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What changed in Sow Good Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Sow Good Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+339 added−447 removedSource: 10-K (2025-03-27) vs 10-K (2024-03-22)

Top changes in Sow Good Inc.'s 2024 10-K

339 paragraphs added · 447 removed · 241 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

78 edited+17 added−42 removed60 unchanged
Biggest changeWe believe the expansion of our product offerings will help drive revenue and margin growth through (i) improving brand recognition, (ii) expanding existing customer relationships, and (iii) capturing new customers seeking unique products. In addition, as our product offering portfolio grows, we anticipate manufacturing efficiencies that provide for increased margin expansion and profitability.
Biggest changeWe seek to achieve this by developing new candy products that complement our existing portfolio as well as the expansion into adjacent product categories like yogurt snacks and jerky. We believe the expansion of our product offerings will help drive revenue through (i) improving brand recognition, (ii) expanding existing customer relationships, and (iii) capturing new customers seeking unique products.
We also have highly communicative retail relationships in which retailers inform us of new candy trends they detect in their stores, informing our next freeze dried candy development and launches. We utilize a test kitchen that is integrated with our in-house manufacturing capability and expertise to swiftly test, develop, and launch new products without sacrificing quality.
We also have highly communicative retail relationships in which retailers inform us of new candy trends they detect in their stores, informing our next freeze dried snack development and launches. We utilize a test kitchen that is integrated with our in-house manufacturing capability and expertise to swiftly test, develop, and launch new products without sacrificing quality.
We believe that our holistic, collaborative and strategic sales approach positions us as a dynamic and agile player, well-prepared to navigate the ever-growing freeze dried candy market. Marketing We believe that Sow Good’s existing treats represent a multi-billion-dollar TAM; however, we have not commissioned a formal market study to properly quantify this expectation.
We believe that our holistic, collaborative and strategic sales approach positions us as a dynamic and agile player, well-prepared to navigate the ever-growing freeze dried candy market. Marketing We believe that Sow Good’s existing treats could represent a multi-billion-dollar TAM; however, we have not commissioned a formal market study to properly quantify this expectation.
Our operations, and those of our co-manufacturers and suppliers, are also subject to various laws and regulations relating to environmental protection and worker health and safety matters. Although we have implemented policies and procedures designed to comply with existing laws and regulations, we operate in a highly regulated environment with constantly evolving legal and regulatory frameworks.
Our operations, and those of our suppliers and any potential co-manufacturers, are also subject to various laws and regulations relating to environmental protection and worker health and safety matters. Although we have implemented policies and procedures designed to comply with existing laws and regulations, we operate in a highly regulated environment with constantly evolving legal and regulatory frameworks.
Being a lean team allows us to be dynamic, nimble, and respond in real-time to customer needs. We have repeatedly surpassed initial sales projections across multiple retail launches, requiring consistent communication with buyers to fine-tune forecasts and ensure accuracy and efficiency in our inventory management processes.
Being a lean team allows us to be dynamic, nimble, and respond in real-time to customer needs. Historically, we have surpassed initial sales projections across multiple retail launches, requiring consistent communication with buyers to fine-tune forecasts and ensure accuracy and efficiency in our inventory management processes.
We plan to also attempt to leverage our new and existing wholesale relationships to gain additional shelf space for our full suite of existing products. 7 Table of Contents Digital Marketing and Social Media We currently manage all of our marketing activities in-house and do not rely on agencies or third parties for such activities.
We plan to also attempt to leverage our new and existing wholesale relationships to gain additional shelf space for our full suite of existing products. 5 Table of Contents Digital Marketing and Social Media We currently manage all of our marketing activities in-house and do not rely on agencies or third parties for such activities.
Accordingly, our products are marketed and sold uniformly under the registered trademark “Sow Good.” We expect to continue to invest in our trademark portfolio as we introduce new products and seek to build and protect our brand. As of December 31, 2023, we owned two U.S. trademark registrations and had six pending U.S. trademark applications.
Accordingly, our products are marketed and sold uniformly under the registered trademark “Sow Good.” We expect to continue to invest in our trademark portfolio as we introduce new products and seek to build and protect our brand. As of December 31, 2024, we owned two U.S. trademark registrations and had six pending U.S. trademark applications.
We have overcome these hurdles and achieved scale manufacturing of freeze dried treats by utilizing proprietary technology to custom build three large-scale freeze driers and by developing manufacturing processes that are tailored specifically for each of our products to ensure maximum flavor, crunch, and consistency.
We have overcome these hurdles and achieved scale manufacturing of freeze dried treats by utilizing proprietary technology to custom build six large-scale freeze driers and by developing manufacturing processes that are tailored specifically for each of our products to ensure maximum flavor, crunch, and consistency.
We believe this allows us to introduce innovative freeze dried treats to the market that will further elevate the status of the Sow Good brand, entrench our existing customer relationships, and provide advantaged entry into new ones.
We believe this allows us to introduce innovative freeze dried snacks to the market that will further elevate the status of the Sow Good brand, entrench our existing customer relationships, and provide advantaged entry into new ones.
Further, we have two registered domain names, www.thisissowgood.com and www.sowginc.com . The information contained on or accessed through our websites does not constitute part of this report. 9 Table of Contents We also rely on unpatented proprietary expertise, recipes, and formulations, as well as other trade secrets and copyright protection, to maintain and improve our competitive position.
Further, we have two registered domain names, www.thisissowgood.com and www.sowginc.com . The information contained on or accessed through our websites does not constitute part of this report. We also rely on unpatented proprietary expertise, recipes, and formulations, as well as other trade secrets and copyright protection, to maintain and improve our competitive position.
Sow Good has harnessed the power of our proprietary freeze drying technology and product-specialized manufacturing facility to transform traditional candy into a novel and exciting everyday confectionaries subcategory that we call freeze dried candy.
Sow Good has harnessed the power of our proprietary freeze drying technology and product-specialized manufacturing facility to transform traditional candy into a novel and exciting everyday confectioneries subcategory that we call freeze dried candy.
The price and availability of these raw materials can vary based on a number of factors beyond our control, including consumer demand, production constraints, adverse weather conditions, changes in supplier relationships, natural disasters, and public sentiment, among others. Certain raw materials used for individual SKUs are currently sourced from one supplier.
The price and availability of these raw materials can vary based on a number of factors beyond our control, including consumer demand, production 3 Table of Contents constraints, adverse weather conditions, changes in supplier relationships, natural disasters, and public sentiment, among others. Certain raw materials used for individual SKUs are currently sourced from one supplier.
Sow Good is seeking to build significant brand recognition, as well as develop a trust and understanding with consumers that our products will consistently offer explosive and exciting taste.
Our Growth Strategy Sow Good is seeking to build significant brand recognition, as well as develop a trust and understanding with consumers that our products will consistently offer explosive and exciting taste.
While expanding distribution, we are simultaneously increasing our brand awareness through online and offline marketing initiatives to accelerate the sell-through velocity of our products once they reach the shelves of our customers. 3 Table of Contents Expand Our Product Offering: We are working to increase the breadth of products offered to customers by leveraging our innovation expertise.
While expanding distribution, we are simultaneously increasing our brand awareness through online and offline marketing initiatives to accelerate the sell-through velocity of our products once they reach the shelves of our customers. Expand Our Product Offering: We are working to increase the breadth of products offered to customers by leveraging our innovation expertise.
Under FSMA, our Irving, Texas facility and co-manufacturers’ facilities are required to have an FSP, a hazard analysis critical control plant plan, or a hazard analysis critical control points plan that identifies critical pathways for contaminants and mandates control measures that must be used to prevent, eliminate, or reduce relevant food-borne hazards.
Under FSMA, our Irving, Texas facility are required to have an FSP, a hazard analysis critical control plant plan, or a hazard analysis critical control points plan that identifies critical pathways for contaminants and mandates control measures that must be used to prevent, eliminate, or reduce relevant food-borne hazards.
We, our co-manufacturers, and our suppliers are subject to extensive laws and regulations in the United States by federal, state, and local government authorities, or by federal, state, and local government authorities in other jurisdictions where they are located.
We and our suppliers are subject to extensive laws and regulations in the United States by federal, state, and local government authorities, or by federal, state, and local government authorities in other jurisdictions where they are located.
