Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $1.9 million, a decline from $15.6 million in Q2 2024, reflecting softer demand due to increased competitive pressure [8][9] - Gross loss for Q2 2025 was $100,000 compared to a gross profit of $9 million in the same period last year, resulting in a gross margin of negative 7% versus 58% in the prior year [9] - Net loss for Q2 2025 was $4.2 million or negative $0.36 per diluted share, compared to net income of $3.3 million or $0.29 per diluted share for the prior year [10] - Adjusted EBITDA for Q2 2025 was negative $2.7 million, down from $6.2 million in Q2 2024 [11] Business Line Data and Key Metrics Changes - The company faced operational challenges that impacted financial performance, but demand has rebounded, outpacing current labor capacity [4][5] - The company has stabilized operations and is focusing on scaling workforce and supply chain to meet demand [6] Market Data and Key Metrics Changes - The competitive environment has intensified with the arrival of large market entrants, contributing to lower sales and gross profit [9] - Retail partnerships are expanding, with new product launches and positive feedback from retailers indicating growing enthusiasm [15][19] Company Strategy and Development Direction - The company is focused on optimizing cost structure, conserving cash, and restoring margins by reducing excess inventory storage costs [13] - Plans include driving product innovation and nurturing relationships with both new and existing retail partners [6][19] - The company is exploring private label, co-manufacturing, and adjacent categories to enhance its product offerings [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term value of the business despite near-term operational challenges [4] - The company believes the worst of the near-term disruptions are behind them, with demand signals remaining encouraging [19] - Management is optimistic about increasing demand in international markets, particularly in the Middle East [16][17] Other Important Information - The company has completed production, packaging, and shipping of its entire holiday inventory, allowing for stabilization of the supply chain [6] - A new CFO, Donna Dye, has joined the leadership team, bringing extensive experience and expertise to the company [7] Q&A Session Summary Question: Can you talk to your inventory levels as well as your need for future financing? - The company has a significant amount of finished goods from last year, with two SKUs being sold at a discount while the rest continues to perform well at regular retail [22][23] - Currently, the company is fine with its financing needs, but future expansion may require evaluation for additional financing [24] Question: How long until your cash flow breakeven at this point do you think? - Management indicated that they expect to reach cash flow breakeven before the end of the year, with good progress being made [25]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited financial statements for Q2 2025 reflect a significant performance downturn, resulting in a net loss, reduced cash, and substantial doubt about the company's ability to continue as a going concern [Condensed Balance Sheets](index=5&type=section&id=Condensed%20Balance%20Sheets) As of June 30, 2025, total assets decreased to **$49.99 million** from **$54.70 million**, primarily due to a significant drop in cash, while stockholders' equity also declined Condensed Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $959 | $3,723 | | Total current assets | $22,800 | $25,076 | | Total assets | $49,985 | $54,696 | | Total current liabilities | $5,384 | $7,365 | | Total liabilities | $21,415 | $22,708 | | Total stockholders' equity | $28,571 | $31,988 | [Condensed Statements of Operations](index=6&type=section&id=Condensed%20Statements%20of%20Operations) For Q2 and H1 2025, revenues plummeted, leading to significant net losses of **$4.19 million** and **$6.76 million** respectively, a sharp reversal from prior year's net income Three Months Ended June 30, Performance Comparison (in millions, except EPS) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $1.86 | $15.65 | -88.1% | | Gross Profit (Loss) | ($0.13) | $9.01 | -101.4% | | Net Income (Loss) | ($4.19) | $3.34 | -225.5% | | Diluted EPS | ($0.36) | $0.29 | -224.1% | Six Months Ended June 30, Performance Comparison (in millions, except EPS) | Metric | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $4.33 | $27.05 | -84.0% | | Gross Profit | $0.97 | $13.64 | -92.9% | | Net Income (Loss) | ($6.76) | $3.85 | -275.7% | | Diluted EPS | ($0.59) | $0.41 | -243.9% | [Condensed Statements of Cash Flows](index=8&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) For H1 2025, net cash decreased by **$2.76 million** due to significant cash usage in operations and investing, a stark reversal from the **$11.96 