What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-13 compared with 2021-11-15 · 113 added, 204 removed, 141 unchanged (69% of the section changed)

19 unchanged sentences

to differ materially from those set forth in the forward-looking statements include the following:

· the effect of the coronavirus (“COVID-19”)

pandemic on our ability to obtain funding through various financing transactions or arrangements;

· volatility or decline of our stock price;

1 unchanged sentence

· potential fluctuation in quarterly results;

· low trading volume and price of our investment in AESE Shares;

· inability to maintain adequate liquidity to meet our financial obligations;

· failure to obtain sufficient sales and distributions of our freeze-dried fruit product offerings;

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

· supply chain disruption and delay;

· transportation, labor, and raw material cost increases;

· litigation, disputes and legal claims involving outside parties;

18 unchanged sentences

Overview and Outlook

On March 20, 2021,

our first freeze drier successfully completed its production testing.

The company is now producing its own freeze-dried fruits and vegetables

from individual quick freeze (IQF) raw materials.

Freeze dried food production also continues to be supplemented by our relationships

with co-manufacturing partners.

In addition, we completed the build-out of our production facility in March, and have finalized products

and packaging, while delivering samples to potential B2B customers.

During the second quarter

of 2021, we launched our direct-to-consumer freeze-dried consumer packaged goods (CPG) food brand, under our Sow Good brand.

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

The smoothie lineup offers a mix of

both new and familiar flavors:

We continue to sell our products

online via our direct-to-consumer channels, in addition to our growing pipeline of business-to-business customers.

In March of 2021, we

completed the construction of our first freeze drier and, in antiparticipation of the increased production demands for our products and

freeze-drying expertise, we are in the development process of our second and third freeze driers.

During the first quarter of

2022, we expanded our ‘Sustain Us’ brand, which offers a line of granolas, snacks, and soups that are marketed toward outdoor

adventure activities, everyday snacking and meal prep needs, and long-term food storage.

During 2021, we completed build-out of our production

facility and launched our direct-to-consumer freeze dried consumer packaged goods (CPG) food brand, under our Sow Good brand.

launched eleven ready-to-blend smoothies, nine fruit snacks, and six vegetable snacks.

The smoothie lineup offers a mix of both new and

familiar flavors:

Açaí of Relief (açaí, blueberry);

Mint to Be (banana, coconut, mint);

Apeeling (banana, strawberry).

Sow Good packaged snack lineup includes single-ingredient fruits and vegetables such as Mon Cherry (cherries);

Cool Beans (edamame);

and What’s Apple’n (apples).

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.

Our unique food products are targeting the large, and growing, freeze-dried food

products market.

The global freeze-dried food products market is estimated by Technavio to total nearly $60B in 2020, with the

United States representing almost 30% of the total.

Technavio further projects market growth to continue at over 8% per year through

With the extensive freeze-dried manufacturing and food product-focused business development experience of our senior management

team, we believe we are well positioned to lead the Company's growth and development in the freeze-dried food industry.

and Berry Apeeling

(banana, strawberry).

Sow Good’s packaged snack lineup includes fruits and vegetables such as Mon Cherry (cherries) and What’s

the Dill (sweet potato chips with dill).

We also launched four new gluten-free granola products under the Sow Good brand.

granola products are made with health-conscious ingredients such as freeze dried fruits, almonds, and hemp hearts.

Our unique food products

are targeting the large, and growing, freeze dried food market.

With the extensive freeze

dried manufacturing and business development experience of our senior management team, we are confident that we are well positioned to

lead the Company's growth and development in the freeze dried food industry.

Going Concern Uncertainty

As of September 30, 2021,

the Company had incurred recurring losses from operations resulting in an accumulated deficit of $40,626,166, and had cash on hand of

As of March 31, 2022, the

Company had incurred recurring losses from operations resulting in an accumulated deficit of $45,104,556, and had cash on hand of $1,814,988.

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.

