Business Operations and Growth - As of September 30, 2024, Sow Good has launched 21 SKUs in its freeze dried candy line and 3 SKUs in its Crunch Cream line, with sales primarily through wholesale and retail channels, accounting for less than 2% of sales from e-commerce[158] - The company has built a 20,945 square foot freeze drying facility in Irving, Texas, and plans to operationalize six additional freeze driers in a new 324,000 square foot facility in Dallas, Texas within the next nine months[159] - Sow Good's products are available in over 6,000 retail outlets across the U.S., including major retailers like Target and Five Below, with plans to increase shelf presence and SKU portfolio[162] - The freeze dried candy market is expected to experience exponential growth due to increasing consumer preferences for novel candy products, with approximately 61% of shoppers seeking new products[168] - The company has entered into co-manufacturing arrangements in China and Colombia to meet strong customer demand while ensuring production quality and safety standards[159] Financial Performance - Revenues for the three months ended September 30, 2024, were 1.5 million or 29% compared to 3.0 million, a decrease of 3.7 million in 2023, attributed to lower revenue and higher costs related to a new facility[183] - Gross profit for the three months ended September 30, 2024, was 779.3 thousand or 58% from 3.8 million, an increase of 997.6 thousand in 2023, driven by significant increases in salaries and benefits[186][192] - Net operating loss for the three months ended September 30, 2024, was 3.6 million or 1,065% compared to a net operating income of 30.6 million, an increase of 6.5 million in 2023, due to a pivot to freeze dried candy and increased capacity[195] - Cost of goods sold for the nine months ended September 30, 2024, was 9.7 million or 146% from 11.6 million, an increase of 2.8 million in 2023, driven by higher salaries, professional services, and other administrative costs[194] - Net income before tax provision for the nine months ended September 30, 2024, was 5.0 million compared to a net loss of 661.4 thousand, a positive change of 4.4 million during the same period in 2023[202] Cash Flow and Liquidity - Working capital increased to 4.5 million as of December 31, 2023, primarily due to increases in cash, accounts receivable, and inventory[205] - Cash and cash equivalents were 2.4 million at December 31, 2023[205] - Net cash used in operating activities was 3.3 million for the same period in 2023[215] - Net cash used in investing activities was 3.2 million from 15.1 million for the nine months ended September 30, 2024, compared to 12.0 million from a public offering[217] - The company priced a public offering of 1,200,000 shares at 12.0 million in proceeds[206] - The company plans to satisfy cash requirements for the next twelve months through cash on hand and additional financing as needed[205] Tax and Regulatory - Sow Good recognizes a federal income tax benefit of 0 for the same period in 2023[178] - The company recognized federal income tax of 0 in 2023[203] Operational Challenges - Seasonal fluctuations, particularly during summer months, have impacted shipments and revenue, with the company actively working to address these challenges[173] - Sow Good aims to optimize its liquidity position while scaling production, which requires significant working capital for inventory and capital expenditures for additional freeze driers[170] Lease and Facility Agreements - The company entered into a lease for approximately 324,000 rentable square feet with initial rent payments starting at 297,289.14 by the end of the lease term[220] - The Company entered into a lease agreement for approximately 51,264 rentable square feet in Dallas, TX, starting November 1, 2023, with base rent payments beginning at approximately 51.7 thousand per month in the last year of the Initial Term[222] - The lease agreement has an Initial Term of approximately five years and two months, with an option to extend for an additional five years at a fair market rent rate[222] Risk Management - The Company does not expect significant effects from commodity price risk outside of inherent inflationary risks[226] - 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[226] - As of September 30, 2024, the Company did not hold a material amount of cash in foreign jurisdictions but anticipates increased foreign operations may expose it to greater currency fluctuation risk[227]
Sow Good Inc.(SOWG) - 2024 Q3 - Quarterly Report