What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-15 compared with 2022-05-13 · 480 added, 268 removed, 571 unchanged (57% of the section changed)

8 unchanged sentences

Property and equipment:

Construction in progress

Property and equipment

11 unchanged sentences

Operating lease liabilities

Notes payable, related parties, net of $ 639,489 and $ 699,213 of debt discounts at March 31, 2022 and December 31, 2021

Notes payable

Notes payable, related parties, net of $ 2,660,748 and $ 699,213 of debt discounts at June 30, 2022 and December 31, 2021, respectively

Notes payable, net of $ 410,681 of debt discounts at June 30, 2022

Total liabilities

2 unchanged sentences

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, 4,820,655 and 4,809,070 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Common stock, $ 0.001 par value, 500,000,000 shares authorized, 4,840,974 and 4,809,070 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

Common stock payable, consisting of 4,255 and 11,585 shares at March 31, 2022 and December 31, 2021, respectively

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

Accumulated deficit

5 unchanged sentences

SOW GOOD INC.

STATEMENTS OF OPERATIONS

CONDENSED STATEMENTS

OF OPERATIONS

For the Three Months

Ended March 31,

For the Six Months

Ended June 30,

Cost of goods sold

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( 1,459,793 )

( 3,205,606 )

( 2,610,653 )

Other income (expense):

Interest expense, including $ 59,724 of warrants issued as a debt discount for the three months ending

March 31, 2022

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

Gain on early extinguishment of debt

Gain on investment in Allied Esports Entertainment, Inc.

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

Total other income (expense)

1 unchanged sentence

$ ( 1,557,794 )

$ ( 3,664,851 )

$ ( 2,365,671 )

Weighted average common shares outstanding - basic

4 unchanged sentences

SOW GOOD INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

the Three Months Ended June 30, 2021

Stockholders'

Balance, March 31, 2021

$ ( 37,486,215 )

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 options granted

to officers and directors for services

Common stock options granted

to employees for services

Net loss for the three months

ended June 30, 2021

( 1,557,794 )

June 30, 2021

$ ( 39,044,009 )

For the Three Months Ended

June 30, 2022

Stockholders'

Balance, March 31, 2022

$ ( 45,104,556 )

Common stock warrants granted to related parties pursuant to debt financing

Common stock warrants granted to note holders pursuant to debt financing

Common stock issued to officers and directors for services

Common stock issued to advisory board for services

Common stock options granted to officers and directors for services

Common stock options granted to employees and advisors for services

Net loss for the three months ended June 30, 2022

( 2,112,789 )

Balance, June 30, 2022

$ ( 47,217,345 )

SOW GOOD INC.

STATEMENTS OF CHANGES

IN STOCKHOLDERS’ EQUITY

the Six Months Ended June 30, 2021

Stockholders'

Balance, December 31, 2020

3 unchanged sentences

( 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 options granted to officers

to officers and directors

Common stock sales for cash

Common stock issued to officers

and directors for services

Common stock options granted to employees

Net loss for the three months ended

March 31, 2021

Balance, March 31, 2021

Common stock issued to employees

and consultants for services

Common stock options granted

to officers and directors for services

Common stock options granted

to employees for services

Net loss for the six months

ended June 30, 2021

( 2,365,671 )

June 30, 2021

$ ( 39,044,009 )

the Six Months Ended June 30, 2022

Stockholders'

1 unchanged sentence

$ ( 43,552,494 )

Common stock issued to officers and

directors for services

Common stock awarded to advisory

board member for services

Common stock options granted to officers

Common stock warrants granted

to related parties pursuant to debt financing

Common stock warrants granted

to note holders pursuant to debt financing

Common stock issued to officers

and directors for services

Common stock options granted to employees

Net loss for the three months ended

March 31, 2022

Common stock issued to advisory

board for services

Common stock options granted

to officers and directors for services

Common stock options granted

to employees and advisors for services

Net loss for the six months

ended June 30, 2022

( 3,664,851 )

Balance, March 31, 2022

June 30, 2022

$ ( 47,217,345 )

See accompanying notes to unaudited condensed financial statements.

See accompanying

notes to unaudited condensed financial statements.

SOW GOOD INC.