All facilities manufacturing our products are certified against a standard recognized by either the Safe Quality Food Institute or British Retail Consortium. These standards are integrated food safety and quality management protocols designed specifically for the food sector and offer a comprehensive methodology to manage food safety and quality.
All facilities that manufacture our products are certified against a standard recognized by either the Safe Quality Food Institute or British Retail Consortium. These standards are integrated food safety and quality management protocols designed specifically for the food sector and offer a comprehensive methodology to manage food safety and quality.
Earning and maintaining the trust of our customers, consumers, supply chain partners, employees, and securityholders is critical to the success and growth of our business, and we take significant measures to protect the privacy and security of their personal data and to comply with applicable laws.
Earning and maintaining the trust of our customers, consumers, supply chain partners, employees, and securityholders is critical to the success and growth of our business, and we take significant measures to protect the privacy and security of their personal data and 7 Table of Contents to comply with applicable laws.
In addition to our principal executive office and food manufacturing facility, we lease approximately 51,264 square feet and 9,900 square feet at two separate warehouse facilities located in Irving, Texas, which we use to receive, store, package, and distribute our products, as well as for office and administrative purposes.
In addition to our principal executive office and food manufacturing facility, we lease approximately 51,264 square feet and 9,900 square feet at two separate warehouse facilities located in Irving, Texas, and 324,000 rentable square feet in Dallas, Texas which we use to receive, store, package, and distribute our products, as well as for office and administrative purposes.
We use the power of freeze dried technology to transform familiar, traditional gummy, chewy, and hard candies into unique, novel, crunchy treats that are bursting with flavor for our consumers.
We use the power of freeze dried technology to transform familiar, traditional gummy, chewy, and hard candies into unique, novel, crunchy treats that are bursting with flavor.
ITEM 1. BUSINESS Overview Sow Good is a trailblazing U.S.-based freeze dried candy and snack manufacturer dedicated to providing consumers with innovative and explosively flavorful freeze dried treats.
ITEM 1. BU SINESS Overview Sow Good is a trailblazing U.S.-based freeze dried candy and snack manufacturer dedicated to providing consumers with innovative and explosively flavorful freeze dried treats.
We believe the technical knowledge and expertise required to build a freeze drier facility matching our current capacity poses a substantial barrier to entry for competitors in the confectionary space.
We believe the technical knowledge and expertise required to build a freeze drier facility matching our current capacity poses a substantial barrier to entry for competitors in the freeze dried snack space.
Electronic filings with the SEC are also available on the SEC internet website at www.sec.gov. 12 Table of Contents
Electronic filings with the SEC are also available on the SEC internet website at www.sec.gov. 10 Table of Contents
In addition, we take appropriate steps to help ensure that appropriate security measures are maintained by the third-party vendors we use, including by conducting security reviews. 10 Table of Contents Government Regulation The food industry is highly regulated.
In addition, we take appropriate steps to help ensure that appropriate security measures are maintained by the third-party vendors we use, including by conducting security reviews. Government Regulation The food industry is highly regulated.
In order to comply with Foreign Supplier Verification Program we have a qualified individual who has successfully completed training in the development and application of a program that verifies that the products we import have been produced in a manner that meets applicable U.S. safety standards. See “- Government Regulation ” below.
In order to comply with Foreign Supplier Verification Program we have a qualified individual who has successfully completed training in the development and application of a program that verifies that the products we import have been produced in a manner that meets applicable U.S. safety standards.
We are also in the process of leveraging our NetSuite Warehouse Management System to scale our distribution functions, increase efficiencies, and decrease human error.
We are also in the process of leveraging our NetSuite Warehouse Management System to scale our distribution functions, increase efficiencies, and minimize the effects of human error.
Sow Good Candy - Freeze Dried Candy In the first quarter of 2023, we launched a freeze dried candy product line, which is our largest seller and has a fourteen SKU offering as of December 31, 2023.
Sow Good Candy - Freeze Dried Candy In the first quarter of 2023, we launched a freeze dried candy product line, which is our largest seller and has a twenty-one SKU offering as of December 31, 2024.
Sales and Marketing Sales Our internal sales team is led by our Director of Sales and Branding who manages major retail accounts and a robust, close-knit network of brokers and distributors to strategically service our customers nationwide and internationally.
Sales and Marketing Sales Our internal sales team is led by our Director of Sales and Branding alongside our sales team to manage major retail accounts and a robust, close-knit network of brokers and distributors to strategically service our customers nationwide and internationally.
Our processing facilities, including those of our co-manufacturers, are subject to periodic inspection by foreign, federal, state, and local authorities. For example, our Irving, Texas facility is subject to periodic inspections by the FDA and Occupational Safety and Health Administration to evaluate compliance with certain applicable requirements.
Our processing facilities are subject to periodic inspection by foreign, federal, state, and local authorities. For example, our Irving, Texas facility is subject to periodic inspections by the FDA and Occupational Safety and Health Administration to evaluate compliance with certain applicable requirements.
Motivated by our mission, success, and consumers’ feedback, we continue to innovate and expand our product offerings to address growing demand for freeze dried products that appeal to consumers.
Motivated by our mission, success, and consumers’ feedback, we continue to innovate and expand our product offerings to address growing demand for freeze dried products that appeal to consumers, such as yogurt snacks.
Consequently, we are subject to heightened risk of legal claims, government investigations, or other regulatory enforcement actions. 11 Table of Contents Legal Proceedings From time to time, we may be involved in various disputes and litigation matters that arise in the ordinary course of business. We are not currently engaged in any material legal proceedings.
Consequently, we are subject to heightened risk of legal claims, government investigations, or other regulatory enforcement actions. Legal Proceedings From time to time, we may be involved in various disputes and litigation matters that arise in the ordinary course of business. We are not currently engaged in any material legal proceedings. 9 Table of Contents Corporate Information Sow Good Inc.
Our specialized team also affords us the advantage of understanding every facet of our operations: our sales, executive, and production teams work closely with one another to understand our customers’ needs, adjust our strategies with precision, and actively increase our production capabilities to meet growing demand.
Our specialized team also affords us the advantage of understanding every facet of our operations: our sales, executive, and production teams work closely with one another to understand our customers’ needs and adjust our strategies with precision.
We sell our treats using an omnichannel strategy primarily focused on the wholesale and retail channels with less than 2% of sales coming from e-commerce as of December 31, 2023. As of December 31, 2023, our treats are offered for sale in over 5,850 brick-and-mortar retail outlets in the United States.
We sell our treats using an omnichannel strategy primarily focused on the wholesale and retail channels with less than 2% of sales coming from e-commerce as of December 31, 2024. As of December 31, 2024, our treats are offered for sale in approximately 3,000 brick-and-mortar retail outlets in the United States.
Moreover, our primary manufacturing facility located in Irving, Texas is a Safe Quality Food (“SQF”) II-certified facility, with a 97 score on our most recent food safety audit, which exemplifies our commitment to maintaining the highest standards in food safety, pathogen prevention, and allergen protocols.
Moreover, our primary manufacturing facility located in Irving, Texas is a Safe Quality Food (“SQF”) II-certified facility, with a 97 score on our most recent food safety audit, which exemplifies our commitment to maintaining the highest standards in food safety, pathogen prevention, and allergen protocols. Innovative Product-Development Process Innovation is at the heart of our company.
Leveraging our retailers’ well-funded marketing campaigns, we engage their community influencers to encourage their followers to purchase our products in the retailer, particularly to bolster new launches and product restock announcements. However, the vast majority of content across social media featuring our products is generated organically by consumers.
Leveraging our retailers’ well-funded marketing campaigns, we engage their community influencers to encourage their followers to purchase our products in the retailer, particularly to bolster new launches and product restock announcements. However, the vast majority of content across social media featuring our products is generated organically by consumers. Website . We also maintain a registered domain website at www.thisissowgood.com .
We believe the company could find suitable replacements for such suppliers at similar terms if necessary. To hedge against price volatility and supply disruptions, we are actively expanding and diversifying our supplier network to reduce reliance on any one supplier or raw material.
We believe the company could find suitable replacements for such suppliers at similar terms if necessary. To hedge against price volatility and supply disruptions, we are expanding and diversifying our supplier network to reduce reliance on any one supplier or raw material. Our Manufacturing and Packaging Process We manufacture our products at our facility in Irving, Texas.
