Sow Good Inc.(US:SOWG)2025-08-14 12:07PART I. FINANCIAL INFORMATION Item 1. Financial Statements (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 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 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 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 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, 202566 - 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 raises6769 - 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, 202548 - 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 liabilities71109 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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 space159 - 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 East151155 - Operational challenges, such as extreme summer heat in 2024, have previously disrupted transportation, increased inventory levels, and negatively impacted revenue and market reputation163164 Results of Operations 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 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, 2024199 - 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 concern199 - 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 paper200 Item 3. Quantitative and Qualitative Disclosures About Market Risk 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 risk213214 - Foreign currency risk is expected to increase as the company's foreign operations in markets like Mexico, Colombia, and China grow215 Item 4. Controls and Procedures 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, 2025216 - No material changes to the company's internal control over financial reporting occurred during the six months ended June 30, 2025217 PART II. OTHER INFORMATION Item 1. Legal Proceedings 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 proceedings220 Item 1A. Risk Factors 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 months222 - 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, 2025223 - The company faces risks from potential significant tariffs, which could materially increase costs, reduce margins, and disrupt the sourcing of raw materials221 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None229 Item 5. Other Information 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 plans232 Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications and incorporated by reference documents