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 $3.6 million, a decrease of $1.5 million or 29% compared to $5.0 million for the same period in 2023, primarily due to delayed shipments caused by extreme heat[182] - Cost of goods sold for the three months ended September 30, 2024, was $3.0 million, a decrease of $700.8 thousand or 19% from $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 $556.0 thousand, down $779.3 thousand or 58% from $1.3 million in 2023, resulting in a gross profit margin of 16% compared to 27% in the prior year[184][185] - Total operating expenses for the three months ended September 30, 2024, were $3.8 million, an increase of $2.8 million or 282% from $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 $(3.3) million, a decrease of $3.6 million or 1,065% compared to a net operating income of $337.6 thousand in 2023[192] - Revenues for the nine months ended September 30, 2024, were $30.6 million, an increase of $24.1 million or 367% compared to $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 $16.4 million, an increase of $9.7 million or 146% from $6.7 million in 2023, with a gross profit margin of 46% compared to (2)% in the prior year[196] - Total general and administrative expenses for the nine months ended September 30, 2024, were $11.6 million, an increase of $8.8 million or 313% from $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 $661.4 thousand, a turnaround of $5.0 million compared to a net loss of $(4.4) million in 2023[194] - Pretax net income for the nine months ended September 30, 2024 was $661.4 thousand, a positive change of $5.0 million compared to a pretax net loss of $4.4 million during the same period in 2023[202] Cash Flow and Liquidity - Working capital increased to $19.7 million as of September 30, 2024, compared 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 $6.9 million as of September 30, 2024, up from $2.4 million at December 31, 2023[205] - Net cash used in operating activities was $6.1 million for the nine months ended September 30, 2024, compared to $3.3 million for the same period in 2023[215] - Net cash used in investing activities was $4.5 million for the nine months ended September 30, 2024, an increase of $3.2 million from $1.3 million in 2023, primarily for additional freezers[216] - Net cash provided by financing activities was $15.1 million for the nine months ended September 30, 2024, compared to $6.5 million in 2023, including $12.0 million from a public offering[217] - The company priced a public offering of 1,200,000 shares at $10.00 per share, netting approximately $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 $62.3 thousand for the three-month period ended September 30, 2024, compared to $0 for the same period in 2023[178] - The company recognized federal income tax of $195,603 for the nine months ended September 30, 2024, compared to $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 $122,175 per month, increasing to $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 $42.5 thousand per month in the first year, increasing to 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