As such, we tightly monitor the water activity of the products, invest heavily in dehumidifying machinery, and perform regular “Sow Good Sensory Tests” to verify that, while the product may visually appear satisfactory, it undergoes a human taste test to guarantee that the product meets our sensory standards of being “hyper dried, hyper crunchy, and hyper flavorful.” 5 Table of Contents Our hand-packed precision packaging process entails meticulous, carefully human-handled packaging of each freeze dried treat.
As such, we tightly monitor the water activity of the products, invest heavily in dehumidifying machinery, and perform regular “Sow Good Sensory Tests” to verify that, while the product may visually appear satisfactory, it undergoes a human taste test to guarantee that the product meets our sensory standards of being “hyper dried, hyper crunchy, and hyper flavorful.” Our packaging process entails human-handled packaging of each freeze dried treat, supplemented with automated packing machines to increase efficiency.
Within the freeze dried candy category, we believe our primary direct competitors are smaller or local companies that have significantly lower production capacity, distribution and/or branding, and includes such firms such as Crazy Candy and Trendy Treats, as well as others.
Within the freeze dried candy category, we believe our primary direct competitors are both larger companies, like Mars, Inc. or the Hershey Company, and smaller or local companies that have significantly lower production capacity, distribution and/or branding, and includes such firms such as Crazy Candy and Trendy Treats.
In addition, each facility has at least one preventive controls-qualified individual who has successfully completed training and received certification in the development and application of risk-based preventive controls, at least equivalent to that received under a standardized curriculum recognized by the USDA and FDA. Each of our co-manufacturers’ facilities complies with the Global Food Safety Initiative.
In addition, each facility has at least one preventive controls-qualified individual who has successfully completed training and received certification in the development and application of risk-based preventive controls, at least equivalent to that received under a standardized curriculum recognized by the USDA and FDA.
Our commitment to providing the most flavorful and crunchy treats extends into the product packaging process, where our 194 employees dedicated to hand-packaging as of December 31, 2023 put our treats through our hand-packed precision packaging process in vigilantly managed low humidity conditions to protect our treats from reintroduction to moisture.
Our commitment to providing the most flavorful and crunchy treats extends into the product packaging process, where our employees are dedicated to hand-packaging our treats through our precision packaging process in vigilantly managed low humidity conditions to protect our treats from reintroduction to moisture.
Deepen Existing Customer Relationships: Our products have launched in retailers nationwide from convenience and grocery stores to big-box retailers, such as Five Below, Target, Misfits Market/Imperfect Foods, TJX Canada, Big Lots, Hy-Vee, Cracker Barrel, and Circle K. In addition, we sell a substantial portion of our products through distributors such as Redstone Foods, CB Distributors and Alpine Foods.
Deepen Existing Customer Relationships: Our products have launched in retailers nationwide from convenience and grocery stores to big-box retailers, Five Below, Misfits Market/Imperfect Foods, TJX Canada, Hy-Vee, Cracker Barrel, 7/11, H-E-B, Kroger and Albertsons. In addition, we sell a substantial portion of our products through distributors such as Redstone Foods, CB Distributors and Lipari Foods.
We began commercializing our freeze dried candy products in the first quarter of 2023, and as of December 31, 2023, we have fourteen stock keeping units (“SKUs”) in our Sow Good Candy line of treats and four SKUs in our Sow Good Crunch Cream line.
We began commercializing our freeze dried candy products in the first quarter of 2023, and as of December 31, 2024, we have twenty-one stock keeping units (“SKUs”) in our Sow Good Candy line of treats and three SKUs in our Sow Good Crunch Cream line, which consists of freeze dried ice cream bars and sandwiches.
We believe this strategy will capture the attention of new consumers, further educate and attract current consumers, and ultimately, increase sales for our retailers.
We believe this strategy will capture the attention of new consumers, further educate and attract current consumers, and ultimately, increase sales for our retailers. Our omnichannel distribution strategy has three key components: retailers, e-commerce, and distributors.
To this end, we leased a total of approximately 62,000 additional square feet of warehouse and distribution space in Irving, Texas in October 2023 to enable us to better handle this heightened volume and optimize our shipping and logistics operations.
To this end, we leased a total of approximately 324,000 additional square feet of manufacturing and industrial space in Dallas, Texas in May 2024 to enable us to better handle this heightened volume and optimize our shipping and logistics operations.
Our Competitive Strengths We believe we are well-positioned competitively to become the leader in the rapidly developing freeze dried candy market due to our distinctive branding, manufacturing expertise, advantage of being an early mover in the category and ability to innovate.
Our Competitive Strengths 1 Table of Contents We believe we are well-positioned competitively to become the leader in the developing freeze dried candy market and adjacent freeze dried snack categories due to our distinctive branding, manufacturing expertise and ability to innovate.
Our freeze drying process hyper concentrates the candy flavor, adds a crunchy texture, and often increases the candy’s size, creating a sweet snacking experience that we believe can satisfy our customers’ sweet tooth in fewer bites. Our products have a wide range in flavor profiles-from sweet to sour to chocolate-y-shapes, and sizes to appeal to a wide range of customers.
Our freeze drying process hyper-concentrates the candy flavor, adds a crunchy texture, and often increases the candy’s size, creating a sweet snacking experience that we believe can satisfy our customers’ sweet tooth in fewer bites.
Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards. Office Locations We do not own any real property.
The principal purposes of our equity incentive plans are to attract, retain and motivate selected 6 Table of Contents employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards. Office Locations We do not own any real property.
Vertically Integrate Our Operations: A key part of driving our margin expansion is continuing to build our vertically integrated business model. The core of this strategy is our highly efficient manufacturing process, which enables rapid expansion of production capacity, provides fixed-cost leverage on increased volumes and optimizes our ability to control quality.
The core of this strategy is our highly efficient manufacturing process, which enables the expansion of production capacity, provides fixed-cost leverage on increased volumes and optimizes our ability to control quality.
Due to the high volume of orders we were experiencing there was a need to increase our warehousing and distribution footprint.
We initially distributed the majority of our products directly to our customers from our Irving, Texas facility. Due to the high volume of orders we were experiencing there was a need to increase our warehousing and distribution footprint.
Information contained on, or that can be accessed through, our websites are not incorporated by reference into this report, and you should not consider information on our websites to be part of this report. Available Information – Reports to Security Holders Our website addresses are www.thisissowgood.com and www.sowginc.com.
Union Bower Road, Irving, Texas 75061, and our telephone number is (214) 623-6055. Our website addresses are www.thisissowgood.com and www.sowginc.com . Information contained on, or that can be accessed through, our websites are not incorporated by reference into this report, and you should not consider information on our websites to be part of this report.
This process of removing moisture from the product, which can take up to twenty-four hours, concentrates its flavor, creating a “hyper dried, hyper crunchy, and hyper flavorful” snackable treat.
This process of removing moisture from the product, which can take up to twenty-four hours, concentrates its flavor, creating a “hyper dried, hyper crunchy, and hyper flavorful” snackable treat. Our freeze drying process and expertise allow us to easily expand our manufacturing into other freeze dried snacks, such as yogurt snacks.
We believe that the years we spent building and refining our machinery and facility, meticulous manufacturing and packaging processes, and stringent food safety and quality controls, have provided a foundational ramp that propels our rapid sales success and creates a meaningful barrier to entry. 6 Table of Contents Sales Channels and Product Distribution Our highly differentiated omnichannel distribution strategy has three key components: retailers, e-commerce, and distributors.
We believe that the years we spent building and refining our machinery and facility, meticulous manufacturing and packaging processes, and stringent food safety and quality controls, have provided a foundational ramp that propels our rapid sales success and creates a meaningful barrier to entry.
The diversity of our retail channel represents a strong competitive advantage for Sow Good and provides us with a larger TAM than would be considered normal for a food brand that is singularly focused on the grocery market. We initially distributed the majority of our products directly to our customers from our Irving, Texas facility.
We currently estimate our products are in approximately 3,000 retail locations across the United States. The diversity of our retail channel represents a strong competitive advantage for Sow Good and provides us with a larger TAM than would be considered normal for a food brand that is singularly focused on the grocery market.
We strive for nothing short of excellence because that is what our customers, employees, and environment deserve. We believe that our company culture has been and will continue to be a key contributor to the fulfillment of this commitment. Our culture enables us to foster the creativity, teamwork, focus, and innovation we need to support our growth.