million** increase in H1 2024 driven by financing Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,515) | $(940) | | Net cash used in investing activities | $(249) | $(2,228) | | Net cash provided by financing activities | $0 | $15,131 | | **Net Change in Cash** | **$(2,764)** | **$11,963** | [Notes to the Condensed Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Financial%20Statements) Key notes reveal substantial doubt about going concern due to net losses and low cash, highlight high customer concentration, significant related-party debt restructuring, and a complete pivot to freeze-dried candy products - The company has raised substantial doubt about its ability to continue as a going concern, citing an accumulated deficit of **$69.2 million**, a net loss of **$6.8 million** for the six-month period, and a cash balance of only **$959,416** as of June 30, 2025[66](index=66&type=chunk) - Management's plans to address the going concern issue include debt restructuring (completed in Q2 2025), cost-cutting, entering new overseas markets, and exploring potential partnerships, asset sales, or capital raises[67](index=67&type=chunk)[69](index=69&type=chunk) - The company has significant customer concentration risk, with its top three customers accounting for **48%**, **17%**, and **9%** of revenues for the six months ended June 30, 2025[48](index=48&type=chunk) - In April 2025, the company restructured **$2.5 million** in outstanding promissory notes held by related parties into new senior convertible notes maturing April 30, 2030, reclassifying the debt from current to long-term liabilities[71](index=71&type=chunk)[109](index=109&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the severe H1 2025 revenue decline and gross profit collapse to intense competitive pressure and customer loss, leading to deteriorated liquidity and reinforcing substantial doubt about the company's going concern ability [Overview and Key Factors](index=26&type=section&id=Overview%20and%20Key%20Factors) Sow Good, a freeze-dried candy manufacturer, faces significant competitive challenges from larger players impacting customer retention, market access, and revenue, alongside supply chain risks - The company operates in a highly competitive industry and has lost significant customers due to competitors using their market status and marketing spend to limit Sow Good's access to shelf space[159](index=159&type=chunk) - As of June 30, 2025, the company's products are sold in approximately **5,000** retail outlets in the U.S. and it has expanded distribution to the Middle East[151](index=151&type=chunk)[155](index=155&type=chunk) - Operational challenges, such as extreme summer heat in 2024, have previously disrupted transportation, increased inventory levels, and negatively impacted revenue and market reputation[163](index=163&type=chunk)[164](index=164&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Operations analysis reveals a dramatic downturn for Q2 and H1 2025, with revenues plummeting by **88%** and **84%** respectively, leading to significant gross losses primarily due to reduced demand and competitive pressure Comparison of Three Months Ended June 30 | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $1.86M | $15.65M | -88% | | Gross Profit (Loss) | ($0.13M) | $9.01M | -101% | | Net Operating (Loss) Income | ($4.07M) | $4.89M | -183% | Comparison of Six Months Ended June 30 | Metric | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $4.33M | $27.05M | -84% | | Gross Profit | $0.97M | $13.64M | -93% | | Net Operating (Loss) Income | ($6.49M) | $5.81M | -212% | [Liquidity, Going Concern and Capital Resources](index=32&type=section&id=Liquidity,%20Going%20Concern%20and%20Capital%20Resources) The company's liquidity is precarious with cash at **$959.4 thousand**, insufficient for the next twelve months, reinforcing substantial doubt about its going concern ability and necessitating additional financing - As of June 30, 2025, the company had only **$959.4 thousand** in cash and cash equivalents, a decrease of **$2.8 million** since December 31, 2024[199](index=199&type=chunk) - Management explicitly states that the company may not have sufficient funds to sustain operations for the next twelve months, which raises substantial doubt about its ability to continue as a going concern[199](index=199&type=chunk) - In April 2025, the company restructured **$2.7 million** of outstanding current debt into long-term convertible notes maturing in 2030, improving its short-term liquidity profile on paper[200](index=200&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company reports minimal commodity price and interest rate risks but anticipates increasing foreign currency risk with expanding international operations in Mexico, Colombia, and China - The company does not expect significant effects from commodity price risk or interest rate