CONDENSED STATEMENTS OF CASH FLOWS

For the Three Months

Ended March 31,

CONDENSED STATEMENTS

OF CASH FLOWS

For the Six Months

Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

6 unchanged sentences

Common stock issued to officers and directors for services

Common stock awarded to advisors for services

Common stock awarded to advisors and consultants for services

Amortization of stock options

3 unchanged sentences

Prepaid expenses

Security deposits

Right-of-use asset

7 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

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

Purchase of property and equipment

Cash paid for construction in progress

( 1,884,720 )

Cash paid for intangible assets

Net cash used in investing activities

( 2,015,033 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds received from notes payable, related parties

Proceeds received from notes payable

Proceeds received from the sale of common stock

1 unchanged sentence

NET CHANGE IN CASH AND CASH EQUIVALENTS

( 1,530,940 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

3 unchanged sentences

Income taxes paid

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Value of debt discounts attributable to warrants

See accompanying notes to unaudited condensed financial statements.

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Note 1 – Organization and Nature of Business

Effective January 21, 2021, we changed our name

from Black Ridge Oil & Gas, Inc.

Effective January 21, 2021, we changed our

name from Black Ridge Oil & Gas, Inc.

to Sow Good Inc.

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

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

Our common stock is traded

on the OTCQB under the trading symbol “SOWG”.

At that time, o ur common stock

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

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

We became a publicly traded company

when our shares began trading on July 1, 2010.

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

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

managing similar assets for third parties.

(“SOWG,” “Sow Good,” or the

“Company”) to pursue the freeze dried fruits and vegetables business as acquired with our October 1, 2020 acquisition of

Our common stock is traded on the OTCQB under the trading symbol “SOWG”.

that time, our 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

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

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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 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,

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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 May 5, 2021, the

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

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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.

On December 31,

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.

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

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Actual results could differ from those estimates.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Cash in Excess of FDIC Limits

3 unchanged sentences

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

had $ 1,266,071 of cash in excess of FIDC and SIPC insured limits at March 31, 2022, and has not experienced any losses in such accounts.

SOW GOOD INC.

Notes to Condensed

Financial Statements

had $ 2,259,715 of cash in excess of FIDC and SIPC insured limits at June 30, 2022, and has not experienced any losses in such accounts.

Property and Equipment

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and amortization are eliminated and any resulting gain or loss is reflected in operations.

Depreciation expense was $ 72,954 and $ 4,996

for the three months ended March 31, 2022 and 2021, respectively.

Depreciation was $ 148,655 and $ 65,052 for the

six months ended June 30, 2022 and 2021, respectively.

For the six months ended June 30, 2022, $ 15,736 of the depreciation expense

was allocated to inventory overhead, resulting in $ 132,919 of depreciation expense.

of Long-Lived Assets

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

SOW GOOD INC.

Notes to Condensed

Financial Statements

Inventory, consisting of raw materials, material

7 unchanged sentences

No reserve for obsolete inventories has been recognized.

SOW GOOD INC.

Notes to Condensed

Financial Statements

The Company evaluates goodwill on an annual basis

13 unchanged sentences

Revenue Recognition

The Company recognizes revenue in accordance with

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

Under ASC 606, the Company recognizes revenue

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

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

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

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

performs the following five steps:

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

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

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

The Company has elected, as a practical

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

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

Methodologies for determining these provisions are dependent

on customer pricing and promotional practices.

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

in the same period that the related revenue is recorded.

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

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

The Company recognizes revenue in accordance

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

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

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

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

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.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Basic and Diluted Earnings (Loss) Per Share

15 unchanged sentences

compensation was $ 575,631 and $ 709,215 , consisting entirely of expenses related to common stock and options issued for services for the

three months ended March 31, 2022 and 2021, respectively, using the Black-Scholes options pricing model and an effective term of 6 to

six months ended June 30, 2022 and 2021, respectively, 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

1 unchanged sentence

In addition, $ 321,798 of expenses related to the amortization of warrants issued in

consideration of personal guarantees provided for debt financing for the three months ended March 31, 2022.

SOW GOOD INC.

Notes to Condensed

Financial Statements

consideration of debt financing for the six months ended June 30, 2022.

The Company recognizes deferred tax assets and

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adoption of ASU 2021-08 is not expected to have a material impact on the Company’s financial statements or related disclosures.

SOW GOOD INC.

Notes to Condensed

Financial Statements

In May 2021, the FASB issued ASU No.

