Sow Good Inc.(US:SOWG)2025-05-14 12:55PART I. FINANCIAL INFORMATION Financial Statements (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 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 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 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) 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 operational29 - 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 markets6061 - 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 20254748 - 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 2030126 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 outlets128 - 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 revenue135 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 competitors150 - 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 2024162 Quantitative and Qualitative Disclosures About Market Risk 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 risk176177 - Foreign currency risk is expected to increase with the growth of international operations, particularly in Mexico, Colombia, and China178 Controls and Procedures 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, 2025179 - No material changes were made to the company's internal control over financial reporting during the first quarter of 2025180 PART II. OTHER INFORMATION Legal Proceedings 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 financials183 Risk Factors 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 business184 - 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, 2025185 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - None187 Other Information 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 plans190 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and various corporate and financial agreements