of the warrants was treated as a debt discount, and amortized over the term of the note.

The amortization of the debt discount is recognized as interest expense.

When a notes payable are issued at a discount, wherein a significant portion of the issuance is between related parties, the valuation of the notes and the discount involve significant judgement and the use of unobservable inputs, classifying it into Level 3 of the fair value hierarchy, requiring a nonrecurring fair value measurement.

Changes other than additions, settlements, or discount amortization, in the fair value of the notes payable, net of discounts do not impact net income or cash flows.

The following schedule summarizes the valuation of financial instruments at fair value on a nonrecurring basis in the balances sheet as of December 31, 2023 and 2022 :

Fair Value Measurements at December 31, 2023

Cash and cash equivalents

Carrying Value

Estimated Fair Value

Notes payable, related parties, net of $ 1,880,711 of debt discounts

$ 6,714,288 $ 7,008,684

Notes payable, net of $ 220,024 of debt discounts

907,976 953,847

Total liabilities

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

$ 7,622,264 $ 7,962,531

Fair Value Measurements at December 31, 2022

Cash and cash equivalents

Intangible assets

Carrying Value

Estimated Fair Value

Notes payable, related parties, net of $ 2,692,757 of debt discounts

Notes payable

$ 3,502,243 $ 4,502,093

Notes payable, net of $ 336,085 of debt discounts

393,915 413,018

Total liabilities

There were no transfers of financial assets or

liabilities between Level 1 and Level 2 inputs for the years ended December 31, 2022 and 2021.

$ 3,896,158 $ 4,915,111

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

Note 6 – Inventory

As of December 31, 2023 the Company's inventory is valued at $ 4,123,246 , consisting of raw materials, material overhead, labor, and manufacturing overhead, consist of the following:

Finished goods

$ 222,051 $ 384,241

Packaging materials

815,883 416,663

Inventory in transit

Work in progress

691,290 766,530

Raw materials

1,822,052 307,515

Total inventory

$ 4,123,246 $ 1,874,949

During the year ended December 31, 2023 , the Company wrote down $ 1,398,888 related to our non-candy products following the Company's decision to focus production on freeze dried candy products in the second quarter of 2023.

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

Prepaid Inventory

As of December 31, 2023 , the company has reported a total of $ 563,131 in prepaid inventory, current assets line item on our consolidated balance sheet.

This represents payments made in advance for inventory purchases that have not yet been shipped as of the balance sheet date.

The prepaid inventory primarily consists of deposits and advance payments to suppliers for the purchase of raw materials and finished goods expected to be received and utilized in production within the next fiscal year.

The Company accounts for prepaid inventory at cost, which includes all charges necessary to bring the inventory items to their present location and condition.

Upon shipment of the inventory, these amounts are reclassified from prepaid inventory to the appropriate inventory accounts on the balance sheet.

Note 7 – Prepaid Expenses

Prepaid expenses consist of the following:

Schedule of prepaid expenses

Prepaid professional costs

Prepaid software licenses

6 unchanged sentences

Note 8 – Property and Equipment

Property and equipment at December 31, 2022 and 2021, consisted of

the following:

Property and equipment

Property and equipment at December 31, 2023 and 2022 , consisted of the following:

Office equipment

$ 21,440 $ 13,872

4,714,626 1,643,010

70,000 70,000

71,589 71,589

Leasehold improvements

1,409,767 1,257,108

Construction in progress

1,522,465 2,487,673

7,809,887 5,543,252

Accumulated depreciation and amortization

( 967,602 ) ( 508,257 )

Total property and equipment, net

Construction in progress consists of costs incurred

to build out our manufacturing facility in Irving Texas, along with the construction of our freeze driers.

These costs will be capitalized

as Leasehold Improvements and Machinery, respectively, upon completion.

On July 1, 2022, the Company disposed of certain

leasehold improvements that were damaged.

The Company received proceeds on the disposal of $ 62,308 pursuant to a settlement with the manufacturer,

resulting in a gain on the disposal of property and equipment of $ 36,392 , which represented the proceeds received, less the net book value

at the time of disposal.

On December 31, 2021, the Company disposed of

packaging equipment no longer in service.

No proceeds were received on the disposal of the equipment, resulting in a loss on disposal

of fixed assets of $ 8,036 , which represented the net book value at the time of disposal.

Depreciation of property and equipment was $ 299,553 , including $ 25,500

capitalized as inventory overhead and expensed to cost of goods sold, and $ 208,448 for the years ended December 31, 2022 and 2021, respectively.

$ 6,842,285 $ 5,034,995

Construction in progress consists of costs incurred to build out our manufacturing facility in Irving Texas, along with the construction of our freeze driers.

These costs will be capitalized as Leasehold Improvements and Machinery, respectively, upon completion.

On July 1, 2022, the Company disposed of certain leasehold improvements that were damaged.

The Company received proceeds on the disposal of $ 62,308 pursuant to a settlement with the manufacturer, resulting in a gain on the disposal of property and equipment of $ 36,392 , which represented the proceeds received, less the net book value at the time of disposal.

Depreciation of property and equipment was $ 459,345 , including $ 168,271 capitalized as inventory, and $ 299,553 , including $ 25,500 capitalized as inventory overhead and expensed to cost of goods sold, December 31, 2023 and 2022 , respectively.

Note 9 – 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.

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, under which an entity owned entirely by Ira Goldfarb, the Company's Executive Chairman, is the landlord.

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 %.

On October 26, 2023, the Company entered into a lease agreement with Prologis, Inc., a Maryland corporation, which the Company intends to use as production space.

The Company leased approximately 51,264 square feet in Dallas, Texas for an initial term of approximately five years and two months.

The lease commenced on November 1, 2023.

The base rent payments started at approximately $ 42,500 per month in the first year, and increase each year, up to approximately $ 51,700 per month during the last year of the initial term.

The Company is also responsible for operating expenses of the premises, which start at $ 7,835 per month, with an annual escalation of 4.3 %.

As a deposit on the lease, the Company is required to provide a letter of credit to the Landlord in the amount of $ 300,000 .

The lease 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 incremental borrowing rate for the lease at the time of commencement was 9.38 %.

SOW GOOD INC.