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and exceptions provided in ASU 2020-04.

2020, the FASB issued ASU No.

2020-06, Debt–Debt with Conversion and Other Options (Subtopic 470-20) and

Derivatives and Hedging–Contracts in Entity’s Own Equity (Subtopic 815-40) :

Accounting for Convertible Instruments

and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for convertible instruments by reducing

the number of accounting models available for convertible debt instruments.

This guidance also eliminates the treasury stock method to

calculate diluted earnings per share for convertible instruments and requires the use of the if converted method.

The new guidance

is effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2021,

with early adoption permitted.

The adoption of ASU 2020-06 has not had a material impact on the Company’s financial statements or

related disclosures.

August 2020, the FASB issued ASU No.

2020-06, Debt–Debt with Conversion and Other Options (Subtopic

470-20) and Derivatives and Hedging–Contracts in Entity’s Own Equity (Subtopic 815-40) :

for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting

for convertible instruments by reducing the number of accounting models available for convertible debt instruments.

This guidance

also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use

of the if converted method.

The new guidance is effective for all entities for annual periods, and interim periods within

those annual periods, beginning after December 15, 2021, with early adoption permitted.

The adoption of ASU 2020-06 has not had

a material impact on the Company’s financial statements or related disclosures.

No other new accounting pronouncements, issued

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

SOW GOOD INC.

Notes to Condensed

or effective during the period ended June 30, 2022, have had or are expected to have a significant impact on the Company’s

financial statements.

1 unchanged sentence

As shown in the accompanying financial statements,

as of March 31, 2022, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $ 45,104,556 , and

had cash on hand of $ 1,814,988 .

as of June 30, 2022, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $ 47,217,345 ,

and had cash on hand of $ 2,756,534 .

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

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

our operations.

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, and the Company raised an additional $3.7 million from

the sale of Promissory Notes and Warrants in April, as noted in our subsequent events footnote.

has commenced sales and continues to develop its operations.

In the event sales do not materialize at the expected

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additional capital.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 4 – Related Party

Debt Financing

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 is payable semi-annually beginning June 30, 2022 at the rate of 6 %

per annum, and the principal amount of the Notes matures and becomes 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 .

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.

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.

Common Stock Payable Awarded to Officers

3 unchanged sentences

common stock on the date of grant.

Common Stock and Options Awarded to Recently

Appointed Director

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 Stock

Incentive Plan (the “2020 Equity Plan”), Mr.

Mueller was also 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.

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.

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.

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.

Common Stock Options Awarded to Former Chief

Financial Officer

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, however, pursuant to a Separation Agreement and Release, dated May 3,

2022 , the vesting terms of the options were accelerated to be fully vested.

SOW GOOD INC.

Notes to Condensed

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 entitles 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.

Note 5 – Fair Value of Financial Instruments

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

SOW GOOD INC.

Notes to Condensed

Financial Statements

The Company’s financial assets and liabilities

9 unchanged sentences

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

SOW GOOD INC.

Notes to Condensed

Financial Statements

The following schedule summarizes the valuation

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

of financial instruments at fair value on a recurring basis in the balance sheets as of June 30, 2022 and December 31, 2021:

Valuation of financial instruments at fair value

Fair Value Measurements at March 31, 2022

Fair Value Measurements at June 30, 2022

Cash and cash equivalents

1 unchanged sentence

Notes payable, related parties, net of $2,660,748 of debt discounts

Notes payable

Notes payable, net of $410,681 of debt discounts

Total liabilities

$ ( 3,609,646 )

Fair Value Measurements at December 31, 2021

6 unchanged sentences

There were no transfers of financial assets or

liabilities between Level 1 and Level 2 inputs for the three months ended March 31, 2022.

liabilities between Level 1 and Level 2 inputs for the six months ended June 30, 2022.

SOW GOOD INC.

6 unchanged sentences

Prepaid insurance costs

Prepaid office and other costs

Trade show advances

Advances on equipment purchases

Prepaid office and other costs

Total prepaid expenses

Note 7 – Property and Equipment

Property and equipment at March 31, 2022 and December 31, 2021, consists

of the following:

Property and equipment at June 30, 2022 and December 31, 2021,

consists of the following:

Property and equipment

1 unchanged sentence

Leasehold improvements

Construction in progress

Accumulated depreciation and amortization

Total property and equipment, net

The Company recognized depreciation expense of

$ 72,954 and $ 4,996 for the three months ended March 31, 2022 and 2021, respectively.

