Sow Good Inc. 10-Q

ITEM 4. CONTROLS AND PROCEDURES. On May 15, 2020, we filed a Form 10-K/A for the year ended December 31, 2019 and a Form 10-Q/A for the period ended September 30, 2019 and a Form 10-Q/A for the period ended September 30, 2019 to restate our previously reported financial information to correct the presentation of unrealized losses on our investment in Allied Esports Entertainment, Inc. in accordance with Accounting Standards Update No. 2016-01 – Financial Instruments – Overall (Subtopic 825-10) . Specifically, unrealized losses that were originally separately presented as other comprehensive income should have been included in our net loss. We evaluated our investment in AESE shares of common stock by determining the fair market value of the shares, using the closing traded price as traded on the Nasdaq stock exchange. The fair market value was then measured against the carrying value, as reported for the prior period, resulting in a gain or loss, which had previously been recognized in other comprehensive income, as unrealized. The adoption of ASU 2016-01, changed the presentation of the gain or loss on equity securities from other comprehensive income to ordinary income, as presented in our restated Form 10-K and Form 10-Q filings. Following our conclusion to restate our financial statements, we initiated a comprehensive review of all our determinations and documentation related to accounting for our investment in Allied Esports Entertainment, Inc., as well as related processes and procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by the Company is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Our management, under the direction of our Chief Executive Officer and Interim Chief Financial Officer, who is one in the same, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such terms are defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2020. As part of such evaluation, management considered the matters discussed below relating to internal control over financial reporting. Based on this evaluation our management, including the Company’s Chief Executive Officer and Interim Chief Financial Officer, has concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2020, as a result of the identified material weakness in internal control over financial reporting, the nature of which is summarized below. We did not have effective controls to provide reasonable assurance as to the appropriate selection and implementation of accounting methods with respect to presentation of unrealized gains (losses) on our investment in Allied Esports Entertainment, Inc. We lacked adequate technical expertise to ensure the proper application, at inception and on an ongoing basis, of the criteria for reporting investments in equity securities pursuant to ASU 2016-01. This material weakness resulted in our restatement of the consolidated financial statements for the year ended December 31, 2019, and for the interim period ending September 30, 2019. To remediate the material weakness described above and enhance our internal control over financial reporting, subsequent to the filing of this Form 10-Q, management will implement the following changes: • Improve training, education and understanding of requirements for all relevant personnel. • Quarterly consultation with a third-party independent expert. • Enhanced reviews whenever there is a change in accounting or significant operational activities. Management believes that these measures, when fully implemented, will mitigate the material weakness described above. The Audit Committee of the Board of Directors and management will continue to monitor the implementation of these remedial measures and the effectiveness of our internal controls and procedures on an ongoing basis. There have been no changes in the Company’s internal control over financial reporting during the three-month period ended March 31, 2020 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting. 23 PART II - OTHER INFORMATION Item 1. Legal Proceedings. Other than routine legal proceedings incident to our business, there are no material legal proceedings to which we are a party or to which any of our property is subject.