1 unchanged sentence

The components of lease expense were as follows:

Schedule of components of lease expense

For the Year Ended

1 unchanged sentence

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

$ 189,605 $ 67,564

Supplemental balance sheet information related to leases was as follows:

Operating lease:

Operating lease assets

$ 4,061,820 $ 1,261,525

Current portion of operating lease liability

$ 550,941 $ 52,543

Noncurrent operating lease liability

3,671,729 1,301,355

Total operating lease liability

$ 4,222,670 $ 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

8.20 % 5.75 %

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

For the Year Ended

1 unchanged sentence

Operating cash flows used for operating leases

$ 194,435 $ 45,970

Leased assets obtained in exchange for lease liabilities:

Total operating lease liabilities

$ 4,222,670 $ 1,353,898

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

The future minimum lease payments due under operating leases as of

December 31 , 2022 is as follows:

Schedule of future minimum lease payments

The future minimum lease payments due under operating leases as of December 31, 2023 is as follows:

Fiscal Year Ending

2 unchanged sentences

Less effects of discounting

( 1,251,292 )

Lease liability recognized

Note 9 – Intangible Assets

Intangible assets consist of the following:

Schedule of Intangible assets

Branding, Sow Good

Branding, Sustain Us

Trademarks and patents

Total intangible assets

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.

Impairment analysis on intangible assets resulted in a loss of $ 310,173 for the year ended December 31,

SOW GOOD INC.

1 unchanged sentence

Note 10 – Notes Payable, Related Parties

Notes payable, related parties consists of the

following at December 31, 2022 and 2021, respectively:

Schedule of Notes payable, related parties

Notes payable, related parties consists of the following at December 31, 2023 and 2022 , respectively:

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.

The unsecured note matures on May 11, 2024 .

The note bears interest at 8 % per annum, payable in cash semi-annually on June 30 and December 31, with appropriate pro rata adjustments made for any partial interest accrual period.

The noteholder also received warrants to purchase 25,000 shares of common stock, exercisable at $ 2.50 per share over a ten -year term.

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 .

The note bears interest at 8 % per annum, payable in cash semi-annually on June 30 and December 31, with appropriate pro rata adjustments made for any partial interest accrual period.

The noteholder also received warrants to purchase 12,500 shares of common stock, exercisable at $ 2.50 per share over a ten -year term.

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.

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 Executive Chairman, Mr.

Goldfarb, as lender.

The unsecured note matures on April 25, 2024 .

The note bears interest at 8 % per annum, payable in cash semi-annually on June 30 and December 31, with appropriate pro rata adjustments made for any partial interest accrual period.

The noteholder also received warrants to purchase 187,500 shares of common stock, exercisable at $ 2.50 per share over a ten -year term.

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.

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 .

The note bears interest at 8 % per annum, payable on January 1, 2025.

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 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 .

The note bears interest at 8 % per annum, payable on January 1, 2025.

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 Executive Chairman, Mr.

Goldfarb, as lender.

The unsecured note matures on August 23, 2025 .

The note bears interest at 8 % per annum, payable on January 1, 2025.

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 Executive Chairman, Mr.

Goldfarb, as lender.

The unsecured note matures on August 23, 2025 .

The note bears interest at 8 % per annum, payable on January 1, 2025.

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

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 .

The note bears interest at 8 % per annum, payable on January 1, 2025.

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

3 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 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.

250,000 250,000

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 Executive 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.

500,000 500,000

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

3 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 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.

250,000 250,000

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 Executive 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 2,000,000

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

Goldfarb, and Chief Executive Officer, Mrs.

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.

100,000 100,000

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 Executive 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.

100,000 100,000

SOW GOOD INC.

6 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.

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.

920,000 920,000

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

Goldfarb, and Chief Executive Officer, Mrs.

Goldman, as lenders.

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 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 1,500,000

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

3 unchanged sentences

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

500,000 500,000

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.

3 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 25,000

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

3 unchanged sentences

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 50,000

Total notes payable, related parties

8,595,000 6,195,000

Less unamortized debt discounts:

1,880,712 2,692,757

Notes payable

6,714,288 3,502,243

current maturities

Notes payable, related parties, less current maturities

$ 4,171,142 $ 3,502,243

The Company recorded total discounts of $ 1,154,050 and $ 2,811,138 , consisting of debt discounts on warrants granted to the related parties during the years ended December 31, 2023 and 2022 , respectively.

The warrants were valued using Black-Scholes option pricing model with significant inputs as follows:

For the Year Ended

Weighted average expected volatility

Weighted average expected life (in years)

Weighted average risk-free interest rate

Expected dividend yield

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 $ 1,009,397 of related party stock-based interest expense pursuant to the amortization of discounts during the year ended December 31, 2023 .

The Company recognized $ 598,340 and $ 320,580 of related-party note interest expense for the years ended December 31, 2023 and December 31, 2022 .

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

The Company recorded total discounts of $ 2,811,138

and $ 699,213 , consisting of debt discounts on warrants granted to the related parties during the years ended December 31, 2022 and 2021,

respectively.

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 $ 817,594 of stock-based interest expense pursuant

to the amortization of discounts during the year ended December 31, 2022.

The Company recognized $ 320,580 of interest expense

for the year ended December 31, 2022.

No interest expense was recognized during the year ended December 31, 2021.

Note 11 – Notes Payable

Notes payable consists of the following at December

31, 2022 and 2021, respectively:

Schedule of notes payable

Notes payable consists of the following at December 31, 2023 and 2022 , respectively:

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

The unsecured note matures on April 25, 2024 .

The note bears interest at 8 % per annum, payable in cash semi-annually on June 30 and December 31, with appropriate pro rata adjustments made for any partial interest accrual period.

The noteholder also received warrants to purchase 100,000 shares of common stock, exercisable at $ 2.50 per share over a ten -year term.

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.

$ 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.

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

2 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 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.

500,000 500,000

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.

3 unchanged sentences

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

150,000 150,000

Total notes payable

unamortized debt discounts

222,024 336,085

Notes payable

907,976 393,915

current maturities

Notes payable, less current maturities

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

The Company recorded total discounts of $ 444,330 ,

consisting of debt discounts on warrants granted to accredited investors on April 8, 2022.

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

The Company recorded $ 108,245 of stock-based interest expense pursuant to the amortization of discounts during the year ended

December 31, 2022.

The Company recognized $ 31,546 and $ 5,911 of interest

expense for the years ended December 31, 2022 and 2021, respectively.

The Company recognized interest expense for the

years ended December 31, 2022 and 2021, as follows:

Schedule of recognized interest expense on notes payable

$ 594,038 $ 393,915

The Company recorded total discounts of $ 202,285 and $ 444,330 , consisting of debt discounts on warrants granted to accredited investors during the years ended December 31, 2023 and 2022 , respectively.