risk[213](index=213&type=chunk)[214](index=214&type=chunk) - Foreign currency risk is expected to increase as the company's foreign operations in markets like Mexico, Colombia, and China grow[215](index=215&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2025, management concluded that disclosure controls and procedures are effective, with no material changes to internal control over financial reporting during the period - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[216](index=216&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the six months ended June 30, 2025[217](index=217&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=36&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any legal proceedings expected to have a material adverse effect on its financial condition or operations - The company is not currently involved in any material legal proceedings[220](index=220&type=chunk) [Item 1A. Risk Factors](index=36&type=section&id=Item%201A.%20Risk%20Factors) This section highlights critical risks including substantial doubt about going concern, potential Nasdaq delisting due to minimum bid price non-compliance, and adverse impacts from significant tariffs - There is substantial doubt about the company's ability to continue as a going concern, as its cash of **$959.4 thousand** is not sufficient to fund operations for the next twelve months[222](index=222&type=chunk) - On May 14, 2025, the company received a non-compliance notice from Nasdaq for its stock's closing bid price being below **$1.00** for 30 consecutive trading days, with a compliance deadline of November 10, 2025[223](index=223&type=chunk) - The company faces risks from potential significant tariffs, which could materially increase costs, reduce margins, and disrupt the sourcing of raw materials[221](index=221&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[229](index=229&type=chunk) [Item 5. Other Information](index=37&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated any Rule 10b5-1 trading plans or other non-Rule 10b5-1 trading arrangements during the period - No directors or officers adopted or terminated any Rule 10b5-1 trading plans[232](index=232&type=chunk) [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications and incorporated by reference documents

[Sow Good Reports Second Quarter 2025 Results](index=1&type=section&id=Sow%20Good%20Reports%20Second%20Quarter%202025%20Results) Sow Good's Q2 2025 results reflect operational stabilization and strong demand despite temporary revenue impacts from production delays and increased competition [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlights operational stabilization and strong demand in Q2 2025, despite temporary revenue impacts from production delays and labor shortages - Operations have stabilized, but revenue was temporarily impacted by production delays and labor shortages, even as demand accelerated[3](index=3&type=chunk) - The company deepened partnerships with key retailers like Five Below and Albertsons, expanding both SKU counts and order volumes[3](index=3&type=chunk) - Sow Good successfully launched in the UAE, with results exceeding expectations, validating global demand for its products[3](index=3&type=chunk) - The company's forward-looking strategy focuses on disciplined execution, cost optimization, innovation, and reaccelerating growth in the second half of 2025[3](index=3&type=chunk) [Second Quarter 2025 Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) Sow Good's financial performance declined significantly in the second quarter of 2025 compared to the same period in 2024, driven by reduced revenue and a shift to net loss Q2 2025 Financial Highlights vs. Q2 2024 | Metric | Q2 2025 (USD) | Q2 2024 (USD) | | :--- | :--- | :--- | | **Revenue** | $1.9 million | $15.6 million | | **Gross Profit (Loss)** | $(0.1) million | $9.0 million | | **Gross Margin** | (7%) | 58% | | **Operating Expenses** | $3.9 million | $4.1 million | | **Net Income (Loss)** | $(4.2) million | $3.3 million | | **EPS (Diluted)** | $(0.36) | $0.29 | | **Adjusted EBITDA** | $(2.7) million | $6.2 million | - The decline in revenue was primarily driven by softer demand due to increased competitive pressure and, to a lesser extent, production delays[4](index=4&type=chunk) - Cash and cash equivalents stood at **$1.0 million** as of June 30, 2025, down from **$3.7 million** at the end of 2024[5](index=5&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) Sow Good's financial statements for Q2 2025 show significant declines in revenue and net income, leading to reduced assets and equity compared to the prior year [Condensed Balance Sheets](index=5&type=section&id=CONDENSED%20BALANCE%20SHEETS) As of June 30, 2025, Sow Good's total assets decreased to $50.0 million from $54.7 million, primarily due to a significant drop in cash and cash equivalents, resulting in