What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-04-14 compared with 2022-03-29 · 121 added, 108 removed, 304 unchanged (43% of the section changed)

9 unchanged sentences

Our common stock is quoted on the OTCQB under the trading symbol

During 2021, the

Company launched a line of freeze-dried snacks, smoothies, soups and granola.

We are marketing our line of products via our direct-to-consumer

focused website, as well as via the business-to-business sales channel.

The Company produces

a line of freeze-dried snacks, smoothies, soups and granola.

We are marketing our line of products via our direct-to-consumer focused

website, as well as via the business-to-business sales channel.

We have also recently launched a freeze-dried candy product offering that

we expect will be a major driver of our growth going forward.

In 2022, we commenced

the construction of our second and third freeze driers in anticipation of the increased production demands for our products and freeze-drying

We expect to place these additional freeze driers in service during the second quarter of 2023.

Our business operates

1 unchanged sentence

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

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 2024.

With the extensive

freeze-dried manufacturing and food product-focused business development experience of our senior management team, including recent additions,

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

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

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

S-FDF Business Combination

27 unchanged sentences

Company had a cash balance of $276,464 and total 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.

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

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

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.

can be no assurance that we will be successful in achieving these objectives.

We continue to pursue sources

11 unchanged sentences

Overview of 2022 results

Our 2021 results were largely

dominated by the completion of our freeze drier and manufacturing facility, the commencement of product sales on our direct-to-consumer

websites, and building the management capacity of the Company to support anticipated sales growth.

We earned $428,132 of revenue

in 2021 following the launch of our direct-to-consumer website for our Sow Good brand in the second quarter of the year.

in 2022, as we began to ramp up our direct-to-consumer website for our Sow Good brand and began to provide products to big box retailers.

Our general and administrative

expenses totaled $6,906,606 in 2021, with Salaries and Benefits expenses of $3,473,661 representing the majority.

Salaries and Benefits

expenses increased throughout the year as the Company added employees necessary to support growing the business beyond 2021, and a goodwill

impairment loss of $1,524,030 on our prior year acquisition of S-FDF, LLC.

expenses totaled $10,731,281 in 2022, including salaries and benefits expenses of $3,662,313 and goodwill and intangible asset impairment

losses of $5,197,470, including $4,887,297 of losses on our 2020 acquisition of S-FDF, LLC.

Salaries and benefits and other general expenses

increased slightly throughout the year due to inflationary pressures.

Our stock-based compensation

of $862,079 consisted of $49,998 of stock issued to officers and directors, $30,000 of stock issued to employees and consultants, and

$543,332 of expense related to the amortization of stock options.

$782,081 of expense related to the amortization of stock options for the year ended December 31, 2022.

Application of Critical Accounting Policies

27 unchanged sentences

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

The Company had approximately $2,813,000 and $1,311,000 in excess of FDIC and SIPC insured limits at December 31, 2021 and

2020, respectively.

The Company 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 has not experienced any losses in such accounts.

17 unchanged sentences

Depreciation expense was $299,553,

and $3,642 for the years ended December 31, 2021 and 2020, respectively.

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.

of Long-Lived Assets

8 unchanged sentences

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.

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 f or

the year ended December 31, 2022.

Inventory, consisting of raw

23 unchanged sentences

reporting unit.

The Company’s evaluation of goodwill completed during the year resulted in an impairment loss of $1,524,030 for

the year ended December 31, 2021.

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.

Revenue Recognition

2 unchanged sentences

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.

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.

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

performance obligation.

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

Methodologies for determining these provisions

are dependent on customer pricing and promotional practices.

The Company records reductions to revenue for estimated product returns and

pricing adjustments in the same period that the related revenue is recorded.

These estimates are based on industry-based historical data,

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

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.

Stock-Based Compensation

19 unchanged sentences

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

Treasury securities at the grant date were recognized as interest expense for the year ended December 31, 2020.

issued in consideration 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.

Results of Operations for the Years Ended December

9 unchanged sentences

Other general and administrative

Intangible asset impairment

Goodwill impairment

3 unchanged sentences

Net operating loss

Other income:

(10,885,495 )

Other income (expense):

Interest expense

Loss on disposal of property and equipment

Gain (loss) on disposal of property and equipment

Gain on early extinguishment of debt

3 unchanged sentences

$ (6,874,156 )

Revenues commenced during

the year ended December 31, 2021, which were generated by online sales of our freeze-dried foods products.