The warrants were valued using Black-Scholes option pricing model with significant inputs as follows:

For the Year Ended

Weighted average expected volatility

Weighted average expected life (in years)

Weighted average risk-free interest rate

Expected dividend yield

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 $ 164,589 and $ 108,245 of stock-based interest expense pursuant to the amortization of discounts during the years ended December 31, 2023 and 2022 , respectively.

The Company recognized $ 56,346 and $ 31,546 of interest expense for the years ended December 31, 2023 and 2022 , respectively.

The Company recognized interest expense for the years ended December 31, 2023 and 2022 , as follows:

Interest on notes payable, related parties

$ 598,340 $ 320,580

Amortization of debt discounts on notes payable, related parties

1,009,396 817,594

Interest on notes payable

65,848 31,546

Amortization of debt discounts on notes payable

164,590 108,245

Interest - other

Total interest expense

$ 1,839,749 $ 1,277,965

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

Note 12 – Stockholders ’ Equity

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.

Common Stock Sold for Cash

O n July 2, 2021, the

Company entered into a Stock Purchase Agreement with multiple accredited investors to sell and issue to the purchasers, thereunder, an

aggregate of 714,701 shares of the Company’s common stock at a price of $4.25 per Share.

Proceeds to the Company from the sale of

the Shares were $ 3,037,511 .

Proceeds to the Company from the sale of the shares were $ 2,770,848 .

A total of 46,669 of these shares, or proceeds of $ 303,348 were purchased by officers and directors.

On February 5, 2021, the Company entered into

a Stock Purchase Agreement with multiple accredited investors to sell and issue to the Purchasers an aggregate 631,250 shares of the Company’s

common stock at a price of $4.00 per share for total proceeds of $ 2,525,000 .

A total of 225,000 of these shares, or proceeds of $ 900,000

were purchased by officers and directors.

Proceeds to the Company from the sale of the shares were $ 3,675,000 .

A total of 195,000 of these shares, or proceeds of $ 975,000 were purchased by officers and directors.

Common Stock Issued to Directors for Services

On July 22, 2022, the

Company accepted Mr.

On June 1, 2023, the Company issued an aggregate 21,095 shares of common stock amongst its five directors for annual services to be rendered.

The aggregate fair value of the common stock was $ 125,230 , based on the closing price of the Company’s common stock on the date of grant.

The shares were expensed upon issuance.

On July 22, 2022, the Company accepted Mr.

Joseph Lahti’s resignation from the Board of Directors and appointed Tim Creed as a member of the Board.

to the Company’s Non-Employee Director Compensation Plan, Mr.

Pursuant to the Company’s Non-Employee Director Compensation Plan, Mr.

Creed received 6,410 shares of common stock as compensation.

fair value of the shares was $ 25,000 , based on the closing price of the Company’s common stock on the date of grant .

On April 11, 2022, the

Company appointed Joe Mueller as a member of the Board of Directors and Audit Committee.

Pursuant to the Company’s Non-Employee

Director Compensation Plan, Mr.

The fair value of the shares was $ 25,000 , based on the closing price of the Company’s common stock on the date of grant.

On April 11, 2022, the Company appointed Joe Mueller as a member of the Board of Directors and Audit Committee.

Pursuant to the Company’s Non-Employee Director Compensation Plan, Mr.

Mueller received 8,064 shares of common stock as compensation.

The fair value of the shares was $ 24,998 ,

based on the closing price of the Company’s common stock on the date of grant.

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

On December 8, 2021,

the Company issued an aggregate 41,665 shares of common stock amongst its five Directors for annual services to be rendered.

The aggregate

fair value of the common stock was $ 125,000 , based on the closing price of the Company’s common stock on the date of grant.

shares were expensed upon issuance.

On December 8, 2021,

the Company issued an additional 5,000 shares to Mr.

Chris Ludeman for Audit Committee Chair services.

fair value of the common stock was $ 15,000 , based on the closing price of the Company’s common stock on the date of grant.

were expensed upon issuance.

On October 1, 2020,

the Company issued an aggregate 20,835 shares of common stock amongst its five Directors for annual services to be rendered.

The aggregate

fair value of the common stock was $ 125,010 , based on the closing price of the Company’s common stock on the date of grant.

shares were expensed upon issuance.

On October 1, 2020,

the Company issued an additional 2,500 shares to Mr.

Benjamin Oehler, for former Audit Committee Chair services.

fair value of the common stock was $ 15,000 , based on the closing price of the Company’s common stock on the date of grant.

were expensed upon issuance.

Common Stock Awarded to Advisory Board Members

20, 2022, the Company awarded an aggregate total of 8,000 shares of common stock to

two advisory board members for services.

The aggregate fair value of the shares was $ 20,000 , based on the closing price of the Company’s

common stock on the date of grant.

25, 2022, the Company awarded 4,255 shares of common stock to a newly appointed advisory

board member for services.

The fair value of the shares was $ 10,000 , based on the closing price of the Company’s common stock on

the date of grant.

Issuance of Shares for Services

dates between January 31, 2021 and December 31, 2021, the Company issued an aggregate 60,951 and 66,484 shares in

monthly increments of 5,541 and 6,044 shares to Claudia and Ira Goldfarb , respectively ,

for their services.

The aggregate fair value of the shares was $ 290,792 and $ 317,188 for Claudia and Ira, respectively, based on the closing

price of the Company’s common stock on the dates of grant.

On May 25, 2021,

the Company issued 2,000 shares to each of two advisory board members for their services.

The total aggregate fair value of the shares was $ 20,000 , based on the closing price of the Company’s common stock on the date of

On January 27, 2021,

upon Benjamin Oehler’s resignation, the Company a ppointed Chris Ludeman as a member of the Board of Directors of the Company,

and appointed him to the Company’s Audit Committee as Chairperson.

Pursuant to his appointment, Mr.

Ludeman was issued

6,400 shares of common stock for his services to be rendered.

The aggregate fair value of the common stock was $ 40,000 , based on the closing

price of the Company’s common stock on the date of grant.

Common Stock Issued to Officers for Services,

Common Stock Payable

On December 31, 2021,

the Company awarded 5,541 and 6,044 shares of common stock to Claudia and Ira Goldfarb , respectively, for services earned during

December 31, 2021.

The aggregate fair value of the shares was $ 12,467 and $ 13,599 for Claudia and

Ira, respectively, based on the closing price of the Company’s common stock on the date of grant .

The shares were subsequently

issued on March 25, 2022, in satisfaction of the outstanding common stock payable.

January 7, 2021, the Company issued an aggregate 16,623 and 18,133 shares of common stock to Claudia and Ira Goldfarb ,

respectively, for services from October 2020 through December 31, 2020 in satisfaction of the outstanding common

stock payable at December 31, 2020.