We believe that our company culture has been and will continue to be a key contributor to the fulfillment of this commitment. Our culture enables us to foster the creativity, teamwork, focus, and innovation we need to support our growth. As of December 31, 2024, we had 86 full-time employees.
It is important to note that all co-manufacturers have entered into long-term and exclusive agreements with Sow Good. Our Irving, Texas facility consists of four freeze driers that we custom fabricated with technical programming tailored specifically to our products. For over three years we custom designed, fabricated and calibrated these freeze driers to meet our exact needs.
Our Irving, Texas facility consists of six freeze driers that we custom fabricated with technical programming tailored specifically to our products. For over four years we custom designed, fabricated and calibrated these freeze driers to meet our exact needs.
We are also subject to labor and employment laws, laws governing advertising, privacy laws, safety regulations, and other laws, including consumer protection regulations that regulate retailers or govern the promotion and sale of merchandise.
We are currently subject to international laws and regulations where we manufacture our products, and to the extent we commence selling and distributing our products internationally, we will become subject to additional laws and regulations. 8 Table of Contents We are also subject to labor and employment laws, laws governing advertising, privacy laws, safety regulations, and other laws, including consumer protection regulations that regulate retailers or govern the promotion and sale of merchandise.
We produce a unique portfolio of freeze dried treats under our Candy and Crunch Cream (freeze dried ice cream bars and sandwiches) product lines.
Our Products Our business operates under the Sow Good brand. Currently we produce a unique portfolio of freeze dried treats under our Candy and Crunch Cream product lines.
In addition to manufacturing capabilities, we have internalized mechanical engineering, branding, design, packaging, digital marketing, customer service and data analytic capabilities, along with finance, research and development and human resource functions.
In addition to manufacturing capabilities, we have internalized mechanical engineering, branding, design, packaging, digital marketing, customer service and data analytic capabilities, along with finance, research and development and human resource functions. Our broad in-house capabilities and manufacturing capacity are expected to enable significant fixed-cost leverage going forward in manufacturing, as well as most other operating expense line items.
Pack sizes range from 1 to 4 oz, depending on the density and size of the product. Sow Good Crunch Cream - Freeze Dried Ice Cream Building upon the success of the Sow Good Candy brand, we launched our highly anticipated Sow Good Crunch Cream line of freeze dried, shelf-stable, no-melt, crunchy ice cream in October 2023.
Sow Good Crunch Cream - Freeze Dried Ice Cream Building upon the success of the Sow Good Candy brand, we launched our highly anticipated Sow Good Crunch Cream line of freeze dried, shelf-stable, no-melt, crunchy ice cream in October 2023, and has a three SKU offering as of December 31, 2024.
New Customer Expansion: Based on our estimate of what penetration for a leading consumer packaged goods (“CPG”) brand should be at maturity, we believe Sow Good’s omnichannel distribution footprint should eventually be multiples of its current size.
We believe this strategy will capture the attention of new consumers, further educate and attract current consumers, and ultimately, increase sales for our retailers. 2 Table of Contents New Customer Expansion: Based on our estimate of what penetration for a leading CPG brand should be at maturity, we believe Sow Good’s omnichannel distribution footprint should eventually be multiples of its current size.
We believe these factors may potentially deter new competitive entrants into the market. 2 Table of Contents Innovative Product-Development Process Innovation is at the heart of our company. We are vigilantly monitoring emerging confectionary trends online and in retail and identifying niche markets, turning them into category staples as evidenced by our successful launch of our Crunch Cream line.
We are vigilantly monitoring emerging confectionary trends online and in retail and identifying niche markets, turning them into category staples as evidenced by our successful launch of our Crunch Cream line.
We plant our seeds by coming into work each day dedicated to creating delicious treats that enrich the lives of our customers, partners and employees. We believe that we are only as excellent as our employees, which is why we provide a living wage, an energizing working environment, full benefits, and stock options to every employee.
We believe that we are only as excellent as our employees, which is why we provide a living wage, an energizing working environment, full benefits, and stock options to every employee. We strive for nothing short of excellence because that is what our customers, employees, and environment deserve.
We and our co-manufacturers each have a food safety plan (“FSP”) that focuses on preventing food safety risks and is designed to be compliant with the requirements set forth under the Food Safety Modernization Act (“FSMA”).
Additionally, our production employees follow strict good manufacturing practices (“GMPs”) to ensure food safety and quality, including wearing hair nets, gloves, and coats, which are washed daily. We have a food safety plan (“FSP”) that focuses on preventing food safety risks and is designed to be compliant with the requirements set forth under the Food Safety Modernization Act (“FSMA”).
While we believe we compete favorably with respect to each of these factors, there is no guarantee that we will be able to compete effectively against our current or future competitors. 8 Table of Contents Culture, Employees and Human Capital Resources Sow Good firmly believes that we can all plant positive seeds to sow a better version of ourselves, our communities, and our world.
While we believe we can compete favorably with respect to each of these factors, there is no guarantee that we will be able to compete effectively against our current or future competitors, particularly those with greater financial and market resources.
As of December 31, 2023, we had 225 full-time employees, of which 56% are female and 82% are minorities. Currently, none of our employees are covered by collective bargaining agreements. To date, we have never experienced an organized work stoppage, strike or labor dispute.
Currently, none of our employees are covered by collective bargaining agreements. To date, we have never experienced an organized work stoppage, strike or labor dispute. Our human resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees.
For many of these customers, we launched with a limited number of SKUs and are now significantly outpacing initial sales projections. As we scale production, we will have the ability to increase the availability of our products to these customers in current locations and distribution to more of their stores, while also broadening our SKU portfolio offerings.
We believe there is a significant growth opportunity in increasing our shelf presence, SKU portfolio, and number of stores with our existing customers. We aim to have the ability to increase the availability of our products to these customers in current locations and distribution to more of their stores, while also broadening our SKU portfolio offerings.
This platform is already set up but with some items set as out of stock until we have additional production capacity. We believe that our trusted brand name, our proprietary freeze drying process and extensive distribution are critical long-term and sustainable barriers to entry in the food industry.
We believe that our trusted brand name, our proprietary freeze drying process and extensive distribution are critical long-term and sustainable barriers to entry in the food industry. We have six freeze driers operational in our Irving, Texas facility, and an additional six freeze driers that we can have operational by the end of 2025.
In addition to third-party inspections of our manufacturing partners, we have instituted audits to address topics including allergen control; ingredient, packaging and product specifications; and sanitation.
See “- Government Regulation ” below. 4 Table of Contents We have instituted audits to address topics including allergen control; ingredient, packaging and product specifications; and sanitation.
During our packaging process, to ensure maximum protection of our products’ flavor, texture, and overall integrity, our products are packaged in specially constructed humidity-controlled rooms. Reintroduction of moisture to the freeze dried product degrades the product’s crunch factor, which is the key characteristic of freeze dried treats.
If we identify one section of the freeze drier that is malfunctioning, we can deactivate that one section without shutting down the entire freeze drier. During our packaging process, to ensure maximum protection of our products’ flavor, texture, and overall integrity, our products are packaged in specially constructed humidity-controlled rooms.
We see our market opportunity as existing at the intersection of two burgeoning categories: freeze dried candy and non-chocolate confections.
Our Market Opportunity We believe the candy category is stagnant, repetitive, and in need of revitalization to reengage and captivate consumers seeking innovative ways to satisfy their sweet cravings. We see our market opportunity existing at the intersection of two categories: the burgeoning freeze dried candy category and the non-chocolate confections category.
Our growth strategy is based on six primary elements: (i) increasing production capacity; (ii) deepening existing customer relationships; (iii) new customer expansion; (iv) expanding our product offering; (v) driving margin expansion; and (vi) vertically integrating our operations. Increase Production Capacity: Merely by meeting the current level of demand for our treats, we anticipate our net sales increasing rapidly.
Our growth strategy is based on five primary elements: (i) deepening existing customer relationships; (ii) new customer expansion; (iii) expanding our product offering; and (iv) vertically integrating our operations.
We have built four bespoke freeze driers using proprietary technology tailored specifically to our products, creating a truly state-of-the-art facility in Irving, Texas. We are in the process of fabricating and operationalizing two additional freeze driers, which we anticipate will come online in our Irving, Texas facility in the third quarter of 2024.
