SOW GOOD INC. Cautionary Statements
We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect our company and to take advantage of the "safe harbor" protection for forward-looking statements that applicable federal securities law affords.
From time to time, our management or persons acting on our behalf may make forward-looking statements to inform existing and potential security holders about our company. All statements other than statements of historical facts included in this report regarding our financial position, business strategy, plans and objectives of management for future operations and industry conditions are forward-looking statements. When used in this report, forward-looking statements are generally accompanied by terms or phrases such as "estimate," "project," "predict," "believe," "expect," "anticipate," "target," "plan," "intend," "seek," "goal," "will," "should," "may" or other words and similar expressions that convey the uncertainty of future events or outcomes. Items making assumptions regarding actual or potential future sales, market size, collaborations, trends or operating results also constitute such forward-looking statements.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements include the following:
· volatility or decline of our stock price;
· low trading volume and illiquidity of our common stock;
· potential fluctuation in quarterly results;
· inability to maintain adequate liquidity to meet our financial obligations;
· failure to obtain sufficient sales and distributions for our freeze dried
product offerings;
· supply chain disruption and delay;
· transportation, labor, and raw material cost increases;
· litigation, disputes and legal claims involving outside parties; and
· risks related to our ability to be traded on the OTCQB and meeting trading
requirements
We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made.
Readers are urged not to place undue reliance on these forward-looking
statements. We assume no obligation to update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of this
report, other than as may be required by applicable law or regulation. Readers
are urged to carefully review and consider the various disclosures made by us in
our reports filed with the
26 Overview and Outlook
We continue to sell our products online via our direct-to-consumer channels, in addition to our growing pipeline of business-to-business customers. In March of 2021, we completed the construction of our first freeze drier and, in anticipation of the increased production demands for our products and freeze-drying expertise, we are in the development process of our second and third freeze driers.
During the third quarter of 2022, we saw a significant increase in demand for our products from large business-to-business customers. We expect our growing pipeline of business-to-business customers to drive sales growth in the coming quarters. We also continued the expansion of our 'Sustain Us' brand, which offers a line of granolas, snacks, and soups that are marketed toward outdoor adventure activities, everyday snacking and meal prep needs, and long-term food storage.
During 2021, we completed the build-out of our production facility and launched
our direct-to-consumer freeze dried consumer packaged goods (CPG) food brand,
under our Sow Good brand.
With the extensive freeze dried manufacturing and business development experience of our senior management team, we are confident that we are well positioned to lead the Company's growth and development in the freeze dried food industry.
Going Concern Uncertainty
As of
The Company has incurred recurring losses from operations resulting in an accumulated deficit, experienced net negative cash flows from operations, and, as set forth above, the Company's cash on hand may not be sufficient to sustain operations. We continue to pursue sources of additional capital through various financing transactions or arrangements, including equity financing or other means. We may not be successful in identifying suitable financing transactions in a sufficient time period or at all, and we may not obtain the capital we require by other means. If we do not succeed in raising additional capital, our resources may not be sufficient to fund our business. Our ability to scale production and distribution capabilities and further increase the value of our brands, is largely dependent on our success in raising additional capital.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. The unaudited financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
27
Results of Operations for the Three Months Ended
The following table summarizes selected items from the statement of operations
for the three months ended
Three Months Ended
September 30, Increase /
2022 2021 (Decrease)
Revenues $ 87,741 $ 21,137 $ 66,604
Cost of goods sold 65,195 19,396 45,799
Gross Profit 22,546 1,741 20,805
Operating expenses:
General and administrative expenses:
Salaries and benefits 788,450 936,783 (148,333 )
Professional services 61,209 108,186 (46,977 )
Other general and administrative expenses 403,429 472,369 (68,940 )
Total general and administrative expenses 1,253,088 1,517,338 (264,250 )
Depreciation and amortization 69,127 64,863 4,264
Total operating expenses 1,322,215 1,582,201 (259,986 )
Net operating loss (1,299,669 ) (1,580,460 ) (280,791 )
Other income (expense)
Interest expense (383,995 ) (1,697 ) 382,298
Gain on disposal of property and equipment 36,392 - 36,392
Total other income (expense) (347,603 ) (1,697 ) 345,906
Net loss $ (1,647,272 ) $ (1,582,157 ) $ 65,115
Revenues
Revenues consist primarily of online freeze dried foods product sales. The
revenues were
28 Cost of Goods Sold
Cost of goods sold for the three months ended
General and administrative expenses
Salaries and benefits
Salaries and benefits for the three months ended
Professional services
Professional services were
Other general and administrative expenses
Other general and administrative expenses for the three months ended
Depreciation
Depreciation expense for the three months ended
Other income (expense)
In the three months ended
Net loss
Net loss for the three months ended
29
Results of Operations for the Nine Months Ended
The following table summarizes selected items from the statement of operations
for the nine months ended
Nine Months Ended
September 30, Increase /
2022 2021 (Decrease)
Revenues $ 381,056 $ 28,213 $ 352,843
Cost of goods sold 263,289 24,295 238,994
Gross Profit 117,767 3,918 113,849
Operating expenses:
General and administrative expenses:
Salaries and benefits 2,947,505 2,610,884 336,621
Professional services 177,197 270,779 (93,582 )
Other general and administrative expenses 1,296,294 1,183,453 112,841
Total general and administrative expenses 4,420,996 4,065,116 355,880
Depreciation and amortization 202,046 129,915 72,131
Total operating expenses 4,623,042 4,195,031 428,011
Net operating loss (4,505,275 ) (4,191,113 ) 314,162
Other income (expense)
Interest expense (843,240 ) (4,431 ) 838,809
Gain on disposal of property and equipment 36,392 - 36,392
Gain on early extinguishment of debt - 113,772 (113,772 )
Gain on investment in Allied Esports
Entertainment, Inc. securities - 133,944 (133,944 )
Total other income (expense) (806,848 ) 244,982 (1,050,133 )
Net loss $ (5,312,123 ) $ (3,947,828 ) $ 1,364,295
30
Revenues
Revenues consist primarily of online freeze dried foods product sales. The
revenues were
Cost of Goods Sold
Cost of goods sold for the nine months ended
General and administrative expenses
Salaries and benefits
Salaries and benefits for the nine months ended
Professional services
Professional services were
Other general and administrative expenses
Other general and administrative expenses for the nine months ended
Depreciation
Depreciation expense for the nine months ended
31 Other income (expense)
In the nine months ended
Net loss
Net loss for the nine months ended
Liquidity and Capital Resources
The following table summarizes our total current assets, liabilities and working
capital at
September 30, December 31,
2022 2021
Current Assets $ 3,619,620 $ 4,891,264
Current Liabilities $ 741,348 $ 403,057
Working Capital $ 2,878,272 $ 4,488,207 As of
The following table summarizes our cash flows during the nine months ended
Nine Months Ended
September 30,
2022 2021
Net cash used in operating activities
Net change in cash and cash equivalents
32
Net cash used in operating activities was
Net cash used in investing activities were
Net cash provided by financing activities were
Satisfaction of our cash obligations for the next 12 months
As of
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of financial conditions and results of
operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in
Our critical accounting policies are more fully described in Note 2 of the
footnotes to our financial statements appearing elsewhere in this Form 10-Q, and
Note 2 of the footnotes to the financial statements provided in our Annual
Report on Form 10-K for the fiscal year ended
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