a decline in total stockholders' equity Balance Sheet Summary (as of June 30, 2025 vs. Dec 31, 2024) | Account | June 30, 2025 (USD) | December 31, 2024 (USD) | | :--- | :--- | :--- | | **Cash and cash equivalents** | $0.96 million | $3.72 million | | **Total current assets** | $22.80 million | $25.08 million | | **Total assets** | $49.99 million | $54.70 million | | **Total current liabilities** | $5.38 million | $7.36 million | | **Total liabilities** | $21.41 million | $22.71 million | | **Total stockholders' equity** | $28.57 million | $31.99 million | [Condensed Statements of Operations](index=6&type=section&id=CONDENSED%20STATEMENTS%20OF%20OPERATIONS) For Q2 2025, Sow Good reported a significant revenue decrease to $1.9 million from $15.6 million in Q2 2024, resulting in a net loss of $4.2 million compared to a $3.3 million net income in the prior-year period Statement of Operations - Three Months Ended June 30 | Metric | 2025 (USD) | 2024 (USD) | | :--- | :--- | :--- | | **Revenues** | $1,856,312 | $15,648,046 | | **Gross Profit (Loss)** | $(129,709) | $9,007,129 | | **Net Operating Income (Loss)** | $(4,073,905) | $4,885,096 | | **Net Income (Loss)** | $(4,186,512) | $3,335,142 | | **Net Income (Loss) per Share - Diluted** | $(0.36) | $0.29 | Statement of Operations - Six Months Ended June 30 | Metric | 2025 (USD) | 2024 (USD) | | :--- | :--- | :--- | | **Revenues** | $4,333,234 | $27,054,369 | | **Gross Profit** | $973,014 | $13,636,571 | | **Net Operating Income (Loss)** | $(6,489,093) | $5,814,353 | | **Net Income (Loss)** | $(6,757,566) | $3,845,730 | | **Net Income (Loss) per Share - Diluted** | $(0.59) | $0.41 | [Statements of Changes in Stockholders' Equity](index=7&type=section&id=STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY) For the six months ended June 30, 2025, total stockholders' equity decreased from $32.0 million to $28.6 million, primarily due to the net loss incurred during the period - Total stockholders' equity decreased from **$31,988,061** at the beginning of the year to **$28,570,587** at June 30, 2025[22](index=22&type=chunk) - The primary driver for the decrease in equity was the net loss of **$6,757,566** for the six-month period[22](index=22&type=chunk) [Condensed Statements of Cash Flows](index=8&type=section&id=CONDENSED%20STATEMENTS%20OF%20CASH%20FLOWS) For the six months ended June 30, 2025, Sow Good experienced a net cash outflow of $2.8 million, primarily from operating activities, resulting in a reduced cash balance Cash Flow Summary - Six Months Ended June 30 | Activity | 2025 (USD) | 2024 (USD) | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(2,514,884) | $(939,534) | | **Net cash used in investing activities** | $(249,140) | $(2,228,050) | | **Net cash provided by financing activities** | $0 | $15,130,582 | | **Net change in cash** | $(2,764,024) | $11,962,998 | | **Cash at end of period** | $959,416 | $14,373,035 | [Non-GAAP Financial Measures](index=2&type=section&id=Non-GAAP%20Financial%20Measures) The company's non-GAAP Adjusted EBITDA significantly declined in Q2 2025, reflecting operational challenges, with management using this metric for performance evaluation despite its limitations [Reconciliation of Net Income (Loss) to Adjusted EBITDA](index=9&type=section&id=RECONCILIATION%20OF%20NET%20INCOME%20(LOSS)%20TO%20EBITDA%20AND%20ADJUSTED%20EBITDA) Sow Good's Adjusted EBITDA for Q2 2025 was $(2.7) million, a significant negative shift from $6.2 million in Q2 2024, reflecting operational challenges Adjusted EBITDA Reconciliation | Period | Net Income (Loss) (USD) | Adjusted EBITDA (USD) | | :--- | :--- | :--- | | **Three Months Ended June 30, 2025** | $(4,186,512) | $(2,694,394) | | **Three Months Ended June 30, 2024** | $3,335,142 | $6,216,642 | | **Six Months Ended June 30, 2025** | $(6,757,566) | $(3,485,112) | | **Six Months Ended June 30, 2024** | $3,845,730 | $8,684,628 | [Definition and Use of Non-GAAP Measures](index=2&type=section&id=Definition%20and%20Use%20of%20Non-GAAP%20Measures) Sow Good defines Adjusted EBITDA as a non-GAAP measure, used by management to assess core operating performance and business strategies, while acknowledging its inherent limitations - The company uses Adjusted EBITDA as a supplemental measure to GAAP, defining it as net income (loss) adjusted for items like depreciation, amortization, interest, taxes, and share-based compensation[9](index=9&type=chunk) - Management uses Adjusted EBITDA to evaluate business strategies, make budgeting decisions, and compare performance against peers[11](index=11&type=chunk) - The company acknowledges limitations of Adjusted EBITDA, such as the exclusion of significant recurring non-cash expenses like stock-based compensation and depreciation[14](index=14&type=chunk) [Company and Report Information](index=2&type=section&id=Company%20and%20Report%20Information) Sow Good Inc. is a U.S.