We have built six bespoke freeze driers using proprietary technology tailored specifically to our products which allows us to freeze dry up to 24 million units of freeze dried candy per year, creating a truly state-of-the-art facility in Irving, Texas. We have six additional freeze driers, which we can have operational by the end of 2025, as needed.
We further support our brand efforts through our informative and user-friendly direct-to-consumer website and growing social media presence, where consumers have notably taken to posting unpaid, authentic reviews. Video reviews of Sow Good’s products that are organically generated by TikTok users have amassed over 4.5 million views as of December 31, 2023.
We further support our brand efforts through our informative and user-friendly direct-to-consumer website and growing social media presence, where consumers have notably taken to posting unpaid, authentic reviews. Our strong brand presentation has been instrumental in securing coveted shelf space upon our launch of our freeze dried snacks.
Sow Good is led by co-founders Claudia and Ira Goldfarb, who have over a decade of manufacturing experience with an extensive freeze drying background, dedication to job creation, and proven track record of identifying and growing niche trends into everyday categories.
Sow Good, co-founded by Claudia and Ira Goldfarb, brings over a decade of manufacturing expertise to the consumer packaged goods (“CPG”) sector, specializing in advanced freeze-drying technology. With experience across pet, baby, and candy products, they have a proven track record of transforming niche trends into everyday consumer staples.
Sow Good products are sold through a diverse set of retail channels, including conventional, natural and specialty grocery, club, and convenience stores. Since launching, Sow Good’s freeze dried candy line is available in Five Below, Target, Misfits Market/Imperfect Foods, TJX Canada, Big Lots, Hy-Vee, Cracker Barrel, and Circle K.
Since launching, Sow Good’s freeze dried candy line is available in Five Below, Misfits Market/Imperfect Foods, TJX Canada, Hy-Vee, Cracker Barrel, 7/11, H-E-B, Kroger and Albertsons. In addition, we sell a substantial portion of our products through distributors such as Redstone Foods, CB Distributors and Lipari Foods.
Effective February 15, 2024, we reincorporated to the State of Delaware from the State of Nevada pursuant to a plan of conversion. Our principal executive offices are located at 1440 N. Union Bower Road, Irving, Texas 75061, and our telephone number is (214) 623-6055. Our website addresses are www.thisissowgood.com and www.sowginc.com .
Effective February 15, 2024, Sow Good Inc. reincorporated to the State of Delaware from the State of Nevada under the name Sow Good Inc. pursuant to a plan of conversion. On May 2, 2024, trading of the Company’s common stock commenced on the Nasdaq Capital Market stock exchange. Our principal executive offices are located at 1440 N.
Video reviews of Sow Good’s products that are organically generated by TikTok users have amassed over 4.5 million views as of December 31, 2023. We believe there is a significant growth opportunity in increasing our shelf presence, SKU portfolio, and number of stores with our existing customers.
We believe there is a significant growth opportunity in increasing our shelf presence, SKU portfolio, and number of stores with our existing customers. We aim to have the ability to increase the availability of our products to these customers in current locations and distribution to more of their stores, while also broadening our SKU portfolio offerings.
We believe the nascent freeze dried candy market is poised for exponential growth given increasing consumer preferences for novel and distinctive candy products. According to the NCA, approximately 61% of shoppers occasionally or frequently seek out products they have never purchased before.
We believe the nascent freeze dried candy market is poised for exponential growth given increasing consumer preferences for novel and distinctive candy products. In addition, we view adjacent snack categories where freeze drying is an established manufacturing method as providing additional growth opportunities.
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The rapid demand growth for our delectable treats since their retail debut in March 2023 highlights our consumers’ excitement for our novel and explosively flavorful treats that “satisfy your sweet tooth in fewer bites.” We have custom-built a 20,945 square foot freeze drying facility in Irving, Texas, and have entered into additional co-manufacturing arrangements in China and Colombia, that together allow us to freeze dry fourteen million units per year to our demanding quality and safety specifications.
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We have custom-built a 20,945 square foot freeze drying facility in Irving, Texas.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf our competitors are more successful or offer better value to consumers, our business could decline. ● Failure to maintain sufficient internal production capacity, source appropriate external production capacity, or to enter into third-party agreements on terms that are beneficial for us may result in our inability to meet customer demand and/or may increase our operating costs and capital expenditures. ● Loss of one or more of our co-manufacturers or our failure to timely identify and establish relationships with new co-manufacturers could harm our business and impede our growth. ● We rely on a small number of suppliers to provide our raw materials for certain of our treats, and our supply chain may be interrupted and prevent us from obtaining the necessary materials we need to operate. ● Consumer preferences for our products, or for freeze dried candy generally could change rapidly, and, if we are unable to respond quickly to new trends, our business may be adversely affected. ● Any damage to our reputation or brand image could adversely affect our business or financial results. ● Fluctuations in various food and supply, transportation and shipping costs could adversely affect our operating results. ● We may not be able to protect our intellectual property and proprietary technology adequately, which may impact our commercial success. ● Food safety concerns and concerns about the health risk of our products may have an adverse effect on our business. ● Our ability to maintain and expand our distribution network and attract consumers, customers, distributors, retailers and brokers will depend on a number of factors, some of which are outside our control. ● Our success depends in part on the effectiveness of our digital marketing strategy and the expansion of our social media presence, but there are risks associated with these efforts. ● Failure to manage inventory at optimal levels could adversely affect our business, financial condition and results of operations. ● Information security events, or real or perceived errors, failures, or bugs in our systems; other technology disruptions; or failure to comply with laws and regulations relating to information security could negatively impact our business, our reputation and our relationships with customers. ● Our international sales and operations, including our planned business development activities outside of the United States, subject us to additional risks and challenges that can adversely affect our business, results of operations and financial condition. ● Our operations are subject to regulation by the FDA and other federal, state, and local authorities in the U.S., and in any other jurisdictions in which we may sell our products, and there is no assurance that we will be in compliance with all laws and regulations. ● Our common stock is currently quoted on the OTCQB, which may have an unfavorable impact on our stock price and liquidity. ● The market price of our common stock is, and is likely to continue to be, highly volatile and subject to wide fluctuations. ● We have never paid dividends on our common stock and we do not intend to pay dividends for the foreseeable future. ● We are a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors. ● The concentration of our stock ownership limits our stockholders’ ability to influence corporate matters. ● Our business depends substantially on the continuing efforts of our senior management and other key personnel, including Ira and Claudia Goldfarb, our Executive Chairman and the Chief Executive Officer, respectively, and our business may be severely disrupted if we lose their services. ● A worsening of economic conditions or a decrease in consumer spending may adversely impact our ability to implement our business strategy. ● The failure to successfully integrate newly acquired products or businesses could negatively impact our profitability. 13 Table of Contents Risks Related to Our Operating History, Financial Position and Capital Needs We have a limited operating history in our current form and have incurred significant operating losses.
Biggest changeIf our competitors are more successful or offer better value to consumers, our business could decline. • We rely on a small number of suppliers to provide our raw materials for certain of our treats, and our supply chain may be interrupted and prevent us from obtaining the necessary materials we need to operate. • Consumer preferences for our products, or for freeze dried candy generally could change rapidly, and, if we are unable to respond quickly to new trends, our business may be adversely affected. • Any damage to our reputation or brand image could adversely affect our business or financial results. • Fluctuations in various food and supply, transportation and shipping costs could adversely affect our operating results. • We may not be able to protect our intellectual property and proprietary technology adequately, which may impact our commercial success. • Food safety concerns and concerns about the health risk of our products may have an adverse effect on our business. • Our ability to maintain and expand our distribution network and attract consumers, customers, distributors, retailers and brokers will depend on a number of factors, some of which are outside our control. • Our success depends in part on the effectiveness of our digital marketing strategy and the expansion of our social media presence, but there are risks associated with these efforts. • Failure to manage inventory at optimal levels could adversely affect our business, financial condition and results of operations. • Information security events, or real or perceived errors, failures, or bugs in our systems; other technology disruptions; or failure to comply with laws and regulations relating to information security could negatively impact our business, our reputation and our relationships with customers. • Our international sales and operations, including our planned business development activities outside of the United States, subject us to additional risks and challenges that can adversely affect our business, results of operations and financial condition. • Our operations are subject to regulation by the FDA and other federal, state, and local authorities in the U.S., and in any other jurisdictions in which we may sell our products, and there is no assurance that we will be in compliance with all laws and regulations. • The market price of our common stock is, and is likely to continue to be, highly volatile and subject to wide fluctuations. • We have never paid dividends on our common stock and we do not intend to pay dividends for the foreseeable future. 11 Table of Contents • We are a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors. • The concentration of our stock ownership limits our stockholders’ ability to influence corporate matters. • Our business depends substantially on the continuing efforts of our senior management and other key personnel, including Ira and Claudia Goldfarb, our Executive Chairman and the Chief Executive Officer, respectively, and our business may be severely disrupted if we lose their services. • A worsening of economic conditions or a decrease in consumer spending may adversely impact our ability to implement our business strategy. • The failure to successfully integrate newly acquired products or businesses could negatively impact our profitability.