Construction in progress consists of costs incurred

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

These costs will be capitalized

as Machinery and Leasehold Improvements, respectively, upon completion.

The Company recognized depreciation of $ 148,655

and $ 65,052 for the six months ended June 30, 2022 and 2021, respectively.

For the six months ended June 30, 2022, $ 15,736

of the depreciation expense was allocated to inventory overhead, resulting in $ 132,919 of depreciation expense.

SOW GOOD INC.

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Schedule of components of lease expense

For the Three

Operating lease cost:

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Schedule of supplemental cash flow and other information

For the Three

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

Operating cash flows used for operating leases

Leased assets obtained in exchange for lease liabilities:

Total operating lease liabilities

The future minimum lease payments due under operating leases as of

March 31, 2022 was as follows:

June 30, 2022 was as follows:

Schedule of future minimum lease payments

1 unchanged sentence

Minimum Lease

2022 (for the nine months remaining)

2022 (for the six months remaining)

2026 and thereafter

6 unchanged sentences

Notes payable, related parties consists of the

following at March 31, 2022 and December 31, 2021, respectively:

following at June 30, 2022 and December 31, 2021, respectively:

Schedule of Notes payable, related parties

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.

2022, the Company received $ 2,000,000 pursuant to a note and warrant purchase agreement from a trust held by the Company’s

Chairman, Mr.

Goldfarb, as lender.

The unsecured note bears interest at 6% per annum, compounded semi-annually, and shall be payable

in cash semi-annually on June 30 th and December 31 st .

The note matures on December 31, 2024 .

The noteholders

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.

The unsecured note bears interest at 6% per annum, compounded semi-annually, and shall be payable in cash semi-annually

on June 30 th and December 31 st .

The note matures on December 31, 2024 .

The noteholders 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.

The unsecured note bears interest at 6% per annum, compounded semi-annually, and shall be payable

in cash semi-annually on June 30 th and December 31 st .

The note matures on December 31, 2024 .

The noteholders

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 $ 920,000 pursuant to a note and warrant purchase agreement from the Lyle A.

Berman Revocable Trust, as beneficially controlled

by one of the Company’s Directors, as lender.

The unsecured note bears interest at 6% per annum, compounded semi-annually,

and shall be payable in cash semi-annually on June 30 th and December 31 st .

The note matures on December 31,

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

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.

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

The unsecured note bears interest at 8% per annum, compounded semi-annually, and shall be payable in cash

semi-annually on June 30 th and December 31 st .

The note matures on December 31, 2024 .

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

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

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

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

The noteholders also received

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

On December 31, 2021, the

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

Berman Revocable Trust, as beneficially

controlled by one of the Company’s Directors, as lender.

The unsecured note bears interest at 8% per annum, compounded semi-annually,

and shall be payable in cash semi-annually on June 30 th and December 31 st .

The note matures on December 31,

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

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

Burke, as lender.

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

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

On December 31, 2021, the

Company received $ 25,000 pursuant to a note and warrant purchase agreement from the Company’s then CFO, Bradley K.

The unsecured note bears interest at 8% per annum, compounded semi-annually, and shall be payable in cash semi-annually on

June 30 th and December 31 st .

The note matures on December 31, 2024 .

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

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

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

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

The noteholder also received warrants to

purchase 3,750 shares of common stock, exercisable at $2.21 per share over a ten-year term.

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

Gutierrez Living

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

The unsecured note bears interest at 8% per

annum, compounded semi-annually, and shall be payable in cash semi-annually on June 30 th and December 31 st .

The note matures on December 31, 2024 .

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

Total notes payable, related parties

Less unamortized debt discounts:

Notes payable

The noteholder also received warrants to purchase 7,500 shares of common stock, exercisable

at $2.21 per share over a ten-year term.

Total notes payable, related

unamortized debt discounts:

Notes payable, related parties

current maturities

Notes payable, related parties, less current maturities

SOW GOOD INC.

Notes to Condensed

Financial Statements

payable, related parties, less current maturities

The Company recorded total discounts of $ 2,948,897 ,

consisting of debt discounts on warrants granted to the related parties during the year ended December 31, 2021.