-based freeze-dried snack manufacturer, and the report includes standard forward-looking statements subject to various business risks [About Sow Good Inc.](index=2&type=section&id=About%20Sow%20Good%20Inc.) Sow Good Inc. is a U.S.-based manufacturer specializing in freeze-dried candy and snacks, leveraging proprietary technology for innovation and manufacturing excellence - Sow Good is a U.S.-based manufacturer of innovative freeze-dried candy and treats, utilizing proprietary technology[8](index=8&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section contains a standard safe harbor statement advising that the press release includes forward-looking statements concerning future results, business strategy, and growth plans, which are subject to various risks and uncertainties - The report contains forward-looking statements regarding future financial position, business strategy, expected growth, and other operational plans[13](index=13&type=chunk) - These statements are subject to risks and uncertainties, including competition, supply chain issues, and the ability to retain customers, as detailed in SEC filings[13](index=13&type=chunk)[15](index=15&type=chunk)

IRVING, Texas, Aug. 05, 2025 (GLOBE NEWSWIRE) -- Sow Good Inc. (Nasdaq: SOWG) (“Sow Good” or “the Company”), a trailblazer in the freeze dried candy and treat industry, today announced the appointment by its board of directors (the “Board”) of Jeff Rubin as a member of the Board, effective August 1, 2025, filling a Board vacancy. Mr. Rubin is a leader in the confectionery industry who brings with him 35 years of experience. He founded IT’SUGAR in 2006 and served as its Chief Executive Officer until July 202 ...

Company Overview - Sow Good Inc. is a U.S.-based manufacturer specializing in freeze dried candy and snacks, focusing on innovative and flavorful products [4] - The company utilizes proprietary freeze-drying technology and a specialized manufacturing facility to create a new category of confectionaries known as freeze dried candy [4] - Sow Good aims to provide good experiences for customers and growth for investors and employees through its core pillars: innovation, scalability, manufacturing excellence, meaningful employment opportunities, and food quality standards [4] Upcoming Conference Call - Sow Good will hold a conference call on August 14, 2025, at 10:00 a.m. Eastern time to discuss its second-quarter results for the period ending June 30, 2025 [1] - A press release with financial results will be issued prior to the conference call [1] - The conference call will be accessible via a registration link, and dial-in instructions will be provided upon registration [2] Additional Information - The conference call will be broadcast live and available for replay on the company's website [3] - For investor inquiries, Cody Slach from Gateway Group, Inc. can be contacted [5]

Core Viewpoint - Sow Good Inc. has appointed Donna Guy as Chief Financial Officer, effective June 5, 2025, succeeding Brendan Fischer, who served as Interim CFO since April 2024 [1][5] Group 1: Leadership Appointment - Donna Guy brings over 25 years of financial leadership experience across public and private companies [2] - Prior to her appointment, Ms. Guy was the Principal Consultant and founder of Elevation Accounting & Finance, LLC, where she advised organizations on various financial operations [2][3] - Ms. Guy has previously consulted with Sow Good Inc., providing her with a deep understanding of the company's operations and strategic goals [2][4] Group 2: Professional Background - Ms. Guy served as Controller and Interim CFO at ADDvantage Technologies Group, Inc. from 2020 to 2021, and as Senior Director of Financial Planning & Analysis at Basic Energy Services from 2016 to 2020 [3] - Earlier in her career, she held senior roles in SEC reporting and accounting at Enduro Resource Partners and XTO Energy [3] - Ms. Guy began her career as an auditor after earning her Bachelor of Business and Accounting from the University of Texas at Arlington in 1998 [3] Group 3: Company Vision and Goals - Claudia Goldfarb, CEO of Sow Good Inc., expressed excitement about Ms. Guy's appointment, highlighting her extensive background in corporate finance and public company reporting [4] - Ms. Guy stated her eagerness to contribute to the company's strategic and financial goals, having already worked closely with the team [5] - Sow Good Inc. is dedicated to innovation, scalability, manufacturing excellence, meaningful employment opportunities, and food quality standards in the freeze dried candy and snack industry [6]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $2.5 million, a significant decrease from $11.4 million in Q1 2024, primarily due to softening demand and increased competitive pressure [7] - Gross profit in Q1 2025 was $1.1 million compared to $4.6 million in the same period last year, with a gross margin improvement to 45% from 41% year-over-year [8] - Net loss for Q1 2025 was $2.6 million, or a loss of $0.23 per diluted share, compared to net income of $511,000, or $0.06 per diluted share, in Q1 2024 [9] - Adjusted EBITDA for Q1 2025 was negative $800,000, down from $2.5 million in Q1 2024 [9] - Cash and cash equivalents at the end of Q1 2025 were $1.6 million, down from $3.7 million at the end of 2024 [10] Business Line Data and Key Metrics Changes - The company reported a 79% increase in revenue from Q4 2024 to Q1 2025, indicating a recovery trend [4] - The freeze-dried candy line has seen renewed consumer enthusiasm, although competitive pressure from larger CPG companies remains a challenge [5] Market Data and Key Metrics Changes - The company is experiencing a slow increase in sell-through data, with units per door rising from 12-13 to 16 over recent weeks [26] - Retail partners like Five Below and Ace Hardware are showing positive initial demand and reorders, indicating a return to normal reorder cadences [28][30] Company Strategy and Development Direction - The company is focusing on cost savings, cash conservation, and expanding candy distribution while exploring new category opportunities [11] - Strategic actions include reducing overhead costs, implementing automation in packaging, and postponing certain production activations to align with demand [12][13] - The company is also pursuing international expansion, having launched products in the Middle East with positive initial orders [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about a gradual recovery in sales, expecting Q2 to show modest improvement over Q1 [21] - The company is focused on maintaining quality and innovation while navigating a competitive landscape with both large and small competitors [22] Other Important Information - The company has entered into exchange agreements with noteholders to extend maturities by five years, reflecting confidence in the recovery plan [10][13] - The management team is actively evaluating strategies to improve cash position, including converting inventory to cash [50] Q&A Session Summary Question: Can you share insights on consumer enthusiasm and retail inventory? - Management noted a slow increase in sell-through data, with a return to normal reorder cadences as consumers return to the brand after trying competitors [26][30] Question: What is the current number of retail doors? - The company is currently in approximately 1,900 to 2,000 retail doors [34] Question: How is the quality of the inventory and plans for working it down? - Management indicated that most heat-affected inventory has been identified and removed, with a focus on working through remaining inventory strategically [35][36] Question: What are the competitive dynamics with larger CPG companies? - Management observed that smaller competitors have exited the space, while larger CPGs are not performing as expected, indicating room for improvement in product quality [38][40] Question: What are the plans for spare capacity in production? - The company is exploring opportunities for private labeling and home manufacturing to utilize spare capacity effectively [46] Question: What strategies are in place to improve cash position? - Management is focused on converting inventory to cash and evaluating all strategies to enhance cash flow [50]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $2.5 million, a significant decrease from $11.4 million in Q1 2024, primarily due to softening demand and increased competitive pressure [7] - Gross profit in Q1 2025 was $1.1 million compared to $4.6 million in the same period last year, with a gross margin improvement to 45% from 41% due to lower cost of goods sold [8][10] - Net loss for Q1 2025 was $2.6 million, or a loss of $0.23 per diluted share, compared to net income of $511,000, or $0.06 per diluted share, in Q1 2024 [10] - Adjusted EBITDA for Q1 2025 was negative $800,000, down from $2.5 million in Q1 2024 [10] - Cash and cash equivalents decreased to $1.6 million from $3.7 million as of December 31, 2024 [10] Business Line Data and Key Metrics Changes - The company reported a 79% increase in revenue from Q4 2024, indicating a recovery trend despite the overall decline year-over-year [5] - The freeze-dried candy line has seen renewed consumer enthusiasm, although competitive pressure from larger CPG companies remains a challenge [6] Market Data and Key Metrics Changes - The company is experiencing a slow increase in sell-through data, with units per door rising from 12-13 to 16 over recent weeks [27] - Retail partners like Five Below and Ace Hardware are showing positive initial demand and reorders, indicating a return to normal reorder cadences [29][31] Company Strategy and Development Direction - The company is focusing on cost savings, cash conservation, and expanding candy distribution while exploring new category opportunities [12] - Strategic actions include reducing overhead costs, enhancing operational efficiency through automation, and postponing certain production activations to align with demand [13][14] - The company plans to enter new categories such as beef jerky and freeze-dried yogurt snacks, emphasizing clean label ingredients [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery trajectory, expecting modest improvement in Q2 over Q1 as new partnerships take hold [23] - The company acknowledges ongoing challenges but believes it is positioning itself to emerge stronger through innovation and category expansion [24] Other Important Information - The company has entered into exchange agreements with noteholders to extend maturities by five years, reflecting confidence in its recovery plan [11][14] - Initial orders from the Middle East market exceeded expectations, presenting a significant growth opportunity [20] Q&A Session Summary Question: What is the trend in weekly or monthly velocities and retail inventory position? - Management noted a slow increase in sell-through data, with units per door rising to 16, and excess inventory at Five Below is being worked through successfully [27][29] Question: How does the company view its inventory quality and expectations for the next quarters? - Management indicated that most heat-affected inventory has been identified and removed, and they have a two-year shelf life on most products, allowing time to work through remaining inventory [37][38] Question: What are the competitive dynamics with larger CPG companies? - Management observed that smaller competitors have exited the space, and while larger CPGs have entered, they are not performing as expected, with significant declines in their sell-through rates [41][43]

PART I. FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited Q1 2025 financial statements show a shift from $0.51 million net income to a $2.57 million net loss, driven by a 78% revenue decline and indicating a going concern risk [Condensed Balance Sheets](index=4&type=section&id=Condensed%20Balance%20Sheets) As of March 31, 2025, total assets slightly decreased to $52.7 million, primarily due to a $2.1 million reduction in cash, while inventory increased and equity declined due to net loss Condensed Balance Sheet Data (in USD) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,615,108 | $3,723,440 | | Inventory, net | $21,142,831 | $20,313,315 | | Total current assets | $24,625,698 | $25,076,140 | | Total assets | $52,723,185 | $54,695,731 | | Total current liabilities | $6,750,942 | $7,364,541 | | Total liabilities | $21,934,075 | $22,707,670 | | Total stockholders' equity | $30,789,110 | $31,988,061 | [Condensed Statements of Operations](index=5&type=section&id=Condensed%20Statements%20of%20Operations) Q1 2025 saw a net loss of $2.57 million, a significant reversal from Q1 2024's $0.51 million net income, primarily due to a 78% revenue decrease Statement of Operations Summary (in USD) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues | $2,476,922 | $11,406,320 | | Gross Profit | $1,102,723 | $4,629,438 | | Total Operating Expenses | $3,517,911 | $3,700,181 | | Net Operating Income (Loss) | ($2,415,188) | $929,257 | | Net Income (Loss) | ($2,571,054) | $510,588 | | Basic Net Loss per Share | ($0.23) | $0.08 | [Condensed Statements of Cash Flows](index=7&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Net cash used in operating activities for Q1 2025 was $2.0 million, a reversal from Q1 2024's $1.3 million provided, leading to a $2.1 million decrease in cash and equivalents Cash Flow Summary (in USD) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($2,000,542) | $1,297,651 | | Net cash used in investing activities | ($107,790) | ($630,332) | | Net cash provided by financing activities | $0 | $3,737,999 | | Net change in cash and cash equivalents | ($2,108,332) | $4,405,318 | [Notes to the Condensed Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20the%20Condensed%20Financial%20Statements%20(Unaudited)) Notes detail the company's freeze-dried candy business, accounting policies, a 'Going Concern' warning due to a $65 million deficit, high customer/supplier concentration, and a $2.8 million debt restructuring - The company's business is now entirely focused on its freeze-dried candy and ice cream product lines, having discontinued its previous smoothie, snack, and granola products, with production capacity expanded to six freeze driers operational[29](index=29&type=chunk) - There is substantial doubt about the Company's ability to continue as a going concern, given its accumulated deficit of **$65 million** and a net loss of **$2.57 million** for the quarter, with management outlining plans for recovery including debt restructuring, cost reductions, and exploring new