The aggregate fair value of the shares was $ 61,505 and $ 67,092 for Claudia and Ira, respectively,

based on the closing price of the Company’s common stock on the date of grant , was presented as Common Stock Payable

as of December 31, 2020 .

The fair value of the shares was $ 24,998 , based on the closing price of the Company’s common stock on the date of grant.

Common Stock Awarded to Advisory Panel Members

On April 20, 2022, the Company awarded an aggregate total of 8,000 shares of common stock to two advisory panel members for services.

The aggregate fair value of the shares was $ 20,000 , based on the closing price of the Company’s common stock on the date of grant.

On March 25, 2022, the Company awarded 4,255 shares of common stock to a newly appointed advisory panel member for services.

The fair value of the shares was $ 10,000 , based on the closing price of the Company’s common stock on the date of grant.

SOW GOOD INC.

1 unchanged sentence

Note 13 – 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

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.

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 January 8, 2024, our stockholders took action by written consent to ratify the amendment to the 2020 Stock Incentive Plan (the “2020 Plan”) approved by the Board on December 15, 2023.

On December 15, 2023, our Board approved an amendment to the 2020 Plan to effect an increase in the number of shares that remain available for issuance under the 2020 Plan by an additional 2,150,000 shares up to an aggregate of 2,272,954 shares available for issuance under the 2020 Plan (the “2020 Plan Amendment”).

Before the 2020 Plan Amendment, the number of shares available for issuance under the 2020 Plan would be too limited to effectively operate as an incentive and retention tool for employees, officers, directors, non-employee directors and consultants of the Company and its affiliates (as defined in the 2020 Plan).

The 2020 Plan and the approved increase will enable us to continue our policy of equity ownership by employees, officers, directors, non-employee directors and consultants of the Company and its affiliates as an incentive to contribute to the creation of long-term value for our stockholders.

Outstanding Options

Options to purchase an aggregate total of 590,991

shares of common stock at a weighted average strike price of $ 4.53 , exercisable over a weighted average life of 8.1 years were outstanding

as of December 31, 2022.

Options to purchase an aggregate total of 2,260,813 and 590,991 shares of common stock were outstanding as of December 31, 2023 and 2022, respectively, at a weighted average strike price of $ 19.38 and $ 4.53 , respectively.

The weighted average life of exercisable outstanding options was 6.6 and 8.1 years as of December 31, 2023 and 2022, respectively.

Options Granted

On July 22, 2022, the

Company appointed Tim Creed as a member of the Board.

On December 15, 2023, pursuant to the respective A&R Employment Agreements of Ira Goldfarb and Claudia Goldfarb, and the terms of the 2020 Equity Incentive Plan, Mr.

Goldfarb was granted stock options entitling him to purchase up to 500,000 shares of common stock, and Mrs.

Goldfarb was granted stock options entitling her to purchase 450,000 shares of common stock, at an exercise price of $ 9.75 per share.

The shares will vest equally over a five -year period from grant date.

In the case of a Change of Control (as defined in their respective A&R Employment Agreements) all shares granted in the Initial Option Grant will vest immediately.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 97 % and a call option value of $ 8.15 , was $ 7,752,000 .

The options are being expensed over the vesting period.

Additionally, on December 15, 2023, pursuant to their respective A&R Employment Agreements, Mr.

Goldfarb was granted additional stock options entitling him to purchase up to 500,000 shares of common stock, and Mrs.

Goldfarb was granted an additional 450,000 options to purchase shares of common stock, at an exercise price of $40.00.

In the case of a Change of Control (as defined in the A&R Employment Agreements) all shares granted in the additional option grant will vest immediately.

The Company engaged a third -party valuation expert to perform a Monte-Carlo simulation options pricing model to determine the call value and expected term of the options.

Based a volatility of $97% and a risk-free interest rate of 3.9 %, the option value was $ 5.84 , resulting in an aggregate value of $ 5,544,200 , which will be amortized over the expected term of the options of 2.3 years.

On November 13, 2023, the Company appointed Keith Terreri as Chief Financial Officer, and granted options to purchase 27,000 shares of common stock having an exercise price of $ 6.19 per share.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 97 % and a call option value of $ 5.12 , was $ 138,240 .

These shares were subsequently forfeited when Mr.

Terreri resigned as Chief Financial Officer on March 8, 2024.

During November 2023, five employees were granted options to purchase an aggregate of 61,500 shares of the Company's common stock, having a weighted average exercise price of $ 8.21 , 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 97 % and a call option value of $ 6.77 , was $ 416,245 .

The options are being expensed over the vesting period.

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.

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.

On July 22, 2022, the Company appointed Tim Creed as a member of the Board.

Pursuant to the Company’s 2020 Equity Plan, Mr.

Creed was granted options

to purchase 24,151 shares of the Company’s common stock at an exercise price of $ 3.90 per share.

These options will vest 20 % as

of July 22, 2023 and 20% each anniversary thereafter until fully vested.

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

on a volatility rate of 137 % and a call option value of $3.6166, was $ 87,346 .

Creed was granted options to purchase 24,151 shares of the Company’s common stock at an exercise price of $ 3.90 per share.

These options will vest 20 % as of July 22, 2023 and 20% each anniversary thereafter until fully vested.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 137 % and a call option value of $ 3.62 , was $ 87,346 .

The options are being expensed over the vesting period.

resulting in $ 7,753 of stock-based compensation expense during the year ended December 31, 2022.

As of December 31, 2022, a

total of $ 79,593 of unamortized expenses are expected to be expensed over the vesting period.

On April 11, 2022, the

Company appointed Joe Mueller as a member of the Board of Directors and Audit Committee.

Pursuant to the Company’s 2020 Equity Plan,

On April 11, 2022, the Company appointed Joe Mueller as a member of the Board of Directors and Audit Committee.

Pursuant to the Company’s 2020 Equity Plan, Mr.

Mueller was granted options to purchase 24,151 shares of the Company’s common stock at an exercise price of $ 3.10 per share.

These options will vest 20 % as of April 11, 2023 and 20% each anniversary thereafter until fully vested.

The estimated value using

the Black-Scholes Pricing Model, based on a volatility rate of 406 % and a call option value of $2.6433, was $ 71,423 .

The options are being

expensed over the vesting period, resulting in $ 10,763 of stock-based compensation expense during the year ended December 31, 2022.

As of December 31, 2022, a total of $ 60,660 of unamortized expenses are expected to be expensed over the vesting period.