In the event sales do not materialize at the expected rates, management would seek additional

financing or would attempt to conserve cash by further reducing expenses.

There can be no assurance that we will be successful in achieving

these objectives.

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.

In the event sales do not materialize at the expected rates, management would seek additional financing or

would attempt to conserve cash by further reducing expenses.

There can be no assurance that we will be successful in achieving these

The Company has incurred recurring

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Results of Operations for the Three Months

Ended September 30, 2021 and 2020.

Ended March 31, 2022 and 2021

The following table summarizes

selected items from the statement of operations for the three months ended September 30, 2021 and 2020, respectively.

selected items from the statement of operations for the three months ended March 31, 2022 and 2021, respectively.

Three Months Ended

September 30,

Cost of goods sold

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Interest expense

Loss on disposal of property and equipment

Loss on investment in Allied Esports Entertainment, Inc.

Gain on early extinguishment of debt

Gain on investment in Allied Esports Entertainment, Inc.

Total other income (expense)

$ (1,582,157 )

$ (2,492,204 )

Revenues commenced during

the current year, which were generated by online sales of our freeze-dried foods products.

The revenues were $21,137 for the three months

ended September 30, 2021, as we test launched our products.

The Company did not earn any revenues during the comparative three months

ended September 30, 2020.

We anticipate increased revenues over the remainder of the year, although there can be no assurance.

Revenues consist primarily

of online freeze-dried foods product sales.

The revenues were $48,372 for the three months ended March 31, 2022, as we continued

to launch our product lines.

The Company did not earn any revenues during the comparative three months ended March 31, 2021.

We anticipate

increased revenues over the remainder of the year, although there can be no assurance.

Cost of Goods Sold

Cost of goods sold for the

three months ended September 30, 2021 were $19,396, primarily consisting of material costs and labor on the sales of freeze-dried

food products, resulting in a gross profit of approximately 8% during the quarter.

The Company did not have any cost of goods sold during

the comparative three months ended September 30, 2020.

three months ended March 31, 2022 were $47,491, primarily consisting of material costs and labor on the sales of freeze-dried food products,

resulting in a gross profit of approximately 2% during the quarter.

The Company did not have any cost of goods sold during the comparative

three months ended March 31, 2021.

General and administrative expenses

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Salaries and benefits for

the three months ended September 30, 2021 were $936,783, compared to $805,938 for the three months ended September 30, 2020,

an increase of $130,845, or 16%, Salaries and benefits included stock-based compensation expense for the three months ended September 30,

2021 of $306,018, compared to $322,888 for the three months ended September 30, 2020, a decrease of $16,870, or 5%.

Stock-based compensation

consists of $145,566 and $322,888 of stock options expense incurred in the three months ended September 30, 2021 and 2020, respectively,

and $160,452 of expense related to shares of common stock issued to officers and consultants in the current period for services rendered.

The increase in salaries and benefits was primarily due to increased operations as we developed our freeze-dried food operations and stock-based

compensation, as management accepted stock-based compensation in lieu of cash.

the three months ended March 31, 2022 were $916,155, compared to $757,144 for the three months ended March 31, 2021, an increase

of $159,011, or 21%, Salaries and benefits included stock-based compensation expense for the three months ended March 31, 2022 of $144,261,

compared to $375,891 for the three months ended March 31, 2021, a decrease of $231,630, or 62%.

Stock-based compensation consists

of $134,261 and $121,221 of stock options expense incurred in the three months ended March 31, 2022 and 2021, respectively, and $10,000

and $254,670 of expense related to shares of common stock issued to officers and consultants for services rendered in the three months

ended March 31, 2022 and 2021, respectively.

The increase in salaries and benefits was primarily due to increased operations as we developed

our freeze-dried food operations, as partially offset by a reduction in stock-based compensation, as management accepted stock-based compensation

in lieu of cash in the comparative period.

Professional services

1 unchanged sentence

$62,693 for the 2022 period, compared to $101,899 for the 2021 period, a decrease of $39,206, or 38%.