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.

consisting of $ 2,249,684 and $ 699,213 of debt discounts on warrants granted to the related parties on April 8, 2022 and on various dates

in December 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 recognized $ 414,679 of interest expense

for the three months ended March 31, 2022.

for the six months ended June 30, 2022.

Interest expense consisted of $ 126,530 of stated interest expense and $ 288,149 of amortized

debt discounts related to stock-based warrants.

There was no interest expense during the three months ended March 31, 2021.

There was no interest expense during the six months ended June 30, 2021.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 11 – Notes Payable

Notes payable consists of the following at March

Notes payable consists of the following at June 30,

2022 and December 31, 2021, respectively:

Schedule of notes payable

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

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 shall be payable in cash semi-annually on June 30 th and December 31 st .

The note matures on December 31, 2024 .

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

On April 8, 2022, the Company received $ 500,000 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 shall be payable in cash semi-annually on June 30 th and December 31 st .

The note matures on December 31, 2024 .

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

On June 16, 2020, the Company entered into a loan authorization and loan

agreement with the United States Small Business Administration (the “SBA”), as lender, pursuant to the SBA’s

Economic Injury Disaster Loan (“EIDL”) assistance program in light of the impact of the COVID-19 pandemic on the

Company’s business (the “EIDL Loan Agreement”) encompassing a $ 150,000

Promissory Note issued to the SBA (the “EIDL Note”)(together with the EIDL Loan Agreement, the “EIDL Loan”),

8 unchanged sentences

Total notes payable

Less unamortized debt discounts:

Notes payable

current maturities

Notes payable, less current maturities

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 recognized $ 44,566 and $ 2,734 of interest

expense during the three months ended March 31, 2022 and 2021, respectively.

expense for the six months ended June 30, 2022 and 2021, respectively.

Interest expense consisted of $ 10,917 of stated interest,

and $ 33,649 of amortized debt discounts related to stock-based warrants for the six months ended June 30, 2022.

Interest expense

of $ 2,734 consisted entirely of the stated interest on the EIDL Loan during the six months ended June 30, 2021.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 12 – Changes in Stockholders’

5 unchanged sentences

of $ 0.001 par value common stock.

As of March 31, 2022, a total of 4,820,655 shares of common stock have been issued.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Common Stock Payable Awarded to Advisory Board

As of June 30, 2022, a total of 4,840,974 shares of common stock have been issued.

Common Stock Awarded to Board Member

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 .

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 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

9 unchanged sentences

the dates of grant.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 13 – Options

10 unchanged sentences

shares of common stock at a weighted average strike price of $ 5.12 , exercisable over a weighted average life of 8.56 years were outstanding

as of March 31, 2022.

as of June 30, 2022.

Options Granted

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 Stock Incentive

Plan (the “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 $ 3,561 of stock-based compensation expense

during the six months ended June 30, 2022.

As of June 30, 2022, a total of $ 67,862 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 $ 4,691 of stock-based compensation expense

during the six months ended June 30, 2022.

As of June 30, 2022, a total of $ 90,408 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 six months ended June 30, 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 Condensed

Financial Statements

On March 30, 2022, a total of sixteen employees

6 unchanged sentences

The options are being expensed over the vesting period, resulting in $ 2,584 of stock-based compensation expense

during the three months ended March 31, 2022.

As of March 31, 2022, a total of $ 51,355 of unamortized expenses are expected to be expensed

over the vesting period.

during the six months ended June 30, 2022.

As of June 30, 2022, a total of $ 48,796 of unamortized expenses are expected to be

expensed over the vesting period.

On March 25, 2022, a newly appointed advisory

3 unchanged sentences

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 406 % and a call option value of $2.2584, was

The options are being expensed over the vesting period, resulting in $ 47 of stock-based compensation expense during the three

months ended March 31, 2022.

As of March 31, 2022, a total of $ 14,366 of unamortized expenses are expected to be expensed over the vesting

The options are being expensed over the vesting period, resulting in $ 766 of stock-based compensation expense during the six

months ended June 30, 2022.

As of June 30, 2022, a total of $ 13,647 of unamortized expenses are expected to be expensed over

the vesting period.

The Company recognized a total of $ 520,633 and

$ 121,221 of compensation expense during the three months ended March 31, 2022 and 2021, respectively, related to common stock options

$ 261,465 of compensation expense during the six months ended June 30, 2022 and 2021, respectively, related to common stock options

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

The remaining unamortized balance of these options is $ 1,665,080 as of March 31, 2022.

SOW GOOD INC.

Notes to Condensed

Financial Statements

The remaining unamortized balance of these options is $ 1,419,792 as of June 30, 2022.

Options Exercised

No options were exercised during the three months

ended March 31, 2022 and 2021.

No options were exercised during the six months

ended June 30, 2022 and 2021.

Options Forfeited

A total of 44,360 options with a weighted average

exercise price of $ 4.07 were forfeited during the three months ended March 31, 2022.

exercise price of $ 5.12 were forfeited during the six months ended June 30, 2022.

Note 14 – Warrants

1 unchanged sentence

Warrants to purchase an aggregate total of 1,342,550

shares of common stock at a $ 2.66 strike price, exercisable over a weighted average life of 9.27 years were outstanding as of March 31,

shares of common stock at a weighted average strike price of $ 2.45 , exercisable over a weighted average life of 9.54 years were outstanding

as of June 30, 2022.

Warrants Granted

No warrants were granted during the three months

ended March 31, 2022 and 2021.

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.

warrants are fully vested and exercisable over a period of 10 years at a price of $ 2.35 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.

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 $ 204,019 of stock-based compensation expense during the six months ended June 30,

As of June 30, 2022, a total of $ 3,071,429 of unamortized expenses are expected to be expensed over the lives of outstanding

debts, including $ 581,434 of unamortized debt discounts on warrants issued during December of 2021.

No warrants were granted during the six months

ended June 30, 2021.

Warrants Exercised or Expired

No warrants were exercised or expired during the

three months ended March 31, 2022 and 2021.

six months ended June 30, 2022 and 2021.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 15 – Income Taxes

6 unchanged sentences

Losses incurred during the period from April 9,

2011 (inception) to March 31, 2022 could be used to offset future tax liabilities.

Accounting standards require the consideration of a

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

deferred tax assets will not be realized.

As of March 31, 2022, net deferred tax assets were $ 7,864,739 , with no deferred tax liability,

2011 (inception) to June 30, 2022 could be used to offset future tax liabilities.

Accounting standards require the consideration

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

of deferred tax assets will not be realized.

As of June 30, 2022, net deferred tax assets were $ 8,170,728 , with no deferred tax liability,

primarily related to net operating loss carryforwards.

2 unchanged sentences

In accordance with FASB ASC 740, the Company has

evaluated its tax positions and determined there are no significant uncertain tax positions as of any date on, or before March 31, 2022.

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

Note 16 – Commitments

12 unchanged sentences

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

SOW GOOD INC.

Notes to Condensed

Financial Statements

Lease Commitments

5 unchanged sentences

The future minimum lease payments due under operating leases as of

March 31, 2022 was as follows:

Schedule of future minimum lease payments

June 30, 2022 was as follows:

Fiscal Year Ending

Minimum Lease

2022 (for the nine months remaining)

2022 (for the six months remaining)

2026 and thereafter

4 unchanged sentences

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

Debt Financing

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 is payable semi-annually beginning June 30, 2022 at the rate of 6%

per annum, and the principal amount of the Notes matures and becomes 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.

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.

aggregate $3,700,000 of Notes, a total of $3,120,000 of Notes were sold to officers or directors.

Common Stock Issued to Advisory Board Members

2022, the Company issued 4,000 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

Common Stock and Options Awarded to Recently

Appointed Director

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 Stock

Incentive Plan (the “2020 Equity Plan”), Mr.

Mueller was also 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.

Common Stock Issued to Advisory Board Member

on Subscriptions Payable

2022, the Company issued 4,255 shares in satisfaction of a Subscriptions Payable to an Advisory

Board Member for services provided.

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

common stock on the date of grant.

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 entitles 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.

Options Granted

On April 1, 2022, a total of twenty employees

and consultants were granted options to purchase an aggregate 63,477 shares of the Company’s common stock, having an exercise price

of $2.75 per share, exercisable over a 10-year term, including options to purchase 27,500 shares issued to Mr.

The options will

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

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.

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

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

Mueller 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.

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

What changed 10-Q

Item 1. Financial Statements