On April 1, 2022, a total of nineteen employees

and consultants were granted options to purchase an aggregate 35,977 shares of the Company’s common stock, having an exercise price

of $ 2.75 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 406 % and a call option value

of $2.6433, was $ 95,099 .

The options are being expensed over the vesting period, resulting in $ 13,859 of stock-based compensation expense

during the year ended December 31, 2022.

As of December 31, 2022, a total of $ 70,420 of unamortized expenses are expected to

be expensed over the vesting period.

On April 1, 2022, the Company granted options

to purchase 27,500 shares of the Company’s common stock, having an exercise price of $ 2.75 per share, exercisable over a 10-year

term, to the Company’s then Chief Financial Officer.

The options were to 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 406 % and a call

option value of $2.6433, was $ 72,692 .

The options were being expensed over the vesting period, however, pursuant to a Separation

Agreement and Release, dated May 3, 2022 , the vesting terms of the options were accelerated to be fully vested, resulting

in $ 72,692 of stock-based compensation expense during the year ended December 31, 2022.

Pursuant to the Separation

Agreement and Release, the vesting of an aggregate 47,500 , with a weighted average exercise price of $ 4.87 , of Mr.

Burke’s previously

awarded options were also accelerated to be fully vested .

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

On March 30, 2022, a total of sixteen employees

and consultants were granted options to purchase an aggregate 19,436 shares of the Company’s common stock, having an exercise price

of $ 2.75 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 407 % and a call option value

of $2.6435, was $ 51,380 .

The options are being expensed over the vesting period, resulting in $ 7,096 of stock-based compensation expense

during the year ended December 31, 2022.

As of December 31, 2022, a total of $ 26,756 of unamortized expenses are expected to

be expensed over the vesting period.

On March 25, 2022, a newly appointed advisory

board member was granted options to purchase an aggregate 6,382 shares of the Company’s common stock, having an exercise price of

$ 2.35 per share, exercisable over a 10-year term.

The options will vest 20% on each anniversary over a five-year period, until fully vested.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 406 % and a call option value of $2.64, was $ 71,423 .

The options are being expensed over the vesting period, resulting in $ 2,220 of stock-based compensation expense during the year

ended December 31, 2022.

As of December 31, 2022, a total of $ 12,193 of unamortized expenses are expected to be expensed over

the vesting period.

On December 8, 2021, a total of eight employees

and consultants were granted options to purchase an aggregate 18,531 shares of the Company’s common stock, having an exercise price

of $ 3.00 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 199 % and a call option value

of $2.9731, was $ 55,094 .

The options are being expensed over the vesting period, resulting in $ 4,636 and $ 693 of stock-based compensation

expense during the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, a total of $ 6,260 of unamortized

expenses are expected to be expensed over the vesting period.

On August 27, 2021, a total of twelve employees

and consultants were granted options to purchase an aggregate 11,918 shares of the Company’s common stock, having an exercise price

of $ 6.00 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 193 % and a call option value

of $5.9316, was $ 70,693 .

The options are being expensed over the vesting period, resulting in $ 8,252 and $ 4,883 of stock-based compensation

expense during the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, a total of $ 21,679 of unamortized

expenses are expected to be expensed over the vesting period.

On May 25, 2021, two advisory board members were

granted options to purchase an aggregate 6,000 shares of the Company’s common stock, having an exercise price of $ 5.00 per share,

exercisable over a 10-year term.

The options are being expensed over the vesting period.

On April 1, 2022, a total of nineteen employees and consultants were granted options to purchase an aggregate 35,977 shares of the Company’s common stock, having an exercise price of $ 2.75 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 406 % and a call option value of $2.64, was $ 95,099 .

The options are being expensed over the vesting period, resulting in $ 5,912 and $ 3,564 of stock-based compensation expense during

the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, a total of $ 20,086 of unamortized expenses

are expected to be expensed over the vesting period.

On April 22, 2021, Brad Burke was granted options

to purchase 27,500 shares of the Company’s common stock, having an exercise price of $ 5.50 per share, exercisable over a 10-year

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 193 % and a call option value of $5.4381, was $ 149,547 .

were being expensed over the vesting period, however, pursuant to a Separation Agreement and Release,

dated May 3, 2022 , the vesting terms of the options were accelerated to be fully vested, resulting in $ 128,733 and $ 20,814

of stock-based compensation expense during the years ended December 31, 2022 and 2021, respectively.

The options are being expensed over the vesting period.

The options were to 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 406 % and a call option value of $2.64, was $ 72,692 .

Pursuant to the Separation Agreement and Release, the vesting of an aggregate 47,500 , with a weighted average exercise price of $ 4.87 , of Mr.

Burke’s previously awarded options were also accelerated to be fully vested.

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

On April 22, 2021, a total of fifteen employees

and consultants were granted options to purchase an aggregate 19,875 shares of the Company’s common stock, having an exercise price

of $ 5.50 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 193 % and a call option value

of $5.4381, was $ 108,082 .

The options were expensed over the vesting period, resulting in $ 14,658 and $ 13,361 of stock-based compensation

expense during the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, a total of $ 47,638 of unamortized

expenses are expected to be expensed over the vesting period.

On January 27, 2021, Chris Ludeman was granted

options to purchase 24,151 shares of the Company’s common stock, having an exercise price of $ 6.25 per share, exercisable over a

10-year term.

The options will vest in three equal annual installments beginning of January 27, 2022 and continuing on each of the two

anniversaries thereafter until fully vested.

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

198 % and a call option value of $6.1794, was $ 149,239 .

The options are being expensed over the vesting period, resulting in $ 29,848 and

$ 22,815 of stock-based compensation expense during the years ended December 31, 2022 and 2021, respectively.

As of December 31,

2022, a total of $ 96,576 of unamortized expenses are expected to be expensed over the vesting period.

On January 4, 2021, Claudia and Ira Goldfarb were

each granted options to purchase 75,000 shares of the Company’s common stock, having an exercise price of $ 3.70 per share, exercisable

over a 10-year term.

The options will vest in three equal installments beginning of January 4, 2022 and continuing on each of the two

anniversaries thereafter until fully vested.

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

rate of 198 % and a call option value of $3.9412, was $ 591,178 .

The options are being expensed over the vesting period, resulting in $ 197,060

and $ 194,900 of stock-based compensation expense during the years ended December 31, 2022 and 2021, respectively.

As of December 31,

2022, a total of $ 199,218 of unamortized expenses are expected to be expensed over the vesting period.

The Company recognized a total of $ 782,081 , and

$ 543,332 of compensation expense during the years ended December 31, 2022 and 2021, respectively, related to common stock options

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

The remaining

unamortized balance of these options is $ 1,203,511 as of December 31, 2022.