The decrease was primarily due

to legal fees incurred in connection with our asset purchase agreement with S-FDF, LLC in the comparative period that were not necessary

in the current period.

The decrease was primarily due to

legal fees incurred in connection with creating our brand in the comparative period that were not necessary in the current period.

Other general and administrative expenses

Other general and administrative

expenses for the three months ended September 30, 2021 was $472,369, compared to $45,001 for the three months ended September 30,

expenses for the three months ended March 31, 2022 was $405,076, compared to $286,821 for the three months ended March 31, 2021,

an increase of $118,255, or 41%.

The increase is primarily attributable to increased administrative infrastructure as we seek to

scale the production and sales of our freeze-dried products.

Depreciation expense for the

three months ended September 30, 2021 was $64,863, compared to $380 for the three months ended September 30, 2020, an increase

The increase is primarily attributable to increased administrative infrastructure as we seek to scale

the production and sales of our freeze-dried products.

Depreciation expense for

the three months ended March 31, 2022 was $65,226, compared to $4,996 for the three months ended March 31, 2021, an increase

of $60,230, or 1,206%.

The increase is attributable to the addition of new equipment placed in service in late 2020 and early 2021.

The increase is attributable to the addition of new equipment placed in service throughout 2021.

Other income (expense)

In the three months ended

September 30, 2021, other expense was $1,697, consisting entirely of interest expense on our EIDL loan with the SBA.

During the comparative

three months ended September 30, 2020, other expense, on a net basis, was $1,510,651, consisting of $1,695 of interest expense derived

from the business loans the Company received from Cadence Bank, N.A and RBC Capital Markets, LLC and additional operating loans from

the PPP and EIDL programs, a loss on the disposal of equipment of $5,369, and a net loss on investments in Allied Esports Entertainment,

securities of $1,503,601, as offset by $14 of interest income.

March 31, 2022, other expense was $103,793, consisting of $44,069 of interest expense on our EIDL loan with the SBA and loans from our

officers and directors, and $59,724 related to the amortization of warrants issued as a debt discount on the loans from our officers and

During the comparative three months ended March 31, 2021, other income, on a net basis, was $342,983, consisting of a

$113,772 gain on early extinguishment of debt and a net gain on investments in Allied Esports Entertainment, Inc.

securities of $230,723,

as offset by $1,512 of interest expense derived from the operating loans the Company received from the PPP and EIDL programs.

Net loss for the three months

ended September 30, 2021 was $1,582,157, compared to $2,492,204 during the three months ended September 30, 2020, a decreased

net loss of $910,047, or 37%.

The decreased net loss was due primarily to our loss on investments in Allied Esports Entertainment, Inc.

ended March 31, 2022 was $1,552,062, compared to $807,877 during the three months ended March 31, 2021, an increased net loss of

$744,185, or 92%.

The increased net loss was due primarily to $297,409 of increased operating losses over the prior year, as we ramped

up our operations, and prior years gains of $113,772 and $230,723 on the forgiveness of our PPP loan and gains on the sale of our investments

in Allied Esports Entertainment, Inc.

securities in the comparative period.

Results of Operations for the Nine Months Ended

September 30, 2021 and 2020.

The following table summarizes

selected items from the statement of operations for the nine months ended September 30, 2021 and 2020, respectively.

Nine Months Ended

September 30,

Cost of goods sold

Operating expenses:

General and administrative expenses:

Salaries and benefits

Professional services

Other general and administrative expenses

Total general and administrative expenses

Depreciation and amortization

Total operating expenses

Net operating loss

Other income (expense)

Interest expense, including $377,440 of warrants issued as a debt discount for the nine months ending September 30, 2020

Loss on disposal of property and equipment

Gain on early extinguishment of debt

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

Total other income (expense)

$ (3,947,828 )

$ (4,421,001 )

Revenues commenced during

the current year, which were generated by online sales of our freeze-dried foods products.