The revenues were $88,440 for

the year ended December 31, 2021.

The Company did not earn any revenues during the comparative year ended December 31, 2020.

We anticipate

increased revenues during 2022, although there can be no assurance regarding the amount of such increased revenues.

Revenues for the year ended

December 31, 2022 were $428,132, compared to $88,440 for the year ended December 31, 2021, an increase of $339,692, or 384%.

increased as we ramped up sales on our product lines and expanded our business-to-business sales during 2022, compared to the same period

in the prior year.

We had minimal revenues during the comparative period, as we had commenced sales midway through 2021.

Cost of Goods Sold

Cost of goods sold for the

year ended December 31, 2021 were $81,311, 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 period.

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

year ended December 31, 2020.

year ended December 31, 2022 were $308,293, compared to $81,311 for the year ended December 31, 2021, an increase of $226,982,

Cost of goods sold, primarily consisted of material costs and labor on the sales of freeze-dried food products, resulted in a

gross profit of approximately 28% and 8% during the year ended December 31, 2022, compared to the year ended December 31, 2021.

Cost of goods sold and our gross profit increased as we began to realize economies of scale pursuant to our increased sales.

General and Administrative Expenses

3 unchanged sentences

Salaries and benefits included stock-based compensation expense of $862,079 for the year ended December 31, 2022, compared

to $726,656 for the year ended December 31, 2020, an increase of $650,723, or 90%.

to $1,377,379 for the year ended December 31, 2021, a decrease of $515,300, or 37%.

Stock-based compensation consists of $782,081

2 unchanged sentences

2022 and 2021, respectively.

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 increase in salaries and benefits was primarily due to inflationary pressures, as diminished by decreased

stock-based compensation awards.

Professional Services

1 unchanged sentence

expenses related to professional services were $245,546 for the 2022 period, compared to $357,945 for the 2021 period, a decrease of $112,399,

The decrease was primarily due to decreased legal costs that were not necessary in the current year, compared to those incurred

on our asset purchase agreement with S-FDF, LLC in the prior year.

The decrease was primarily due to decreased 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

4 unchanged sentences

and sales of our freeze-dried products.

Intangible Asset Impairment

Intangible asset impairment

losses of $310,173, for the year ended December 31, 2022, related to impairment of our licensing and trademark assets, as our sales

have not ramped up quickly enough to support the carrying value.

Goodwill Impairment

Goodwill impairment expense

for the year ended December 31, 2021 was $1,524,030, compared to $-0- for the year ended December 31, 2020.

In 2021, the Company

recognized a $1,524,030 loss on impairment of goodwill related to our prior year acquisition of S-FDF, LLC.

Goodwill impairment losses

related to our 2020 acquisition of S-FDF, LLC was $4,887,297 and $1,524,030 for the years ended December 31, 2022 and 2021.

Depreciation expense for the

year ended December 31, 2021 was $208,448, compared to $3,642 for year ended December 31, 2020.

The increase is attributable to the

significant increase in capital expenditures incurred as we developed our freeze-dried foods production facility and placed it into service.

year ended December 31, 2022 was $274,053, compared to $208,448 for year ended December 31, 2021, an increase of $65,605 or 31%.

The increase is attributable to the significant increase in capital expenditures incurred as we developed our freeze-dried foods production

facility and placed it into service.

Other Income (Expense)

In the year ended December

31, 2022, other expense was $1,241,573, consisting of $1,277,965 of interest expense derived from operating loans, as offset by a gain

on the disposal of equipment of $36,392.

In the year ended December

31, 2021, other income was $233,769, consisting of a gain on early extinguishment of debt of $113,772 related to forgiveness of our PPP

2 unchanged sentences

derived from operating loans, and a loss on the disposal of equipment of $8,036.

In the year ended December

31, 2020, other expense was $2,311,517, consisting of $386,164 of interest expense derived from operating loans, including $377,440 of

warrants issued as consideration to officers and directors in exchange for their personal guarantees, a loss on the disposal of equipment

of $5,369, and a net loss on investments in Allied Esports Entertainment, Inc.

securities of $1,925,029, as offset by a $5,000 grant from

the Small Business Administration under their EIDL program and $45 of interest income.

Provision for Income Taxes

4 unchanged sentences

December 31, 2022 was $12,127,068, compared to $6,874,156 during the year ended December 31, 2021, an increase of $5,252,912, or

The increased net loss was primarily due to our loss on impairment of goodwill related to our prior year acquisition of S-FDF, LLC.

The increased net loss was primarily due to our loss on impairment of intangible assets and goodwill related to our 2022 acquisition

of S-FDF, LLC.

Liquidity and Capital Resources

15 unchanged sentences

Net change in cash and cash equivalents

$ (3,069,464 )

Net cash used in operating

activities was $5,146,635 and $5,551,261 for the years ended December 31, 2022 and 2021, respectively, a year over year

increased use of $3,807,852.

The increased use was primarily due to an increased net loss of $1,553,217.

Changes in working capital from

continuing operating activities resulted in a decrease in cash of $1,547,282 during the year ended December 31, 2021, as compared

to an increase in cash of $340,735 for the same period in the previous year.

decreased use of $404,626.

The decreased use was primarily due to increased revenues.

Changes in working capital from continuing operating

activities resulted in a decrease in cash of $2,800,327 during the year ended December 31, 2022, as compared to $1,547,282 for the

same period in the previous year.

Net cash used in investing

activities was $653,051 for the year ended December 31, 2021, compared to $3,284,457 of net cash provided by investing activities

for the year ended December 31, 2020.

activities was $2,622,829 for the year ended December 31, 2022, compared to $653,051 for the year ended December 31, 2021,

a year over year increased use of $1,969,778.

During the year ended December 31, 2022, cash used in investing activities consisted of

$982,818 paid for the purchase of property and equipment and $84,594 paid for the purchase of intangible assets, as offset by $414,361

of proceeds received from the sale of AESE securities.

During the year ended December 31, 2020, cash provided by investing activities

consisted of $1,154,459 of cash received pursuant to our business combination with S-FDF, LLC, and $3,181,735 of proceeds received from

the sale of AESE securities, as offset by $257,626 of equipment purchases and $794,111 paid on construction projects still in progress.

$193,184 paid for the purchase of property and equipment, $2,487,673 of payments for the construction of the Company’s second and

third freeze dryers and expansion of its operations facility, as well as, $5,929 paid for the purchase of intangible assets, as offset

by $63,957 of proceeds received from the disposal of property and equipment.

During the year ended December 31, 2021, cash used in

investing activities consisted of $982,818 paid for the purchase of property and equipment and $84,594 paid for the purchase of intangible

assets, as offset by $414,361 of proceeds received from the sale of AESE securities.

Net cash provided by financing

1 unchanged sentence

Net cash provided

by financing activities consisted of $2,075,000 of proceeds received from related party debt financing, and $5,562,511 we raised from

the sale of an aggregate 631,250 shares of the Company’s common stock at $4.00 per share, and the sale of an aggregate 714,701 shares

sold at $4.25 per share, during the year ended December 31, 2021.

Net cash provided by financing activities consisted of $802,025

of proceeds received from debt financing, including $112,925 of proceeds received under the Paycheck Protection Program (“PPP”)

that were forgiven in January of 2021, as offset by $539,100 of debt repayments for the year ended December 31, 2020.

by financing activities the year ended December 31, 2022 consisted of $4,700,000 of proceeds received from debt financing, including

$4,120,000 received from related parties.

Net cash provided by financing activities consisted of $2,075,000 of proceeds received from

related party debt financing, and $5,562,511 we raised from the sale of an aggregate 631,250 shares of the Company’s common stock

at $4.00 per share, and the sale of an aggregate 714,701 shares sold at $4.25 per share, during the year ended December 31, 2021.

Satisfaction of our cash obligations for

33 unchanged sentences

We cannot assure you that we will be able to secure our fruit supply.

In addition, we may face limits on the ability to source some of the candy for our freeze-dried candy products.

Contractual obligations and commitments

18 unchanged sentences

results of operations liquidity, capital expenditures or capital resources that are material to investors.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

Commodity Price Risk

We do not expect any significant

effects from commodity price risk outside of inherent inflationary risks.

Interest Rate Risk

We do not anticipate entering

into any transactions that would expose us to any direct interest rate risk.

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-K

Item 7. Management’s Discussion and Analysis