On March 30, 2022, a total of sixteen employees and consultants were granted options to purchase an aggregate 19,436 shares of the Company’s common stock, having an exercise price of $ 2.75 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 407 % and a call option value of $2.64, was $ 51,380 .

The options are being expensed over the vesting period, resulting in $ 7,096 of stock-based compensation expense during the year ended December 31, 2023 .

As of December 31, 2023 , a total of $ 26,756 of unamortized expenses are expected to be expensed over the vesting period.

On March 25, 2022, a newly appointed advisory panel member was granted options to purchase an aggregate 6,382 shares of the Company’s common stock, having an exercise price of $ 2.35 per share, exercisable over a 10 -year term.

The options will vest 20% on each anniversary over a five -year period, until fully vested.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 406 % and a call option value of $2.26, was $ 14,413 .

The options are being expensed over the vesting period, resulting in $ 2,220 of stock-based compensation expense during the year ended December 31, 2023 .

As of December 31, 2023 , a total of $ 12,193 of unamortized expenses are expected to be expensed over the vesting period.

The Company recognized a total of $ 711,068 , and $ 782,081 of compensation expense during the years ended December 31, 2023 and 2022 , respectively, related to common stock options that are being amortized over the implied service term, or vesting period, of the options.

The remaining unamortized balance of these options is $ 14,625,420 as of December 31, 2023 and the weighted-average period over which these awards are expected to be recognized is approximately 2.4 years.

Options Cancelled or Forfeited

An aggregate 61,642 and 176,312 options with a

weighted average strike price of $ 5.87 and $ 12.66 per share were forfeited by former employees during the years ended December 31, 2022

and 2021, respectively.

An aggregate 21,083 and 87,793 options with a weighted average strike price of $ 2.84 and $ 7.11 per share were forfeited by former employees during the years ended December 31, 2023 and 2022 , respectively.

Options Expired

No options expired during the years ended December 31, 2022

During the years ended December 31, 2023 and 2022 there were no options expirations.

Options Exercised

No options were exercised during the years ended

December 31, 2022 and 2021.

No options were exercised during the years ended December 31, 2023 and 2022 .

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

The following is a summary of information about

the Stock Options outstanding at December 31, 2022.

Schedule of options outstanding and exercisable

Shares Underlying Options Outstanding

The following is a summary of information about the Stock Options outstanding at December 31, 2023 .

Shares Underlying

Shares Underlying Options Outstanding

Options Exercisable

Exercise Prices

Life (in years)

December 31, 2022

590,991 2.35 5 - 195.00 00

The following is a summary of activity of outstanding

stock options:

Schedule of option activity

8.1 $ 4.53 160,199 $ 5.02

December 31, 2023

2,620,813 2.35 5 - 195.00 00

6.6 $ 19.38 271,259 $ 4.69

The following is a summary of activity of outstanding stock options:

Balance, December 31, 2021

541,187 $ 6.77

Options granted

Options cancelled

( 87,793 ) ( 7.11 )

Balance, December 31, 2022

590,991 $ 4.53 $ 2,677,189

Options granted

2,050,905 23.55

Options cancelled

( 21,083 ) ( 2.84 )

Balance, December 31, 2023

2,620,813 $ 19.38 $ 50,802,052

Exercisable, December 31, 2023

Note 14 – Warrants

Outstanding Warrants

Warrants to purchase an aggregate total of 1,591,250

shares of common stock at a $ 2.47 strike price, exercisable over a weighted average life of 9.16 years were outstanding as of December

271,259 $ 4.69 $ 1,272,205

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

Note 14 – Warrants

Outstanding Warrants

Warrants to purchase an aggregate total of 2,291,250 shares of common stock at a $ 2.50 strike price, exercisable over a weighted average life of 8.51 years were outstanding as of December 31, 2023 .

Warrants are fair-valued using the Black-Scholes options pricing model, using the applicable volatility and risk-free rate based on the term of the warrant, at the issue date.

The fair value of the warrants is allocated to the notes payable, and amortized to interest over the term of the notes.

Interest expense related to debt discount amortization was $ 1,173,986 and $ 925,839 for the years ended December 31, 2023 and 2022 respectively.

Warrants Granted

On December 21, 2022 ,

warrants to purchase an aggregate 62,500 shares of common stock were issued to a director 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 316 % and a weighted average call option value of $3.15, was

The warrants are being expensed over the life of the loans, resulting in $ 2,018 of stock-based compensation expense during the

year ended December 31, 2022.

As of December 31, 2022, a total of $ 194,924 of unamortized expenses are expected to be expensed

over the remaining life of the outstanding debts.

On September 29, 2022 ,

warrants to purchase an aggregate 187,500 shares of common stock were issued to directors 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 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 $1.9441, was

The warrants are being expensed over the life of the loans, resulting in $ 32,355 of stock-based compensation expense during

the year ended December 31, 2022.

As of December 31, 2022, a total of $ 332,157 of unamortized expenses are expected to be expensed

over the remaining life of the outstanding debts.

On April 8, 2022, warrants to purchase an aggregate

925,000 shares of common stock were issued pursuant to a private placement debt offering in which aggregate proceeds of $ 3,700,000 were

received in exchange for promissory notes and warrants to purchase an aggregate 925,000 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 $ 2.35 per

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.

A total of 780,000 of the warrants were issued to officers

or directors.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 154 % and a weighted average call

option value of $2.9443, was $ 2,694,014 .

The warrants are being expensed over the life of the loans, resulting in $ 656,301 of stock-based

compensation expense during the year ended December 31, 2022.

As of December 31, 2022, a total of $ 2,037,713 of unamortized

expenses are expected to be expensed over the lives of outstanding debts.

December 31, 2021, the Company closed a private placement and concurrently entered into a Note and Warrant Purchase Agreement with related

parties to sell an aggregate $ 2,075,000

of promissory notes and warrants to purchase an aggregate 311,250

shares of common stock, 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 estimated value using the

Black-Scholes Pricing Model, based on a volatility rate of 198 %

and a call option value of $2.25, was $ 699,213 .

The warrants are being expensed over the life of the loans, resulting in $ 235,165

of stock-based compensation expense during the year ended December 31, 2022.

As of December 31, 2022, a total of $ 464,048

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

The officers,

directors and related parties receiving grants and the amounts of such grants were as follows:

Schedule of debt discount life loans

Stock Warrant

Name and Title at Time of Grant

Shares Granted

Ira and Claudia Goldfarb, Chairman and Chief Executive Officer

Brad Burke, Chief Financial Officer

Lyle Berman, Director

Gutierrez, brother of the Company’s Chief Executive Officer

On May 11, 2023, we closed on an offering to sell $100,000 of promissory notes and warrants to purchase an aggregate 25,000 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.