The revenues were $28,213 for the nine months

ended September 30, 2021, as we test launched our products.

The Company did not earn any revenues during the comparative nine months ended

September 30, 2020.

We anticipate increased revenues over the remainder of the year, although there can be no assurance.

Cost of Goods Sold

Cost of goods sold for the

nine months ended September 30, 2021 were $24,295, primarily consisting of material costs and labor on the sales of freeze-dried

food products, resulting in a gross profit of approximately 14% during the period.

The Company did not have any cost of goods sold during

the comparative nine months ended September 30, 2020.

General and administrative expenses

Salaries and benefits

Salaries and benefits for

the nine months ended September 30, 2021 were $2,610,884, compared to $1,330,135 for the nine months ended September 30, 2020,

an increase of $1,280,749, or 96%, Salaries and benefits included stock-based compensation expense of $1,015,233, compared to $393,831

for the nine months ended September 30, 2020, an increase of $621,402, or 158%.

Stock-based compensation consists of $407,031 and

$393,831 of stock options expense incurred in the nine months ended September 30, 2021 and 2020, respectively, and $608,202 of expense

related to shares of common stock issued to officers and consultants in the current period for services rendered.

The increase in salaries

and benefits was primarily due to increased operations as we developed our freeze-dried food operations and stock-based compensation,

as management accepted stock-based compensation in lieu of cash.

Professional services

Professional services were

$270,779 for the 2021 period, compared to $327,090 for the 2020 period, a decrease of $56,311, or 17%.

The decrease was primarily due

to legal fees incurred in connection with our asset purchase agreement with S-FDF, LLC in the comparative period that were not necessary

in the current period.

Other general and administrative expenses

Other general and administrative

expenses for the nine months ended September 30, 2021 was $1,183,453, compared to $186,380 for the nine months ended September 30,

2020, an increase of $997,073, or 535%.

The increase is primarily attributable to increased administrative infrastructure as we seek to

scale the production and sales of our freeze-dried products.

Depreciation expense for the

nine months ended September 30, 2021 was $129,915, compared to $1,030 for the nine months ended September 30, 2020, an increase

of $128,885, or 12,513%.

The increase is attributable to the addition of new equipment placed in service in late 2020 and early 2021.

Other income (expense)

In the nine months ended September 30,

2021, other income was $243,285, consisting of a gain on investments in Allied Esports Entertainment, Inc.

securities of $133,944 and

a gain on early extinguishment of debt of $113,772 related to the forgiveness of the PPP loan, as offset by $4,431 of interest expense

derived from the operating loans the Company received from the PPP and EIDL programs.

During the comparative nine months ended September 30,

2020, other expense was $2,576,366, consisting of $384,456 of interest expense derived from the business loans the Company received from

Cadence Bank, N.A, RBC Capital Markets, LLC and additional operating loans from the PPP and EIDL programs, including $377,440 of

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

a net loss on investments in Allied Esports Entertainment, Inc.

of $2,186,557, as offset by $16 of interest income.

Net loss for the nine months

ended September 30, 2021 was $3,947,828, compared to $4,421,001 during the nine months ended September 30, 2020, a decrease

of $473,173, or 11%.

The decreased net loss was primarily due to our gain on early extinguishment of debt and gain on investments in Allied

Esports Entertainment, Inc.

securities, compared to our prior period loss on investments, as partially offset by increased stock-based

compensation and costs associated with the development of our freeze-dried food operations.

Liquidity and Capital Resources

The following table summarizes

our total current assets, liabilities and working capital at September 30, 2021 and December 31, 2020, respectively.

September 30,

our total current assets, liabilities and working capital at March 31, 2022 and December 31, 2021, respectively.

Current Assets

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Working Capital

As of September 30, 2021,

we had working capital of $3,425,459.

As of March 31, 2022, we

had working capital of $3,168,852.

The following table summarizes

our cash flows during the nine months ended September 30, 2021 and 2020, respectively.