markets[60](index=60&type=chunk)[61](index=61&type=chunk) - The company exhibits significant customer and supplier concentration, with the top three customers accounting for **83.2% of revenues** and the top three suppliers for **76% of purchases** in Q1 2025[47](index=47&type=chunk)[48](index=48&type=chunk) - Subsequent to the quarter end, on April 28, 2025, the company restructured **$2.8 million** of outstanding and accrued debt into new senior convertible promissory notes maturing in 2030[126](index=126&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 78% Q1 2025 revenue decline and $2.6 million net loss to intense competition and reduced demand, highlighting liquidity concerns and a $2.8 million debt restructuring - The company operates as a freeze-dried candy and snack manufacturer with **21 candy SKUs** and **3 ice cream SKUs**, sold through an omnichannel strategy in approximately **3,000 retail outlets**[128](index=128&type=chunk) - A key challenge is competition from larger players with greater resources, which has led to the loss of significant customers and a substantial reduction in revenue[135](index=135&type=chunk) Results of Operations Comparison (in USD) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Revenues | $2,476,922 | $11,406,320 | (78%) | | Gross profit | $1,102,723 | $4,629,438 | (76%) | | Net income (loss) | ($2,571,054) | $510,588 | (604%) | - The **78% decrease in revenue** was driven by significantly reduced demand due to increased competitive and market pressure by large competitors[150](index=150&type=chunk) - As of March 31, 2025, the company had working capital of **$17.9 million** but only **$1.6 million** in cash and cash equivalents, down from **$3.7 million** at year-end 2024[162](index=162&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company anticipates no significant commodity or interest rate risk, but expects foreign currency risk to increase with international expansion into Mexico, Colombia, and China - The company does not anticipate significant exposure to commodity price or interest rate risk[176](index=176&type=chunk)[177](index=177&type=chunk) - Foreign currency risk is expected to increase with the growth of international operations, particularly in Mexico, Colombia, and China[178](index=178&type=chunk) [Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of March 31, 2025[179](index=179&type=chunk) - No material changes were made to the company's internal control over financial reporting during the first quarter of 2025[180](index=180&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The company does not anticipate any current legal proceedings to materially adversely affect its financial position, results, or cash flows - The company does not expect any current legal proceedings to have a material adverse effect on its financials[183](index=183&type=chunk) [Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) Key risks include potential tariffs impacting costs and margins, and substantial doubt about the company's ability to continue as a going concern due to its $65 million accumulated deficit and insufficient cash - Significant tariffs could materially increase costs, decrease margins, and adversely affect the business[184](index=184&type=chunk) - There is substantial doubt about the company's ability to continue as a going concern, with cash of **$1.6 million** and an accumulated deficit of **$65 million** noted as insufficient to fund operations without additional financing as of March 31, 2025[185](index=185&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred during the reporting period - None[187](index=187&type=chunk) [Other Information](index=31&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading plans or other non-Rule 10b5-1 arrangements during the period - None of the Company's directors or officers adopted or terminated any Rule 10b5-1 plans[190](index=190&type=chunk) [Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and various corporate and financial agreements

Core Insights - Sow Good Inc. is launching two new products: Freeze Dried Caramel and Raw Caramel at the 2025 Sweets & Snacks Expo [3] - The new products will be available for purchase starting June 2025 through the company's website and retail partners [4] - Sow Good Inc. focuses on innovative freeze drying techniques to transform traditional confections, aiming to deliver unique textures and flavors [5] Product Details - Freeze Dried Caramel: A product designed to offer a unique texture and flavor experience [3] - Raw Caramel: Another innovative offering that complements the freeze dried variant [3] - Seasonal SKUs will also be launched at the end of the second quarter [3] Company Background - Sow Good Inc. is based in Dallas, TX, and is dedicated to reimagining classic treats through innovative techniques [5] - The company emphasizes the production of its confections in the USA [4]