On May 11, 2023, the Company received aggregate proceeds of $100,000 from one of the Company’s Directors on the sale of these notes and warrants.

On April 25, 2023, we closed on an offering to sell up to $ 1,200,000 of promissory notes and warrants to purchase an aggregate 300,000 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.

On April 25, 2023, the Company received aggregate proceeds of $ 800,000 from two of the Company’s Directors and $ 400,000 from one accredited investor on the sale of these notes and warrants.

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

The warrants are exercisable at a price of $ 2.21 per share over a ten -year term.

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 April 8, 2022, warrants to purchase an aggregate 925,000 shares of common stock were issued pursuant to a private placement debt offering in which aggregate proceeds of $ 3,700,000 were received in exchange for promissory notes and warrants to purchase an aggregate 925,000 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 $ 2.35 per share.

A total of 780,000 of the warrants were issued to officers or directors.

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

A total of 1,300 warrants with a weighted average

exercise price of $ 3.00 per share expired during the year ended December 31, 2022.

No warrants were exercised, cancelled or expired

during the years ended December 31, 2022 and 2021, otherwise.

The following is a summary of activity of outstanding

Schedule of warrant activity

No warrants were exercised, cancelled or expired during the year ended December 31, 2023 .

A total of 1,300 warrants with a weighted average exercise price of $ 3.00 per share expired during the year ended December 31, 2022

The following is a summary of activity of outstanding warrants:

Balance, December 31, 2021

Warrants granted

1,175,000 2.40

Warrants expired

( 1,300 ) ( 3.00 )

Balance, December 31, 2022

1,591,250 $ 2.47

Warrants granted

1 unchanged sentence

Balance, December 31, 2023

2,291,250 $ 2.50

Exercisable, December 31, 2023

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.

2,291,250 $ 2.50

Note 15 - Earnings Per Share

Basic and diluted earnings per share years ended December 31, 2023 and 2022

For the Year Ended

Net income (loss) attributable to common shareholders

$ ( 3,060,433 ) $ ( 12,127,068 )

Basic weighted average shares

5,168,339 4,835,389

Basic income and diluted loss per share

$ ( 0.59 ) $ ( 2.51 )

The table below includes information related to stock options and warrants that were outstanding at the end of each respective year ended December 31, 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.

For the Year Ended

Weighted average stock options

Weighted average price of stock options

$ 19.38 $ 4.81

Weighted average warrants

2,084,994 1,010,337

Weighted average price of warrants

$ 2.50 $ 2.47

Average price of common stock

$ 5.37 $ 4.06

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

Note 16 – Gain on Early Extinguishment

During the year ended December 31, 2021, the Company

recognized a gain on early extinguishment of debt of $ 113,772 , consisting of the forgiveness of $ 112,925 of principal and $ 847 of interest,

on our PPP loan pursuant to Payroll Protection Program established as part of the Coronavirus Aid, Relief, and Economic Security Act (the

“CARES Act”).

Note 17 – Gain on Investment in Allied

Esports Entertainment, Inc.

Following the close of BRAC’s merger, the

Company retained 2,685,500 shares of AESE common stock with a value, based on the closing stock of $4.45 on the merger, of $11,950,475,

and tradeable warrants to purchase 505,000 shares of AESE (NASDAQ:

AESEW) (“Sponsor Warrants”), of which the Company had sold

its last remaining 177,479 shares for total net proceeds of $414,361 as of December 31, 2021, and still owned 177,479 shares as of

December 31, 2020, after selling 1,970,920 shares for total net proceeds of $3,108,067, selling warrants to purchase 505,000 Sponsor Warrants

for total proceeds of $73,668, and distributing 537,101 Sponsor Shares on August 10, 2020 to employees and directors under the 2018 Management

Incentive Plan.

As of December 31, 2021, the Company had sold

all of its shares in AESE common stock, and as of December 31, 2020, the market value of the Company’s investment in AESE’s

common stock was $ 280,417 ,

based on the closing stock price of $1.58

per share, resulting in losses on our investment in securities, as follows:

Schedule of unrealized loss on investment

Net gain (loss) on investment in Allied Esports Entertainment, Inc.

Net gains and losses recognized on equity securities sold during the period

Unrealized losses recognized on equity securities still held at the end of the period

Note 16 – Income Taxes

We account for income taxes under the provisions

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

Under this approach, deferred

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

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

for income tax purposes.

Our provision for income taxes for the years

ended December 31, 2022 and 2021 consisted of the following:

Schedule of components of income tax expense

Current taxes

Deferred taxes

Net income tax provision (benefit)

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

The effective income tax rate for the years ended

December 31, 2022 and 2021 consisted of the following:

Schedule of effective income tax rate

We account for income taxes under the provisions of ASC Topic 740, Income taxes, which provides for an asset and liability approach for income taxes.

Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributable to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.

We had no provision for income taxes for the years ended December 31, 2023 and 2022.

The effective income tax rate for the years ended December 31, 2023 and 2022 consisted of the following:

Federal statutory income tax rate

21.00 % 21.00 %

State income taxes

0.00 % 0.00 %

Permanent differences

( 0.21 )% 0.10 %

Change in effective state income tax rate

0.00 % 0.00 %

True up prior year tax return

0.06 % ( 0.50 )%

Change in valuation allowance

( 20.85 )% ( 20.60 )%

Net effective income tax rate

The components of the deferred tax assets and

liabilities as of December 31, 2022 and 2021 are as follows:

Schedule of deferred tax assets and liabilities

0.00 % 0.00 %

The components of the deferred tax assets and liabilities as of December 31, 2023 and 2022 are as follows:

Deferred tax assets:

Federal and state net operating loss carryovers

$ 9,391,254 $ 8,681,830

Stock compensation

2,578,060 862,079

Stock-based debt discounts

440,963 925,839

Goodwill and intangibles

1,106,693 5,197,470

Reorganization costs

Allowance for bad debts

Total deferred tax assets

$ 13,545,237 $ 15,667,218

Deferred tax liabilities:

Property and equipment

Unrealized gain on investment in Allied Esports Entertainment, Inc.

( 561,128 ) ( 149,777 )

2 unchanged sentences

Net deferred tax assets (liabilities)

valuation allowance

12,984,109 15,517,441

valuation allowance

( 12,984,109 ) ( 15,517,441 )

2 unchanged sentences

NOTES TO THE FINANCIAL STATEMENTS

As of December 31, 2022, the Company

has a net operating loss carryover of approximately $ 41,300,000 .