Nine Months Ended

September 30,

our cash flows during the three months ended March 31, 2022 and 2021, respectively.

Three Months Ended

Net cash used in operating activities

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$ (1,194,871 )

Net cash provided by (used in) investing activities

Net cash used in investing activities

Net cash provided by financing activities

Net change in cash and cash equivalents

$ (1,530,940 )

Net cash used in operating

activities was $4,304,501 and $1,111,648 for the nine months ended September 30, 2021 and 2020, respectively, a period over period

increase of $3,192,853.

The increase was primarily due to an increase of $1,021,099 in inventory purchases, as well as, increased costs

as we moved our operations from Minnesota to Texas to develop our new freeze-dried food business.

activities was $1,482,598 and $1,194,871 for the three months ended March 31, 2022 and 2021, respectively, a period over period increase

The increase was primarily due to our increased net loss.

Net cash used in investing

activities were $590,250 for the nine months ended September 30, 2021.

Cash used in investing activities were comprised of $1,004,611

of fixed asset purchases, as we built out our freeze-dried foods warehouse and equipment, as partially offset by $414,361 of proceeds

received from the sale of investments in Allied Esports Entertainment, Inc.

securities during the nine months ended September 30,

Net cash provided by financing

activities was $5,562,511 and $262,925 for the nine months ended September 30, 2021 and 2020, respectively.

All of the 2021 activity

was the result of the $2,525,000 we raised from the sale of an aggregate 631,250 shares of the Company’s

common stock at $4.00 per share, and another $3,037,511 raised from the sale of an aggregate 714,701 shares sold at $4.25 per share ,

compared to $262,925 of net proceeds received and repayments on notes payable in the comparative nine months ended September 30,

activities were $48,342 and $696,745 for the three months ended March 31, 2022 and 2021, respectively, a period over period decrease

Cash used in investing activities were comprised of $44,726 of fixed asset purchases, as we built out our freeze-dried foods

warehouse and equipment, and $3,616 of purchases on trademarks during the three months ended March 31, 2022, compared to $38,208 of fixed

asset purchases, along with $658,537 of construction in progress costs incurred during the three months ended March 31, 2021.

There were no financing activities

during the three months ended March 31, 2022.

Net cash provided by financing activities was $2,525,000 for the three months ended

March 31, 2021.

All of the 2021 activity was the result of the $2,525,000 we raised from the sale

of an aggregate 631,250 shares of the Company’s common stock at $4.00 per share, and another $3,037,511 raised from the sale of

an aggregate 714,701 shares sold at $4.25 per share .

Satisfaction of our cash obligations for

the next 12 months

As of September 30, 2021,

our balance of cash was $2,580,489 and we had total working capital of $3,425,459.

As of March 31, 2022, our

balance of cash was $1,814,988 and we had total working capital of $3,168,852.

B ased on projections

of cash expenditures in the Company’s current business plan, the cash on hand as of September 30, 2021 would be insufficient

to sustain operations over the next year.

of cash expenditures in the Company’s current business plan, the cash on hand as of March 31, 2022 would be insufficient to

sustain operations over the next year.

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

1 unchanged sentence

Should the Company be successful in launching its products, we may pursue

the expansion of our production capabilities through the construction of a second freeze drier.

Adding a second freeze drier would require

the expansion of our production capabilities through the construction of a third freeze drier.

Adding a third freeze drier would require

approximately $1 million of incremental capital and would likely require the Company to identify additional sources of funding .

1 unchanged sentence

and additional financing in the form of equity or debt as needed.

Our ability to scale production

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

On April 8, 2022, we raised $3.7 million from the sale of Promissory

Notes and Warrants, including $3,120,000 received from related parties, resulting in approximately $4.4 million of cash on hand as

of May 1, 2022.

Our ability to scale production and distribution capabilities and further increase the value of our brands is largely

dependent on our success in raising additional capital .

Off-Balance Sheet Arrangements

22 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis