What changed in this filing

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Item 1. Financial Statements

2023-05-22 compared with 2022-11-14 · 326 added, 517 removed, 550 unchanged (61% of the section changed)

2 unchanged sentences

CONDENSED BALANCE SHEETS

September 30,

Current assets:

Cash and cash equivalents

Accounts receivable

Accounts receivable, net

Prepaid expenses

7 unchanged sentences

Right-of-use asset

Intangible assets

LIABILITIES AND STOCKHOLDERS' EQUITY

5 unchanged sentences

Operating lease liabilities

Notes payable, related parties, net of $ 2,777,036 and $ 699,213 of debt discounts at September 30, 2022 and December 31, 2021, respectively

Notes payable, net of $ 373,383 of debt discounts at September 30, 2022

Notes payable, related parties, net of $ 3,230,987 and $ 2,692,757 of debt discounts at March 31, 2023 and December 31, 2022, respectively

Notes payable, net of $ 299,598 and $ 336,085 of debt discounts at March 31, 2023 and December 31, 2022, respectively

Total liabilities

1 unchanged sentence

Stockholders' equity:

Preferred stock, $ 0.001 par value, 20,000,000 shares authorized, no shares issued

and outstanding

Common stock, $ 0.001 par value, 500,000,000 shares authorized, 4,847,384 and

4,809,070 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Preferred stock, $ 0.001 par value, 20,000,000 shares authorized, no shares issued and outstanding

Common stock, $ 0.001 par value, 500,000,000 shares authorized, 4,847,384 shares issued and outstanding

Additional paid-in capital

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

Accumulated deficit

7 unchanged sentences

For the Three Months

For the Nine Months

Ended September 30,

Ended March 31,

Cost of goods sold

9 unchanged sentences

( 1,448,269 )

( 1,580,460 )

( 4,505,275 )

( 4,191,113 )

Other income (expense):

Interest expense, including $ 285,522 and $ 607,320 of warrants issued as a debt discount for the three

and nine months ending September 30, 2022, respectively

Gain on disposal of property and equipment

Gain on early extinguishment of debt

Gain on investment in Allied Esports Entertainment, Inc.

Total other income (expense)

$ ( 1,647,272 )

$ ( 1,582,157 )

Other expense:

Interest expense, including $ 370,678 and $ 59,724 of warrants issued as a debt discount for the three months ending March 31, 2023 and 2022, respectively

Total other expense

$ ( 1,401,530 )

5 unchanged sentences

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Three Months Ended

September 30, 2021

Stockholders'

Balance, June 30, 2021

$ ( 39,044,009 )

Common stock sales for cash to officers and directors

( 1,474,996 )

Common stock sales for cash

Common stock issued to officers and directors 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 September 30, 2021

( 1,582,157 )

Balance, September 30, 2021

$ ( 40,626,166 )

For the Three Months Ended September 30, 2022

Stockholders'

Balance, June 30, 2022

$ ( 47,217,345 )

Common stock warrants granted to related parties pursuant to debt financing

Common stock issued to officers and directors 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 September 30, 2022

( 1,647,272 )

Balance, September 30, 2022

$ ( 48,864,617 )

For the Nine Months Ended September 30, 2021

Stockholders'

Balance, December 31, 2021

$ ( 43,552,494 )

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

( 1,853,600 )

Common stock sales for cash to officers and directors

Common stock sales for cash

Common stock issued to officers and directors for services

Common stock issued to employees and consultants for services

Common stock awarded to advisory board member for services

Common stock options granted to officers and directors for services

Common stock options granted to employees for services

Net loss for the nine months ended September 30, 2021

Common stock options granted to employees and advisors for services

Net loss for the three months ended March 31, 2022

( 1,552,062 )

Balance, September 30, 2021

Balance, March 31, 2022

$ ( 45,104,556 )

For the Nine Months Ended September 30, 2022

Stockholders'

2 unchanged sentences

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 nine months ended September 30, 2022

Net loss for the three months ended March 31, 2023

( 1,401,530 )

Balance, September 30, 2022

Balance, March 31, 2023

$ ( 57,081,092 )

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 Nine Months

Ended September 30,

For the Three Months

Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES

2 unchanged sentences

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

Bad debts expense

Depreciation and amortization

Gain on disposal of property and equipment

Gain on investment in Allied Esports Entertainment, Inc.

Gain on early extinguishment of debt

Common stock issued to officers and directors for services

Common stock awarded to advisors and consultants for services

Common stock awarded to advisors for services

Amortization of stock options

3 unchanged sentences

Prepaid expenses

( 1,021,099 )

Security deposits

Right-of-use asset

5 unchanged sentences

( 1,482,598 )

( 4,304,501 )

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds received from disposal of property and equipment

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

Purchase of property and equipment

( 1,004,611 )

Cash paid for construction in progress

( 2,175,241 )

Cash paid for intangible assets

Net cash used in investing activities

( 2,272,066 )

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

Net cash provided by financing activities

8 unchanged sentences

Value of debt discounts attributable to warrants

See accompanying notes to

unaudited condensed financial statements.

See accompanying notes to unaudited condensed financial statements.

SOW GOOD INC.

17 unchanged sentences

managing similar assets for third parties.

On September 26, 2017, the Company finalized an

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

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

On October 10, 2017, the Company’s sponsored

special purpose acquisition company, Black Ridge Acquisition Corp.

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

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

In addition, the

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

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

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

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

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

management services agreement.

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

August 9, 2019.

On October 1, 2020, the

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in addition to other Sow Good board members and a small group of accredited investors.

The proceeds were used to invest in inventory ahead

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

The proceeds are being used to invest in inventory

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

On July 23, 2021, we

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ingredients such as freeze-dried fruit, almonds, hemp hearts, and coconut oil.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Granola products are initially being sold direct-to-consumer

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

On December 31, 2021,

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The warrants are exercisable at a price of $ 2.35 per share over a ten-year term.

These proceeds will also be used for working capital

investment and to ramp up our freeze dried consumer packaged goods business.

These proceeds were used for working capital investment

and to ramp up our freeze dried consumer packaged goods business.

SOW GOOD INC.

Notes to Condensed

Financial Statements

On August 23, 2022, we

4 unchanged sentences

Loans may be advanced to the Company from time to time from August 23, 2022 to the Maturity Date.

On September 29, 2022, the Company

received aggregate proceeds of $ 750,000 from two of the Company’s Directors on the sale of these notes and warrants.

On various dates from September 29,

2022 through March 7, 2023, the Company received aggregate proceeds of $ 2,250,000 from two of the Company’s Directors on the

sale of these notes and warrants.

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 expertise.

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

In the first quarter of 2023, we launched a freeze-dried

candy product offering that we expect will be a major driver of our growth going forward.

As of May 19, 2023, we have 14 candy product

lines for sale.

Note 2 – Basis of Presentation and Significant

31 unchanged sentences

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 $ 832,600 of cash in excess of FIDC and SIPC insured limits at September 30, 2022, and has not experienced any losses in such

had $ 175,245 of cash in excess of FIDC and SIPC insured limits at March 31, 2023, and has not experienced any losses in such accounts.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Property and Equipment

16 unchanged sentences

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

Depreciation was $ 223,887 and $ 129,915 for

the nine months ended September 30, 2022 and 2021, respectively.

For the nine months ended September 30, 2022, $ 21,841 of the

depreciation expense was allocated to inventory overhead, resulting in $ 202,046 of depreciation expense.

Depreciation was $ 76,218 and $ 72,954 for the

three months ended March 31, 2023 and 2022, respectively.

For the three months ended March 31, 2022, $ 7,728 of the depreciation

expense was allocated to inventory overhead, resulting in $ 65,226 of depreciation expense.

of Long-Lived Assets

13 unchanged sentences

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

1 unchanged sentence

Schedule of inventory

September 30,

Finished goods

4 unchanged sentences

No reserve for obsolete inventories has been recognized.

The Company evaluates goodwill on an annual basis

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

Such indicators could include, but are

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

action or assessment by a regulator.

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

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

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

The Company estimates the

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

utilizes comparable companies’ data.

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

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

The Company’s evaluation of goodwill completed during the year resulted in an impairment loss of $ 1,524,030 for the year ended December 31,

SOW GOOD INC.

Notes to Condensed

Financial Statements

Revenue Recognition

19 unchanged sentences

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

Accounts Receivable

Accounts receivable are carried at their estimated

collectible amounts.

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

and their current financial condition.

The Company had an allowance for doubtful accounts of $ 8,997 at March 31, 2023.

Basic and Diluted Earnings (Loss) Per Share

4 unchanged sentences

anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Stock-Based Compensation

8 unchanged sentences

by the counterparty to earn the equity instruments is reached because of sufficiently large disincentives for nonperformance.

compensation was $ 731,499 and $ 1,015,233 , consisting entirely of expenses related to common stock and options issued for services for

the nine months ended September 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 7 year U.S.

compensation was $ 126,836 and $ 144,261 , consisting entirely of expenses related to common stock and options issued for services for the

three months ended March 31, 2023 and 2022, 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 7 year U.S.

Treasury securities at the grant date.

In addition, $ 607,320 of expenses related to the amortization of warrants issued

in consideration of debt financing for the nine months ended September 30, 2022.

In addition, $ 370,678 and $ 59,724 of expenses related to the amortization of warrants

issued in consideration for debt financing for the three months ended March 31, 2023 and 2022, respectively.

The Company recognizes deferred tax assets and

3 unchanged sentences

deferred tax assets for which it does not consider realization of such assets to be more likely than not.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Recent Accounting Pronouncements

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effective, will not have a material impact on the Company's financial statements upon adoption.

October 2021, the FASB issued ASU 2021-08 , Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities

from Contracts with Customers, which creates an exception to the general recognition and measurement principle for contract assets

and contract liabilities from contracts with customers acquired in a business combination.

The new guidance will require companies to

apply the definition of a performance obligation under accounting standard codification (“ASC”) Topic 606 to recognize and

measure contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a

business combination.

Under current GAAP, an acquirer in a business combination is generally required to recognize and measure the assets

it acquires and the liabilities it assumes at fair value on the acquisition date.

The new guidance will result in the acquirer recording

acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under

ASC Topic 606.

In October 2021, the FASB issued Accounting Standards

Update (“ASU”) 2021-08 , Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from

Contracts with Customers, which creates an exception to the general recognition and measurement principle for contract assets and

contract liabilities from contracts with customers acquired in a business combination.

The new guidance will require companies to apply

the definition of a performance obligation under accounting standard codification (“ASC”) Topic 606 to recognize and measure

contract assets and contract liabilities (i.e., deferred revenue) relating to contracts with customers that are acquired in a business

Under current GAAP, an acquirer in a business combination is generally required to recognize and measure the assets it acquires

and the liabilities it assumes at fair value on the acquisition date.

The new guidance will result in the acquirer recording acquired

contract assets and liabilities on the same basis that would have been recorded by the acquiree before the acquisition under ASC Topic

These amendments are effective for fiscal years beginning after December 15, 2022, with early adoption permitted.

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

In May 2021, the FASB issued ASU No.

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

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

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

ASU 2021-04 addresses issuer’s

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

ASU 2021-04 is effective for

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

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

SOW GOOD INC.

Notes to Condensed

Financial Statements

March 2020, the FASB issued ASU 2020-04 establishing Topic 848, Reference Rate Reform .

ASU 2020-04 contains practical expedients

for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance is optional and is

effective between March 12, 2020 and December 31, 2022.

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

We are currently evaluating the impact that the expected market transition from the London Interbank Offered Rate, commonly referred to

as LIBOR, to alternative references rates will have on our financial statements as well as the applicability of the aforementioned expedients

and exceptions provided in ASU 2020-04.

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) :

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.

The adoption of

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

No other new accounting pronouncements, issued

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

or effective during the period ended March 31, 2023, 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 September 30, 2022, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $ 48,864,617 ,

as of March 31, 2023, the Company has incurred recurring losses from operations resulting in an accumulated deficit of $ 57,081,092 ,

and had cash on hand of $ 348,441 .

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.

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.

has commenced sales and continues to develop its operations.

The Company has

commenced sales and continues to develop its operations.

In the event sales do not materialize at the expected

7 unchanged sentences

and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

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.

April 25, 2023 and May 11, 2023, we raised an aggregate $ 1.6 million from the sale of Promissory Notes and Warrants, including

$ 1,200,000 received from related parties, resulting in approximately $ 1.9 million of cash on hand as of May 22, 2023.

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.

Note 4 – Related Party

6 unchanged sentences

Loans may be advanced to the Company from time to time from August 23, 2022 to the Maturity Date.

On September 29, 2022, the Company

received aggregate proceeds of $ 750,000 from two of the Company’s Directors on the sale of these notes and warrants.

SOW GOOD INC.

Notes to Condensed

Financial Statements

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

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

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

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

$ 100,000 of promissory notes.

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

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

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

The principal amount of the Notes mature and become

due and payable on April 8, 2025 .

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

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

The Company may redeem outstanding warrants prior to their expiration,

at a price of $0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $9.00

per share for thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

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

Offering closed simultaneously with execution of the Purchase Agreement.

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

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

Common Stock Payable Awarded to Officers

25, 2022, the Company issued 5,541 and 6,044 shares of common stock to Claudia and Ira Goldfarb , respectively, in satisfaction

of an outstanding common stock payable for services earned during December 31, 2021.

aggregate fair value of the shares was $ 12,467 and $ 13,599 for Claudia and Ira, respectively, based on the closing price of the Company’s

common stock on the date of grant.

Common Stock and Options Awarded to Recently

Appointed Director

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.

Creed was also granted options to purchase

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

These options will vest 20 % as of July 22,

2023 and 20% each anniversary thereafter until fully vested.

On April 11, 2022, the

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

Pursuant to the Company’s Non-Employee

Director Compensation Plan, Mr.

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

Pursuant to the Company’s 2020 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.

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.

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.

On various dates between January 5,

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

of these notes and warrants.

SOW GOOD INC.

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The following schedule summarizes the valuation

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

of financial instruments at fair value on a recurring basis in the balance sheets as of March 31, 2023 and December 31, 2022:

Valuation of financial instruments at fair value

Fair Value Measurements at September 30, 2022

Fair Value Measurements at March 31, 2023

Cash and cash equivalents

Intangible assets

Notes payable, related parties, net of $3,230,987 of debt discounts

3 unchanged sentences

Cash and cash equivalents

Intangible assets

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

Notes payable

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

Total liabilities

$ ( 3,665,754 )

There were no transfers of financial assets or

liabilities between Level 1 and Level 2 inputs for the nine months ended September 30, 2022.

liabilities between Level 1 and Level 2 inputs for the three months ended March 31, 2023.

SOW GOOD INC.

4 unchanged sentences

Schedule of prepaid expenses

September 30,

Prepaid software licenses

4 unchanged sentences

Note 7 – Property and Equipment

Property and equipment at September 30, 2022 and December 31,

Property and equipment at March 31, 2023 and December 31, 2022,

consists of the following:

Property and equipment

September 30,

Office equipment

7 unchanged sentences

as Machinery and Leasehold Improvements, respectively, upon completion.

On July 1, 2022, the Company disposed of certain

leasehold improvements that were damaged.

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

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

at the time of disposal.

The Company recognized depreciation of $ 76,218

and $ 129,915 for the nine months ended September 30, 2022 and 2021, respectively.

For the nine months ended September 30,

and $ 72,954 for the three months ended March 31, 2023 and 2022, respectively.

For the three months ended March 31, 2022,

$ 7,728 of the depreciation expense was allocated to inventory overhead, resulting in $ 65,226 of depreciation expense.

2 unchanged sentences

Financial Statements

Note 8 – Intangible Assets

Intangible assets consist of the following:

Schedule of Intangible assets

September 30,

Branding, Sow Good

Branding, Sustain Us

Trademarks and patents

Total intangible assets

Note 8 – Leases

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subject to the ASU 2016-02.

In the locations in which it is economically feasible to continue to operate, management expects to

enter into a new lease upon expiration.

The operating and office facility lease contains provisions requiring payment of property taxes,

utilities, insurance, maintenance and other occupancy costs applicable to the leased premise.

As the Company’s leases do not provide

implicit discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in

determining the present value of lease payments.

In the locations in which it is economically feasible to continue to operate, management expects to enter

into a new lease upon expiration.

The operating and office facility lease contains provisions requiring payment of property taxes, utilities,

insurance, maintenance and other occupancy costs applicable to the leased premise.

As the Company’s leases do not provide implicit

discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining

the present value of lease payments.

The components of lease expense were as follows:

Schedule of components of lease expense

September 30,

For the Three Months Ended

Operating lease cost:

Fixed rent expense

SOW GOOD INC.

Notes to Condensed

Financial Statements

Supplemental balance sheet information related to leases was as follows:

Amortization of right-of-use asset

Interest on lease liability

Total operating lease cost

Supplemental balance sheet information related

to leases was as follows:

Schedule of supplemental balance sheet information

September 30,

Operating leases:

Operating lease:

Operating lease assets

Current portion of operating lease liabilities

Noncurrent operating lease liabilities

Total operating lease liabilities

Current portion of operating lease liability

Noncurrent operating lease liability

Total operating lease liability

Weighted average remaining lease term:

1 unchanged sentence

Weighted average discount rate:

Operating leases

Supplemental cash flow and other information related to leases was

Operating lease

SOW GOOD INC.

Notes to Condensed

Financial Statements

Supplemental cash flow and other information

related to operating leases was as follows:

Schedule of supplemental cash flow and other information

September 30,

For the Three Months Ended

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

1 unchanged sentence

The future minimum lease payments due under operating leases as of

September 30, 2022 was as follows:

March 31, 2023 is as follows:

Schedule of future minimum lease payments

1 unchanged sentence

Minimum Lease

2022 (for the three months remaining)

2023 (for the nine months remaining)

2027 and thereafter

6 unchanged sentences

Notes payable, related parties consists of the

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

following at March 31, 2023 and December 31, 2022, respectively:

Schedule of Notes payable, related parties

September 30,

On March 7, 2023, the Company received $ 250,000 pursuant to a note and warrant purchase agreement from the Lyle A.

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

The unsecured note matures on August 23, 2025 .

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

The noteholder also received warrants to purchase 62,500 shares of common stock, exercisable at $2.60 per share over a ten-year term.

On March 2, 2023, the Company received $ 250,000 pursuant to a note and warrant purchase agreement from a trust held by the Company’s Chairman, Mr.

Goldfarb, as lender.

The unsecured note matures on August 23, 2025 .

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

The noteholder also received warrants to purchase 62,500 shares of common stock, exercisable at $2.60 per share over a ten-year term.

On February 1, 2023, the Company received $ 500,000 pursuant to a note and warrant purchase agreement from a trust held by the Company’s Chairman, Mr.

Goldfarb, as lender.

The unsecured note matures on August 23, 2025 .

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

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

On January 5, 2023, the Company received $ 250,000 pursuant to a note and warrant purchase agreement from the Lyle A.

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

The unsecured note matures on August 23, 2025 .

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

The noteholder also received warrants to purchase 62,500 shares of common stock, exercisable at $2.60 per share over a ten-year term.

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

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

The unsecured note matures on August 23, 2025 .

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

The noteholder also received warrants to purchase 62,500 shares of common stock, exercisable at $2.60 per share over a ten-year term.

SOW GOOD INC.

Notes to Condensed

Financial Statements

On September 29, 2022, the Company received $ 500,000 pursuant to a note and warrant purchase agreement from a trust held by the Company’s Chairman, Mr.

31 unchanged sentences

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

SOW GOOD INC.

Notes to Condensed

Financial Statements

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.

2 unchanged sentences

The note matures on December 31, 2024 .

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

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.

3 unchanged sentences

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

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.

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

Burke, as lender.

9 unchanged sentences

Less unamortized debt discounts:

Notes payable, related parties

Notes payable

current maturities

1 unchanged sentence

The Company recorded total discounts of $ 4,382,782

consisting of $ 364,512 , $ 2,249,684 and $ 699,213 of debt discounts on warrants granted to the related parties on September 29, 2022, 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 $ 752,257 of interest expense

for the nine months ended September 30, 2022.

Interest expense consisted of $ 215,884 of stated interest expense and $ 536,373 of amortized

debt discounts related to stock-based warrants.

There was no interest expense during the nine months ended September 30, 2021.

of debt discounts on warrants granted to the related parties on various dates from December 31, 2021 through March 7, 2023.

The discounts are being amortized to interest expense over the term of the notes, until repayment, using the straight-line method, which

closely approximates the effective interest method.

The Company recorded $ 334,191 and $ 59,724 of stock-based interest expense pursuant

to the amortization of discounts during the three months ended March 31, 2023 and 2022, respectively.

The Company recognized $ 117,556 and $ 42,575 of

interest expense for the three months ended March 31, 2023 and 2022, respectively.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 10 – Notes Payable

Notes payable consists of the following at September 30,

Notes payable consists of the following at March 31,

2023 and December 31, 2022, respectively:

Schedule of notes payable

September 30,

On April 8, 2022, the Company received $ 80,000 pursuant to a note and warrant purchase agreement from an accredited investor, as lender.

22 unchanged sentences

expense over the term of the notes, until repayment, using the straight-line method, which closely approximates the effective interest

The Company recorded $ 36,487 of stock-based interest expense pursuant to the amortization of discounts during the three months

ended March 31, 2023.

The Company recognized $ 8,581 and $ 1,494 of interest

expense for the nine months ended September 30, 2022 and 2021, respectively.

Interest expense consisted of $ 20,036 of stated interest,

and $ 70,947 of amortized debt discounts related to stock-based warrants for the nine months ended September 30, 2022.

Interest expense

of $ 4,431 consisted entirely of the stated interest on the EIDL Loan during the nine months ended September 30, 2021.

expense on notes payable for the three months ended March 31, 2023 and 2022, respectively.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 11 – Changes in Stockholders’

3 unchanged sentences

No shares have been issued to date.

The Company has 500,000,000

authorized shares of $ 0.001

par value common stock.

As of September 30, 2022, a total of 4,847,384

shares of common stock have been issued.

Common Stock Awarded to Board Member

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.

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

On April 11, 2022, the

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

Pursuant to the Company’s Non-Employee

Director Compensation Plan, Mr.

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

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

board member for services.

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

the date of grant.

The shares were subsequently issued on April 11, 2022.

Settlement of Common Stock Payable Awarded

25, 2022, the Company issued 5,541 and 6,044 shares of common stock to Claudia and Ira

Goldfarb , respectively , for their services earned in December of 2021.

The fair value of

the shares was $ 12,467 and $ 13,599 for Claudia and Ira, respectively, based on the closing price of the Company’s common stock on

the dates of grant.

The Company has 500,000,000 authorized shares

of $ 0.001 par value common stock.

As of March 31, 2023, a total of 4,847,384 shares of common stock have been issued.

Note 12 – Options

10 unchanged sentences

shares of common stock at a weighted average strike price of $ 4.53 , exercisable over a weighted average life of 7.9 years were outstanding

as of September 30, 2022.

Options Granted

On July 22, 2022, the

Company appointed Tim Creed as a member of the Board.

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

Creed was granted options

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

These options will vest 20 % as

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

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

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

The options are being expensed over the vesting period,

resulting in $ 3,350 of stock-based compensation expense during the nine months ended September 30, 2022.

As of September 30,

2022, a total of $ 83,996 of unamortized expenses are expected to be expensed over the vesting period.

On April 11, 2022, the

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

Pursuant to the Company’s 2020 Equity Plan,

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 $ 7,162 of stock-based compensation expense during the nine months ended September 30,

As of September 30, 2022, a total of $ 64,261 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 $ 9,468 of stock-based compensation expense

during the nine months ended September 30, 2022.

As of September 30, 2022, a total of $ 85,241 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 nine months ended September 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 .

On March 30, 2022, a total of sixteen employees

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

of $ 2.75 per share, exercisable over a 10-year term.

The options will vest 60% on the third anniversary, and 20% each anniversary thereafter

until fully vested.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 407 % and a call option value

of $2.6435, was $ 51,380 .

The options are being expensed over the vesting period, resulting in $ 5,038 of stock-based compensation expense

during the nine months ended September 30, 2022.

As of September 30, 2022, a total of $ 42,709 of unamortized expenses are expected

to be expensed over the vesting period.

On March 25, 2022, a newly appointed advisory

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

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

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

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

The options are being expensed over the vesting period, resulting in $ 1,493 of stock-based compensation expense during the nine

months ended September 30, 2022.

As of September 30, 2022, a total of $ 12,920 of unamortized expenses are expected to be expensed

over the vesting period.

as of March 31, 2023.

The Company recognized a total of $ 126,836 and

$ 407,031 of compensation expense during the nine months ended September 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 options.

The remaining unamortized balance of these options is $ 1,370,205 as of September 30, 2022.

$ 134,261 of compensation expense during the three months ended March 31, 2023 and 2022, 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 $ 1,076,675 as of March 31, 2023.

Options Exercised

No options were exercised during the nine months

ended September 30, 2022 and 2021.

Options Forfeited

A total of 46,986 options with a weighted average

exercise price of $ 5.64 were forfeited during the nine months ended September 30, 2022.

No options were exercised during the three months

ended March 31, 2023 and 2022.

Note 13 – Warrants

2 unchanged sentences

shares of common stock at a weighted average strike price of $ 2.49 , exercisable over a weighted average life of 9.1 years were outstanding

as of September 30, 2022.

as of March 31, 2023.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Warrants Granted

29, 2022 , warrants to purchase an aggregate 187,500 shares of common stock were issued to directors

pursuant to a private placement debt offering in which aggregate proceeds of $ 750,000 were received in exchange for promissory notes and

warrants to purchase an aggregate 187,500 shares of common stock, representing 25,000 warrant shares per $ 100,000 of promissory notes.

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

The Company may redeem outstanding

warrants prior to their expiration, at a price of $ 0.01 per share, provided that the volume weighted average sale price per share of Common

Stock equals or exceeds $9.00 per share for thirty (30) consecutive trading days ending on the third business day prior to the mailing

of notice of such redemption.

The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 140 % and a weighted

average call option value of $1.9441, was $ 364,512 .

The warrants are being expensed over the life of the loans, resulting in $ 688 of stock-based

compensation expense during the nine months ended September 30, 2022.

As of September 30, 2022, a total of $ 363,824 of unamortized

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

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 $ 430,160 of stock-based compensation expense during the nine months ended September 30,

As of September 30, 2022, a total of $ 2,786,595 of unamortized expenses are expected to be expensed over the lives of outstanding

debts, including $ 522,741 of unamortized debt discounts on warrants issued during December of 2021.

No warrants were granted during the nine months

ended September 30, 2021.

Warrants Expired

A total of 1,300 warrants with a weighted average

exercise price of $ 3.00 were forfeited during the nine months ended September 30, 2022.

No warrants were exercised during the nine months

ended September 30, 2021.

Warrants Exercised

No warrants were exercised during the nine months

ended September 30, 2022 and 2021.

On March 7, 2023 ,

warrants to purchase an aggregate 62,500 shares of common stock were issued to the Lyle A.

Berman Revocable Trust, as beneficially

controlled by one of the Company’s Directors, pursuant to a private placement debt offering

in which aggregate proceeds of $ 250,000 were received in exchange for promissory notes and warrants to purchase an aggregate 62,500 shares

of common stock, representing 25,000 warrant shares per $ 100,000 of promissory notes.

The warrants are fully vested and exercisable

over a period of 10 years at a price of $ 2.60 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price

of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $9.00 per share for

thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated

value using the Black-Scholes Pricing Model, based on a volatility rate of 138 % and a weighted average call option value of $3.65, was

The warrants are being expensed over the life of the loans, resulting in $ 6,084 of stock-based compensation expense during the

three months ended March 31, 2023.

As of March 31, 2023, a total of $ 222,070 of unamortized expenses are expected to be expensed

over the remaining life of the outstanding debts.

On March 2, 2023 ,

warrants to purchase an aggregate 62,500 shares of common stock were issued to a trust held by the Company’s Chairman, Mr.

Goldfarb, pursuant to a private placement debt offering in which aggregate proceeds of $ 250,000

were received in exchange for promissory notes and warrants to purchase an aggregate 62,500 shares of common stock, representing 25,000

warrant shares per $ 100,000 of promissory notes.

The warrants are fully vested and exercisable over a period of 10 years at a price

of $ 2.60 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share, provided that

the volume weighted average sale price per share of Common Stock equals or exceeds $9.00 per share for thirty (30) consecutive trading

days ending on the third business day prior to the mailing of notice of such redemption.

The estimated value using the Black-Scholes Pricing

Model, based on a volatility rate of 139 % and a weighted average call option value of $3.66, was $ 228,464 .

The warrants are being expensed

over the life of the loans, resulting in $ 7,321 of stock-based compensation expense during the three months ended March 31, 2023.

As of March 31, 2023, a total of $ 221,143 of unamortized expenses are expected to be expensed over the remaining life of the outstanding

On February 1, 2023 ,

warrants to purchase an aggregate 125,000 shares of common stock were issued to a trust held by the Company’s Chairman, Mr.

Goldfarb, pursuant to a private placement debt offering in which aggregate proceeds of $ 500,000

were received in exchange for promissory notes and warrants to purchase an aggregate 125,000 shares of common stock, representing 25,000

warrant shares per $ 100,000 of promissory notes.

The warrants are fully vested and exercisable over a period of 10 years at a price

of $ 2.60 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price of $ 0.01 per share, provided that

the volume weighted average sale price per share of Common Stock equals or exceeds $9.00 per share for thirty (30) consecutive trading

days ending on the third business day prior to the mailing of notice of such redemption.

The estimated value using the Black-Scholes Pricing

Model, based on a volatility rate of 138 % and a weighted average call option value of $2.21, was $ 276,462 .

The warrants are being expensed

over the life of the loans, resulting in $ 17,168 of stock-based compensation expense during the three months ended March 31, 2023.

As of March 31, 2023, a total of $ 259,294 of unamortized expenses are expected to be expensed over the remaining life of the outstanding

On January 5, 2023 ,

warrants to purchase an aggregate 62,500 shares of common stock were issued to the Lyle A.

Berman Revocable Trust, as beneficially

controlled by one of the Company’s Directors, pursuant to a private placement debt offering

in which aggregate proceeds of $ 250,000 were received in exchange for promissory notes and warrants to purchase an aggregate 62,500 shares

of common stock, representing 25,000 warrant shares per $ 100,000 of promissory notes.

The warrants are fully vested and exercisable

over a period of 10 years at a price of $ 2.60 per share.

The Company may redeem outstanding warrants prior to their expiration, at a price

of $ 0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $9.00 per share for

thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.

The estimated

value using the Black-Scholes Pricing Model, based on a volatility rate of 140 % and a weighted average call option value of $2.23, was

The warrants are being expensed over the life of the loans, resulting in $ 12,325 of stock-based compensation expense during

the three months ended March 31, 2023.

As of March 31, 2023, a total of $ 127,016 of unamortized expenses are expected to be

expensed over the remaining life of the outstanding debts.

SOW GOOD INC.

Notes to Condensed

Financial Statements

Note 14 – Income Taxes

6 unchanged sentences

Losses incurred during the period from April 9,

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

2011 (inception) to March 31, 2023 could be used to offset future tax liabilities.

Accounting standards require the consideration

1 unchanged sentence

of deferred tax assets will not be realized.

As of September 30, 2022, net deferred tax assets were $ 8,432,000 , with no deferred

tax liability, primarily related to net operating loss carryforwards.

A valuation allowance of approximately $ 8,432,000 was applied to

the net deferred tax assets.

As of March 31, 2023, net deferred tax assets were $ 8,877,000 , with no deferred tax

liability, primarily related to net operating loss carryforwards.

A valuation allowance of approximately $ 8,877,000 was applied to the

net deferred tax assets.

Therefore, the Company has no tax expense for 2023 to date.

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 September 30,

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

Note 15 – Commitments

18 unchanged sentences

to extend, at a monthly lease term of $ 10,036 , with approximately a 3% annual escalation of lease payments commencing September 15, 2021.

The future minimum lease payments due under operating leases as of

September 30, 2022 was as follows:

Fiscal Year Ending

Minimum Lease

2022 (for the three months remaining)

2026 and thereafter

Less effects of discounting

Lease liability recognized

Note 16 – Subsequent Events

2 unchanged sentences

No events occurred of a material nature that would

have required adjustments to or disclosures in these financial statements.

have required adjustments to or disclosures in these financial statements except as follows:

Debt Financing Received on September 2022 Note

On April 11, 2023, the Company received $250,000 pursuant to a note

and warrant purchase agreement from the Lyle A.

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

The unsecured note matures on August 23, 2025.

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

noteholder also received warrants to purchase 62,500 shares of common stock, exercisable at $2.60 per share over a ten-year term.

SOW GOOD INC.

Notes to Condensed

Financial Statements

May 2023 Debt Financing

In connection with a

private placement, dated April 25, 2023 (the "Offering"), on May 11, 2023, the Company entered into a Note and Warrant Purchase

Agreement (the "Purchase Agreement") with one of our directors (the "Purchaser") to sell and issue to the Purchaser

up to $100,000 in the May 2023 Promissory Note (the "Note") and (ii) a ten-year warrant (the "Warrant") to purchase

up to 25,000 shares (the "Warrant Shares" and together with the Note and Warrant, the "Securities") of the Company's

common stock, representing 25,000 warrant shares per $100,000 of notes purchased.

The Note Purchase Agreement, Note, and Warrant are based

on substantially similar terms as the April 2023 Note Purchase Agreement, promissory notes, and warrants issued on April 25, 2023

as part of the Offering.

The Note is a (1) year

Interest on the Note accrues at a rate of 8% per annum, payable in cash semi-annually on June 30 and December 31, with appropriate

pro rata adjustments made for any partial interest accrual period, and the outstanding principal amount of the Note matures and becomes

due and payable on the Maturity Date (as defined in the Note to be May 11, 2024, unless accelerated by an Event of Default).

defined in the Note) may be advanced to the Company from time to time from May 11, 2023 to the Maturity Date, upon prior written

notice from Company.

The Warrant is issued

to the Purchaser as they advance Loans to the Company, in accordance with the terms of the Note.

Upon issuance, the Warrant is exercisable

immediately and for a period of 10 years at a price of $2.50 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.

Assuming full advance of the Loans and full exercise of the Warrant, further proceeds to the Company from the exercise of the Warrant

Shares is calculated as $50,000.

April 2023 Debt Financing

On April 25, 2023, the

Company closed a private placement (the “Offering”) and concurrently entered into a Note and Warrant Purchase Agreement (the

“Purchase Agreement”) with multiple accredited investors (the “Purchasers”) to sell and issue to the Purchasers,

(i) an aggregate of up to $1,500,000 in the April 2023 Promissory Notes (the “Notes”) and (ii) ten-year warrants (the “Warrants”)

to purchase up to an aggregate of 375,000 shares (the “Warrant Shares”, and together with the Notes and Warrants, the “Securities”)

of the Company’s common stock, par value $0.001 per share, representing 25,000 warrant shares per $100,000 of Notes purchased.

total of $1.3 million was received on various dates from May 1, 2023 through May 11, 2023, including $900,0000 received

from related parties.

The Notes are one (1)

Interest on the Notes accrues at a rate of 8% per annum, payable in cash semi-annually on June 30 and December 31,

with appropriate pro rata adjustments made for any partial interest accrual period, and the outstanding principal amount of the Notes

matures and becomes due and payable on the Maturity Date (as defined in the notes to be April 25, 2024, unless accelerated by an

Event of Default).

Loans (as defined in the Notes) may be advanced to the Company from time to time from April 25, 2023 to the Maturity

Date, upon prior written notice from Company.

The Warrants are issued

to the Purchasers as they advance Loans to the Company, in accordance with the terms of the Note.

Upon issuance, the Warrants are exercisable

immediately and for a period of 10 years at a price of $2.50 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.

Assuming full advance of the Loans and full exercise of the Warrants, further proceeds to the Company from the exercise of the Warrant

Shares is calculated as $750,000.

The Offering closed simultaneously with execution of the Purchase Agreement.

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