Our international operations also subject us to a variety of additional risks and challenges, including: • increased management, travel, infrastructure and legal compliance costs associated with having operations and developing our business in multiple jurisdictions; • providing our treats and operating our business across a significant distance, in different languages, among different cultures and time zones, including the potential need to modify our marketing and products to ensure that they are culturally appropriate and relevant in different countries; • compliance with non-U.S. data privacy, protection and security laws, rules and regulations, including data localization requirements, and the risks and costs of non-compliance; • legislative changes that may impose fines or other penalties for failure to comply with certain content removal, law enforcement cooperation and disclosure obligations; • longer payment cycles and difficulties enforcing agreements, collecting accounts receivable or satisfying revenue recognition criteria, especially in emerging markets; • hiring, training, motivating and retaining highly-qualified personnel, while maintaining our unique corporate culture; • increased financial accounting and reporting burdens and complexities; • longer sales cycles; • requirements or preferences for domestic products; • differing technical standards, existing or future regulatory and certification requirements and required features and functionality; • orders restricting or blocking our services in particular geographies, or other government-imposed remedies as a result of content hosted on our services; • political and economic conditions and uncertainty in each country or region in which we operate and general economic and political conditions and uncertainty around the world; • changes in a specific country’s or region’s political or economic conditions; • compliance with laws and regulations for non-U.S. operations, including anti-bribery laws, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our treats and develop our business in certain non-U.S. markets, and the risks and costs of non-compliance; 28 Table of Contents • heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact our financial condition and result in restatements of our consolidated financial statements; • heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact our financial condition and result in restatements of our consolidated financial statements; • fluctuations in currency exchange rates and related effects on our results of operations; • difficulties in repatriating or transferring funds from or converting currencies in certain countries; • communication and integration problems related to entering new markets with different languages, cultures and political systems; • new and different sources of competition; • differing labor standards, including restrictions related to, and the increased cost of, terminating employees in some countries; • the need for localized subscription agreements; • the need for localized language support and difficulties associated with delivering support, training and documentation in languages other than English; • increased reliance on channel partners; • reduced protection for intellectual property rights in certain non-U.S. countries and practical difficulties of obtaining, maintaining, protecting and enforcing such rights abroad; and • compliance with the laws of numerous foreign taxing jurisdictions, including withholding tax obligations, and overlapping of different tax regimes.
Our international operations also subject us to a variety of additional risks and challenges, including: • increased management, travel, infrastructure and legal compliance costs associated with having operations and developing our business in multiple jurisdictions; • providing our treats and operating our business across a significant distance, in different languages, among different cultures and time zones, including the potential need to modify our marketing and products to ensure that they are culturally appropriate and relevant in different countries; • compliance with non-U.S. data privacy, protection and security laws, rules and regulations, including data localization requirements, and the risks and costs of non-compliance; • legislative changes that may impose fines or other penalties for failure to comply with certain content removal, law enforcement cooperation and disclosure obligations; • longer payment cycles and difficulties enforcing agreements, collecting accounts receivable or satisfying revenue recognition criteria, especially in emerging markets; • hiring, training, motivating and retaining highly-qualified personnel, while maintaining our unique corporate culture; • increased financial accounting and reporting burdens and complexities; • longer sales cycles; • requirements or preferences for domestic products; • differing technical standards, existing or future regulatory and certification requirements and required features and functionality; • orders restricting or blocking our services in particular geographies, or other government-imposed remedies as a result of content hosted on our services; • political and economic conditions and uncertainty in each country or region in which we operate and general economic and political conditions and uncertainty around the world; • changes in a specific country’s or region’s political or economic conditions; • compliance with laws and regulations for non-U.S. operations, including anti-bribery laws, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our treats and develop our business in certain non-U.S. markets, and the risks and costs of non-compliance; • heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact our financial condition and result in restatements of our consolidated financial statements; • heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact our financial condition and result in restatements of our consolidated financial statements; • fluctuations in currency exchange rates and related effects on our results of operations; • difficulties in repatriating or transferring funds from or converting currencies in certain countries; • communication and integration problems related to entering new markets with different languages, cultures and political systems; • new and different sources of competition; 24 Table of Contents • differing labor standards, including restrictions related to, and the increased cost of, terminating employees in some countries; • the need for localized subscription agreements; • the need for localized language support and difficulties associated with delivering support, training and documentation in languages other than English; • increased reliance on channel partners; • reduced protection for intellectual property rights in certain non-U.S. countries and practical difficulties of obtaining, maintaining, protecting and enforcing such rights abroad; and • compliance with the laws of numerous foreign taxing jurisdictions, including withholding tax obligations, and overlapping of different tax regimes.
Factors that may cause fluctuations in our quarterly results include, but are not limited to: • our inability to retain our existing customers, and expand sales of our products to our existing customers; • our ability to attract new customers and consumers to our brand, the type and amount of products purchased, and the cost of acquisition; • the mix of our products sold during the period, and the gross margins associated with those sales; • changes in our pricing policies, or those of our competitors; • the amount and timing of discounts, rebates, or promotional activity; • the amount and timing of costs and operating expenses related to the expansion of manufacturing capacity, distribution channels, production capabilities, and operational infrastructure; • the amount and timing of costs and operating expenses associated with developing and commercializing new products; • the amount and timing of costs and operating expenses related to the acquisition of businesses, assets, technologies, or intellectual property rights; 31 Table of Contents • the timing and impact of any security breaches, service outages or other performance problems with our technology infrastructure and software solutions; • the timing and costs associated with legal or regulatory actions; • changes in the competitive dynamics of our industry, including consolidation among customers, suppliers, or competitors; • loss of our executive officers or other key employees; • trends and conditions impacting the consumer packaged goods industry, and the freeze dried goods category in particular; • the impacts and disruptions caused by the COVID-19 pandemic, or any other pandemics, epidemics, disease outbreak, or similar widespread public health concern on our business and operating results, or incidence of disease; and • general economic, political, social, and market conditions.
Factors that may cause fluctuations in our quarterly results include, but are not limited to: • our inability to retain our existing customers, and expand sales of our products to our existing customers; • our ability to attract new customers and consumers to our brand, the type and amount of products purchased, and the cost of acquisition; • the mix of our products sold during the period, and the gross margins associated with those sales; • changes in our pricing policies, or those of our competitors; • the amount and timing of discounts, rebates, or promotional activity; • the amount and timing of costs and operating expenses related to the expansion of manufacturing capacity, distribution channels, production capabilities, and operational infrastructure; 27 Table of Contents • the amount and timing of costs and operating expenses associated with developing and commercializing new products; • the amount and timing of costs and operating expenses related to the acquisition of businesses, assets, technologies, or intellectual property rights; • the timing and impact of any security breaches, service outages or other performance problems with our technology infrastructure and software solutions; • the timing and costs associated with legal or regulatory actions; • changes in the competitive dynamics of our industry, including consolidation among customers, suppliers, or competitors; • loss of our executive officers or other key employees; • trends and conditions impacting the consumer packaged goods industry, and the freeze dried goods category in particular; • the impacts and disruptions caused by the COVID-19 pandemic, or any other pandemics, epidemics, disease outbreak, or similar widespread public health concern on our business and operating results, or incidence of disease; and • general economic, political, social, and market conditions.