Under existing Federal law, a portion of the net operating loss may be

utilized to offset taxable income through the year ended December 31, 2037.

A portion of the net operating loss carryover begins

to expire in 2030.

For tax years beginning after December 31, 2017, pursuant to the enactment of the Tax Cuts and Jobs Act (“TCJA”)

net operating losses now carry forward indefinitely but are limited to offsetting 80% of taxable income in a tax year.

Of the total net

operating loss as of December 31, 2022, approximately $ 4,240,000 of the Company’s NOL is subject to the TCJA net operating loss

ASC Topic 740 provides that a valuation allowance

is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset

will not be realized.

In 2021, The Company increased its valuation allowance from 6,905,572 to $ 15,517,441 to adjust for the increase

in net deferred tax assets primarily due to an increase in the net operating loss carryovers.

The Company believes it is more likely than

not that the benefit of these remaining assets will not be realized.

The Company filed annual US

Federal income tax returns and annual income tax returns for the state of Minnesota through 2020.

Going forward, it will file annual state

income tax returns for the state of Texas.

We are not subject to income tax examinations by tax authorities for years before 2016 for

Income taxing authorities have conducted no formal examinations of our past federal or state income tax returns and supporting

The Company adopted the provisions

of ASC Topic 740 regarding uncertainty in income taxes.

The Company has found no significant uncertain tax positions as of any date on

or before December 31, 2022.

Note 19 – Subsequent

The Company evaluates events that have occurred

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

No events occurred of a material nature

that would have required adjustments to or disclosure in these financial statements except as follows:

Debt Financing

On various dates from

January 5, 2023 to March 7, 2023, the Company received aggregate proceeds of $1,250,000 from two of the Company’s Directors on the

sale of an offering entered into on September 29, 2022, 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.

The Company issued aggregate warrants to purchase 312,500 shares of common stock pursuant

to the advances received on this offering.

As of December 31, 2023 , the Company has a net operating loss carryover of approximately $ 44,720,255 .

Under existing Federal law, a portion of the net operating loss may be utilized to offset taxable income through the year ended December 31, 2037.

A portion of the net operating loss (“NOL”) carryover begins to expire in 2030.

For tax years beginning after December 31, 2017, pursuant to the enactment of the Tax Cuts and Jobs Act (“TCJA”) net operating losses now carry forward indefinitely but are limited to offsetting 80% of taxable income in a tax year.

Of the total net operating loss as of December 31, 2023 , approximately $ 18,966,124 of the Company’s NOL is subject to the TCJA net operating loss provisions.

ASC Topic 740 provides that a valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized.

In 2023, the Company decreased its valuation allowance from $ 15,517,441 to $ 12,984,109 to adjust for the decrease in net deferred tax assets.

The Company believes it is more likely than not that the benefit of these remaining assets will not be realized.

The Company filed annual US Federal income tax returns and annual income tax returns for the state of Minnesota through 2020.

Following the 2020 tax year, the Company has filed annual state franchise tax returns for the state of Texas.

We are not subject to income tax examinations by tax authorities for years before 2020 for all returns.

Income taxing authorities have conducted no formal examinations of our past federal or state income tax returns and supporting records.

The Company adopted the provisions of ASC Topic 740 regarding uncertainty in income taxes.

The Company has found no significant uncertain tax positions as of any date on or before December 31, 2023 .

Note 17 – Subsequent Events

Management has evaluated events and transactions subsequent to the balance sheet date through the date of this report (the day the financial statements were available to be issued) for potential recognition or disclosure in the financial statements.

Management has not identified any items requiring recognition or disclosure, except as follows:

Change in Board of Directors

On January 5, 2024, Tim Creed tendered his resignation, effective January 5, 2024 from the Board of Directors and the Company appointed Edward Shensky as a member of the Board of Directors of the Company effective immediately.

Creed’s resignation was not a result of any disagreement with the Company on any matter related to its operations, policies or practices.

Shensky will stand for re-election at the Company’s next annual meeting.

His appointment to the Board of Directors was not pursuant to any arrangement or understanding between Mr.

Shensky and any other person.

Pursuant to the Company’s Non-Employee Director Compensation Plan, Mr.

Shensky will receive annualized compensation of $ 25,000 , to be paid in cash or common stock, at the Company’s election, beginning with his appointment and continuing on each subsequent anniversary of his appointment thereafter or the date of his election at an annual meeting of shareholders, whichever comes first.

On January 11, 2024, the Company issued an aggregate of 1,233 shares to Mr.

Shensky under the Non-Employee Director Compensation Plan, which represents the number of shares to be issued based on the closing price of the Company’s shares on the OTCQB marketplace on January 10, 2024.

Employment Agreement with and Resignation of Chief Financial Officer

On January 11, 2024, the Board ratified the Employment Agreement (the “Terreri Employment Agreement”) entered into on December 1, 2023 with Keith Terreri, the Company’s Chief Financial Officer.

The Terreri Employment Agreement supersedes Mr.

Terreri’s previously filed offer letter and includes the previously approved compensation terms as well as restrictive covenants, a release and the severance terms described in more detail below.

The Terreri Employment Agreement provides for Mr.

Terreri’s entitlement to receive an annual base salary of $ 270,000 and an annual target bonus opportunity equal to 25% of base salary.

Additionally, the Terreri Employment Agreement provides Mr.

Terreri’s entitlement to a grant of 27,000 stock options, representing the right to purchase shares of the Company’s common stock, subject to Mr.

Terreri’s continuous service to the Company through each vesting date.

On March 2, 2024, Mr.

Terreri tendered his resignation effective as of March 4, 2024.

Terreri’s options were vested at the time his resignation was effective, so in accordance with the Terreri Employment Agreement, all 27,000 of his options are forfeited.

SOW GOOD INC.

NOTES TO THE FINANCIAL STATEMENTS

Amendment to the 2020 Stock Incentive Plan

On January 8, 2024, our stockholders took action by written consent to ratify the amendment to the 2020 Stock Incentive Plan (the “2020 Plan”) approved by the Board on December 15, 2023.

Approval of Option Grants under the 2020 Plan

On December 15, 2023 our Board of Directors approved option grants under the 2020 Plan to Ira Goldfarb and Claudia Goldfarb, subject to approval by a majority of the voting stockholders.

In addition to ratifying the 2020 Plan Amendment, on January 9, 2024, the majority of voting stockholders of the Company approved Board on December 15, 2023.