Sow Good Inc.(US:SOWG)2025-11-14 13:17Financial Performance - Revenues for the three months ended September 30, 2025, were $1.6 million, a decrease of $2.0 million or 56% compared to $3.6 million for the same period in 2024, primarily due to reduced demand from increased competitive pressure [172]. - Cost of goods sold for the same period increased to $10.5 million, an increase of $7.5 million or 250% compared to $3.0 million in 2024, driven by inventory reserve charges [173]. - Gross profit for the three months ended September 30, 2025, was $(8.9) million, a decrease of $(9.5) million or 1709% from a gross profit of $0.6 million in 2024, attributed to lower revenues and higher costs [174]. - The gross margin loss was (576%) for the three months ended September 30, 2025, compared to a gross margin profit of 16% for the same period in 2024, reflecting lower sales and increased costs [175]. - Revenues for the nine months ended September 30, 2025, were $5.9 million, a decrease of $24.7 million or (81%) compared to $30.6 million for the same period in 2024, driven by reduced demand due to increased competition [187]. - Gross loss for the nine months ended September 30, 2025, was $(8.9) million, a decrease of $22.2 million or (156%) compared to a gross profit of $14.2 million for the same period in 2024 [189]. - The gross profit margin for the nine months ended September 30, 2025, was (135.5)%, a significant decrease from 46.37% for the same period in 2024, due to decreased sales and increased overhead costs [190]. - The net loss before tax provision for the nine months ended September 30, 2025, was $(17.7) million, a decrease of $18.4 million or (2775%) compared to a net income of $0.7 million for the same period in 2024 [199]. Operating Expenses - Operating expenses for the nine months ended September 30, 2025, totaled $11.1 million, a decrease of $502.5 thousand or (4%) compared to $11.6 million for the same period in 2024 [186]. - Salaries and benefits for the nine months ended September 30, 2025, were $5.7 million, a decrease of $648.9 thousand or (10%) compared to $6.4 million for the same period in 2024 [191]. - Professional services expenses for the nine months ended September 30, 2025, were $548.1 thousand, a decrease of $834.3 thousand or (60%) compared to $1.4 million for the same period in 2024 [193]. - The company recognized impairment charges of $24.7 thousand during the nine months ended September 30, 2025, related to the derecognition of the Rock Quarry lease [196]. Capital and Financing - As of September 30, 2025, the company had working capital of $9.1 million, a decrease from $17.7 million as of December 31, 2024, primarily due to a decrease in cash and inventory [203]. - The company expects to incur significant capital expenditures related to the development of its freeze-dried candy business and may require additional financing, raising concerns about its ability to continue as a going concern [202]. - The Company restructured its current debt by issuing Convertible Notes totaling $2.8 million, maturing on April 30, 2030, with interest rates between 6% and 8% [204]. - Net cash used in operating activities decreased to $3.3 million for the nine months ended September 30, 2025, from $6.1 million in the same period of 2024, primarily due to reduced inventory spending and lower accounts receivable [206]. - Net cash used in investing activities was $1.1 thousand for the nine months ended September 30, 2025, a significant decrease of $4.5 million compared to $4.5 million in 2024, which was mainly for building additional freezers and office improvements [207]. - The Company reported no net cash provided by financing activities for the nine months ended September 30, 2025, compared to $15.1 million in 2024, which included $12.0 million from a public offering and $3.7 million from private placements [208]. Facilities and Operations - The company has built a 20,945 square foot freeze drying facility in Irving, Texas, capable of producing up to 24 million units of freeze dried candy per year [151]. - As of September 30, 2025, the company has fifteen stock keeping units (SKUs) in its Sow Good Candy line, with products available in approximately 5,000 retail outlets across the U.S. [150]. - The company aims to expand its market presence by increasing its SKU portfolio and distribution channels, including two Middle East distributors [154]. - The company plans to diversify its product line to include freeze dried snacks beyond candy, such as yogurt snacks and jerky, to reduce product-specific risks [159]. - The Company has a real property lease for a 20,945 square foot facility at a monthly rate of $10.0 thousand, with a lease term extending through September 15, 2025 [209]. - An additional warehouse lease of approximately 9,000 square feet was entered into on July 1, 2023, at a rate of $8,456 per month, with a 4% annual escalation [210]. - The Company entered into a 62-month industrial lease for approximately 324,000 square feet, starting at $122,175 per month, with payments increasing to $297,289.14 by the end of the lease [211]. - A new lease agreement for approximately 51,264 square feet was established on October 26, 2023, starting at approximately $42.5 thousand per month, increasing to $51.7 thousand by the last year of the term [212]. Risk Management - The Company does not expect significant effects from commodity price risk outside of inherent inflationary risks [216]. - The Company does not anticipate entering into transactions that would expose it to direct interest rate risk [217].