The market price of our common stock is likely to continue to be highly volatile and could be subject to wide fluctuations in response to a number of factors, some of which are beyond our control, including but not limited to: • dilution caused by our issuance of additional shares of common stock and other forms of equity securities, which we expect to make in connection with future capital financings to fund our operations and growth, to attract and retain valuable personnel and in connection with future strategic partnerships with other companies; • quarterly variations in our revenues and operating expenses as we commence our production and sales; • changes in the valuation of similarly situated companies, both in our industry and in other industries sales; • challenges associated with timely SEC filings; • changes in analysts’ estimates affecting our company, our competitors and/or our industry; • changes in the accounting methods used in or otherwise affecting our industry; • additions and departures of key personnel; • fluctuations in interest rates and the availability of capital in the capital markets; • significant sales of our common stock following the registration of shares; • any guidance we may provide to the public, any changes in this guidance, or our failure to meet this guidance; • announcements of new products by us or our competitors, and competition from new or existing products; 30 Table of Contents • addition or loss of significant customers, suppliers or other business partners; • new laws or regulations applicable to our business or products, or changes to the interpretation of existing laws or regulations; • announcements of significant acquisitions, strategic partnerships, or joint ventures by us or our competitors; • outcome of litigation, regulatory matters, enforcement actions, or other disputes that may arise; and • general economic, industry, and market conditions.
The market price of our common stock is likely to continue to be highly volatile and could be subject to wide fluctuations in response to a number of factors, some of which are beyond our control, including but not limited to: • dilution caused by our issuance of additional shares of common stock and other forms of equity securities, which we expect to make in connection with future capital financings to fund our operations and growth, to attract and retain valuable personnel and in connection with future strategic partnerships with other companies; • quarterly variations in our revenues and operating expenses as we commence our production and sales; • changes in the valuation of similarly situated companies, both in our industry and in other industries sales; • challenges associated with timely SEC filings; • changes in analysts’ estimates affecting our company, our competitors and/or our industry; • changes in the accounting methods used in or otherwise affecting our industry; • additions and departures of key personnel; • fluctuations in interest rates and the availability of capital in the capital markets; • significant sales of our common stock following the registration of shares; • any guidance we may provide to the public, any changes in this guidance, or our failure to meet this guidance; • announcements of new products by us or our competitors, and competition from new or existing products; • addition or loss of significant customers, suppliers or other business partners; • new laws or regulations applicable to our business or products, or changes to the interpretation of existing laws or regulations; • announcements of significant acquisitions, strategic partnerships, or joint ventures by us or our competitors; • outcome of litigation, regulatory matters, enforcement actions, or other disputes that may arise; and • general economic, industry, and market conditions.
Many of our current competitors have, and potential competitors may have, longer operating histories, greater brand recognition, larger fulfillment infrastructures, greater technical capabilities, significantly greater financial, marketing, and other resources and larger customer bases than we do.
Many of our current competitors have, and potential future competitors may have, longer operating histories, greater brand recognition, larger fulfillment infrastructures, greater technical capabilities, significantly greater financial, marketing, and other resources and larger customer bases than we do.
If our products are not manufactured, processed, packaged and labeled in conformity with our specifications and the strict regulatory requirements of the FDA or other regulatory authorities, we or our co-manufacturers may be subject to adverse inspectional findings or enforcement actions, which could materially impact our ability to market our products or result in a recall of our product, that have already been distributed.
If our products are not manufactured, processed, packaged and labeled in conformity with our specifications and the strict regulatory requirements of the FDA or other regulatory authorities, we may be subject to adverse inspectional findings or enforcement actions, which could materially impact our ability to market our products or result in a recall of our product, that have already been distributed.
The challenges of competing with other non-chocolate confectionary businesses may result in reductions in our revenue and operating margins. The retail food industry is very competitive, and particularly so in the non-chocolate confectionary segment. We compete with many companies on the basis of taste, quality and price of product offered, and customer service.
The challenges of competing with other non-chocolate confectionary businesses may result in reductions in our revenue and operating margins. The retail food industry is very competitive, and particularly so in the non-chocolate confectionary segment. We compete with many companies on the basis of taste, quality and price of product offered, market access and customer service.
This could result in time consuming and expensive production interruptions, negative publicity, the destruction of product inventory, the discontinuation of sales or our relationships with such co-manufacturers, distributors, or suppliers, lost sales due to the unavailability of product for a period of time and higher-than-anticipated rates of returns of goods.
This could result in time consuming and expensive production interruptions, negative publicity, the destruction of product inventory, the discontinuation of sales or our relationships with such distributors or suppliers, lost sales due to the unavailability of product for a period of time and higher-than-anticipated rates of returns of goods.
Our forecast for demand, however, may not accurately reflect the actual market demands, which depends on a number of factors including, without limitation, launches of new products, changes in product life cycles and pricing, product defects, changes in consumer spending patterns, supplier back orders and other supplier-related issues, distributors’ and retailers’ procurement plans, as well as the volatile economic environment in the markets where we sell our products.
Our forecast for demand, however, may 21 Table of Contents not accurately reflect the actual market demands, which depends on a number of factors including, without limitation, launches of new products, changes in product life cycles and pricing, product defects, changes in consumer spending patterns, supplier back orders and other supplier-related issues, distributors’ and retailers’ procurement plans, as well as the volatile economic environment in the markets where we sell our products.
Managing our planned growth effectively will require us to: • maintain a low cost of customer acquisition relative to customer lifetime value; • identify products that will be viewed favorably by customers; • enhance our facilities and purchase additional equipment at our facility in Irving, Texas; and • successfully hire, train and motivate additional employees, including additional personnel for our production, sales and marketing efforts and our finance and accounting functions.
Managing our planned growth effectively will require us to: • maintain a low cost of customer acquisition relative to customer lifetime value; • identify products that will be viewed favorably by customers; 14 Table of Contents • enhance our facilities and purchase additional equipment at our facility in Irving, Texas; and • successfully hire, train and motivate additional employees, including additional personnel for our production, sales and marketing efforts and our finance and accounting functions.
Damage to our reputation or brand image or loss of consumer confidence in our services could adversely affect our business and financial results as well as require additional resources to rebuild or repair our reputation. Fluctuations in various food and supply, transportation and shipping costs could adversely affect our operating results.
Damage to our reputation or brand image or loss of consumer confidence in our products could adversely affect our business and financial results as well as require additional resources to rebuild or repair our reputation. Fluctuations in various food and supply, transportation and shipping costs could adversely affect our operating results.
In the event of extended power outages, labor disruptions, natural disasters or other catastrophic occurrences, failures of the refrigeration systems in our third-party delivery trucks, or other circumstances, our inability to store inventory at appropriate temperatures and low humidity could result in significant product inventory losses, as well as increased risk of food-borne illnesses and other food safety incidents.
In the event of extended power outages, labor disruptions, natural disasters or other catastrophic occurrences, including extreme heat, failures of the refrigeration systems in our third-party delivery trucks, or other circumstances, our inability to store inventory at appropriate temperatures and low humidity could result in significant product inventory losses, as well as increased risk of food-borne illnesses and other food safety incidents.
If one or more of our senior executives is unable or unwilling to continue to work for us in the present position, we may have to spend a considerable amount of time and resources searching, recruiting, and integrating a replacement into our operations, which would substantially divert management’s attention from our business and severely disrupt our business.
If one or more of our senior executives is unable or unwilling to continue to work for us in the present position, we may have to spend a considerable amount of time and resources searching, recruiting, and integrating a replacement into our operations, which 28 Table of Contents would substantially divert management’s attention from our business and severely disrupt our business.
Such proceedings may be protracted with no certainty of success, and an adverse outcome could subject us to liability, force us to cease use of certain trademarks or other intellectual property, or force us to enter into licenses with others. 22 Table of Contents Third parties may initiate legal proceedings alleging that we are infringing or otherwise violating their intellectual property rights.
Such proceedings may be protracted with no certainty of success, and an adverse outcome could subject us to liability, force us to cease use of certain trademarks or other intellectual property, or force us to enter into licenses with others. Third parties may initiate legal proceedings alleging that we are infringing or otherwise violating their intellectual property rights.
There can be no assurance that we will be able to successfully compete against these competitors. We expect competition in the non-chocolate confectionary and freeze dried candy segments generally to continue to increase.
