Sow Good Inc.(SOWG) - 2024 Q2 - Quarterly Report

Revenue Growth - Revenues increased from $1.3 million for the three months ended June 30, 2023, to approximately$15.6 million for the three months ended June 30, 2024, reflecting significant growth [163]. - Revenues for the three months ended June 30, 2024, were $15.6 million, a significant increase of$14.3 million or 1,090% compared to $1.3 million in the same period of 2023 [188]. - For the six months ended June 30, 2024, revenues reached$27.1 million, an increase of $25.5 million or 1,687$1.5 million in the same period of 2023 [200]. Production Capacity and Facilities - A new 324,000 square foot production facility in Dallas, Texas, is expected to significantly increase production capacity and meet rising demand for freeze dried treats [174]. - The company has built five bespoke freeze driers and is fabricating a sixth, with plans for six additional driers in the new Dallas facility [162]. - The company entered into a lease for approximately 324,000 rentable square feet in Dallas, Texas, for a term of approximately 62 months, starting at $122,175 per month and increasing to$297,289.14 per month by the end of the lease [226]. Financial Performance - Gross profit for the three months ended June 30, 2024, was $9.0 million, an increase of$10.6 million or 670% compared to a gross loss of $1.6 million in 2023, resulting in a gross profit margin of 58$3.6 million, compared to a net loss of $3.3 million in 2023, reflecting an increase in earnings of$6.9 million or 208% [196]. - Net income for the six months ended June 30, 2024 was $4.1 million, a positive change of$8.8 million compared to a net loss of $4.7 million for the same period in 2023 [207]. Cost and Expenses - Cost of goods sold for the same period was$6.6 million, up $3.7 million or 129$2.9 million in 2023, primarily due to increased sales volumes [189]. - Salaries and benefits for the six months ended June 30, 2024, were $4.5 million, an increase of$3.6 million or 438% compared to $831.2 thousand in 2023 [202]. - Professional services expenses for the six months ended June 30, 2024, were$1.1 million, an increase of $952.6 thousand or 870$109.5 thousand in 2023 [203]. - Other general and administrative expenses for the six months ended June 30, 2024, were $2.3 million, an increase of$1.4 million or 157% compared to $884.5 thousand in 2023 [204]. - Interest expense for the six months ended June 30, 2024, was$1.0 million, a decrease of $327.5 thousand or 24$1.3 million in 2023 [206]. Working Capital and Cash Flow - Working capital increased to $26.0 million as of June 30, 2024, up from$4.5 million as of December 31, 2023, primarily due to increases in cash, accounts receivable, and inventory [209]. - Cash and cash equivalents reached $14.4 million as of June 30, 2024, compared to$2.4 million at December 31, 2023 [209]. - Net cash provided by financing activities was $15.1 million for the six months ended June 30, 2024, an increase of$12.4 million from $2.8 million in the same period of 2023 [222]. - Net cash used in operating activities was$939,534 for the six months ended June 30, 2024, a decrease from $2.4 million used in the same period of 2023 [220]. - Net cash used in investing activities was$2.2 million for the six months ended June 30, 2024, compared to $362.2 thousand for the same period in 2023 [221]. Market and Product Development - The non-chocolate confections market grew 13.8$10 billion, and is forecasted to grow at a CAGR of 5.8% from 2023 to 2030 [164]. - The company aims to expand its product line to increase growth opportunities and reduce product-specific risks through SKU diversification [178]. - The company has 17 SKUs in the Sow Good Candy line and 5 SKUs in the Sow Good Crunch Cream line, with products available in over 5,850 retail outlets as of June 30, 2024 [161]. Tax and Regulatory Matters - Federal income tax recognized for the three-month periods ended June 30, 2024, and 2023 was $257,918 and$0, respectively [185]. - The company maintains a full valuation allowance related to its net deferred tax assets due to its historical net loss position [207]. Risk Management - The Company does not expect significant effects from commodity price risk outside of inherent inflationary risks [230]. - The Company is not exposed to floating rates of interest and does not anticipate entering into transactions that would expose it to direct interest rate risk [231]. - As of June 30, 2024, the Company did not hold a material amount of cash in foreign jurisdictions but anticipates increased exposure to currency fluctuation risk as foreign operations grow [232].