There can be no assurance that we will be able to successfully compete against these competitors. We expect competition in the non-chocolate confectionary and freeze dried treat segments generally to continue to increase.
Most state and local laws operate similarly. Consequently, almost any deviation from subjective or objective requirements of the FDCA, or applicable state or local laws, leaves us vulnerable to a variety of administrative actions, enforcement actions, and/or civil and criminal penalties. Failure to comply with laws and regulations could materially adversely affect our business, operating results, and financial condition.
Consequently, almost any deviation from subjective or objective requirements of the FDCA, or applicable state or local laws, leaves us vulnerable to a variety of administrative actions, enforcement actions, and/or civil and criminal penalties. Failure to comply with laws and regulations could materially adversely affect our business, operating results, and financial condition.
If we fail to compete successfully in this market, our business, financial condition, and results of operations would be materially and adversely affected. Consumer preferences for our products, or for freeze dried candy generally could change rapidly, and, if we are unable to respond quickly to new trends, our business may be adversely affected.
If we fail to compete successfully in this market, our business, financial condition, and results of operations would be materially and adversely affected. 16 Table of Contents Consumer preferences for our products, or for freeze dried candy generally could change rapidly, and, if we are unable to respond quickly to new trends, our business may be adversely affected.
Such injuries may result from inadvertent mislabeling, tampering by unauthorized third parties or product contamination or spoilage. Under certain circumstances, we may be required to recall or withdraw products, suspend production of our products, or cease operations, which may lead to a material adverse effect on our business.
Such injuries may result from inadvertent mislabeling, tampering by unauthorized third parties or product contamination or spoilage. Under certain circumstances, we may be required to recall 19 Table of Contents or withdraw products, suspend production of our products, or cease operations, which may lead to a material adverse effect on our business.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected. 33 Table of Contents
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected.
The results of legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these proceedings may result in adverse monetary damages, penalties, or injunctive relief against us, which could have a material adverse effect on our operating results, financial condition, and liquidity.
The results of legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these proceedings may result in adverse monetary damages, penalties, or injunctive relief against us, which could have a material 29 Table of Contents adverse effect on our operating results, financial condition, and liquidity.
ITEM 1A. RISK FACTORS Summary Risk Factors The risk factors described below are a summary of the principal risk factors associated with an investment in the Company. These are not the only risks we face.
ITEM 1A. RIS K FACTORS Summary Risk Factors The risk factors described below are a summary of the principal risk factors associated with an investment in the Company. These are not the only risks we face.
Further, some of our manufacturing know-how and process has been implemented by or with our co-manufacturers. As a result, we may not be able to prevent others from using similar processes, which could adversely affect our business.
Further, some of our manufacturing know-how and process had been implemented by or with our prior co-manufacturers. As a result, we may not be able to prevent others from using similar processes, which could adversely affect our business.
We believe that our ability to attract new customers is directly correlated to the level of engagement we achieve with our customers in their home countries. To the extent that we are unable to effectively engage with non-U.S. customers, we may be unable to effectively grow in international markets.
We believe that our ability to 23 Table of Contents attract new customers is directly correlated to the level of engagement we achieve with our customers in their home countries. To the extent that we are unable to effectively engage with non-U.S. customers, we may be unable to effectively grow in international markets.
Further, new laws, rules, and regulations could be enacted with which we are not familiar or with which our practices do not comply. 27 Table of Contents Several U.S. jurisdictions have passed omnibus privacy laws that apply to us now or may apply in the future as we grow and expand, and other jurisdictions are considering imposing additional restrictions.
Further, new laws, rules, and regulations could be enacted with which we are not familiar or with which our practices do not comply. Several U.S. jurisdictions have passed omnibus privacy laws that apply to us now or may apply in the future as we grow and expand, and other jurisdictions are considering imposing additional restrictions.
If we raise additional funds through collaborations and licensing arrangements, we might be required to relinquish significant rights or grant licenses on terms that are not favorable to us. 15 Table of Contents Our rapid growth may not be indicative of our future growth, and our limited operating history may make it difficult to assess our future viability.
If we raise additional funds through collaborations and licensing arrangements, we might be required to relinquish significant rights or grant licenses on terms that are not favorable to us. Our prior rapid growth may not be indicative of our future growth, and our limited operating history may make it difficult to assess our future viability.
Regardless of whether claims that we are infringing patents or other intellectual property rights have merit, such claims can be time-consuming, divert management’s attention and financial resources, and can be costly to evaluate and defend.
Regardless of whether claims that we are infringing patents or other intellectual property rights have merit, such claims can be time-consuming, divert management’s attention 18 Table of Contents and financial resources, and can be costly to evaluate and defend.
Any of these systems and infrastructure are vulnerable to damage or interruption from earthquakes, vandalism, sabotage, terrorist attacks, floods, fires, power outages, telecommunications failures, computer viruses or other deliberate attempts to harm the systems.
Any of these systems and infrastructure are vulnerable to damage or interruption from earthquakes, vandalism, sabotage, terrorist attacks, floods, fires, power outages, 22 Table of Contents telecommunications failures, computer viruses or other deliberate attempts to harm the systems.
We anticipate our operating expenses and capital expenditures will increase substantially in the foreseeable future as we seek to expand our retail distribution, invest in our approach to build brand awareness, leverage our product development capabilities, and invest in production capacity and automation.
We anticipate our operating expenses will increase in the foreseeable future as we seek to expand our retail distribution, invest in our approach to build brand awareness, leverage our product development capabilities, and invest in production capacity and automation.
A failure or perceived failure to meet our quality or safety standards, including product adulteration, contamination, or tampering, or allegations of mislabeling, whether actual or perceived, could occur in our operations or those of our co-manufacturers, distributors or suppliers.
A failure or perceived failure to meet our quality or safety standards, including product adulteration, contamination, or tampering, or allegations of mislabeling, whether actual or perceived, could occur in our operations, distributors or suppliers.
Our inability to enter into satisfactory distribution agreements may inhibit our ability to implement our business plan or to establish markets necessary to expand the distribution of our products successfully. Our customers generally are not obligated to continue purchasing products from us.
Our inability to enter 20 Table of Contents into satisfactory distribution agreements may inhibit our ability to implement our business plan or to establish markets necessary to expand the distribution of our products successfully. Our customers are not obligated to continue purchasing products from us.
Our reputation or brand image could be adversely impacted by, among other things, any failure to maintain high ethical, social and environmental sustainability practices for our operations, the views of management and other stakeholders, our impact on the environment, public pressure from investors or policy groups to change our policies, consumer perceptions of our advertising campaigns, sponsorship arrangements or marketing programs, including opportunities we choose to forego due to management philosophy, consumer perceptions of our use of social media, or consumer perceptions of statements made by us, our employees and executives, agents or other third-parties.
Our reputation or brand image has been affected by our product melting problems in 2024 and could be in the future adversely impacted by, among other things, any failure to maintain high ethical, social and environmental sustainability practices for our operations, the views of management and other stakeholders, our impact on the environment, public pressure from investors or policy groups to change our policies, consumer perceptions of our advertising campaigns, sponsorship arrangements or marketing programs, including opportunities we choose to forego due to management philosophy, consumer perceptions of our use of social media, or consumer perceptions of statements made by us, our employees and executives, agents or other third-parties.
We also believe that growth of our revenue depends on several factors, including our ability to: • expand our production capacity; • increase awareness of our brand; • expand our existing channels of distribution; • develop additional channels of distribution; • grow our customer base; • cost-effectively increase online sales at our direct website and third-party marketplaces; • effectively introduce new products; • manufacture at a scale that satisfies future demand; and • effectively source key raw materials.
We also believe that growth of our revenue depends on several factors, including our ability to: • increase awareness of our brand; • expand into international markets; • expand our existing channels of distribution; 13 Table of Contents • develop additional channels of distribution; • grow our customer base; • cost-effectively increase online sales at our direct website and third-party marketplaces; • effectively introduce new products; • expand our production capacity, as necessary; • manufacture at a scale that satisfies future demand; and • effectively source key raw materials.
The market price of our common stock is, and is likely to continue to be, highly volatile and subject to wide fluctuations.
Risks Related to Ownership of Our Common Stock The market price of our common stock is, and is likely to continue to be, highly volatile and subject to wide fluctuations.
As part of these efforts, we rely on social media and other digital marketing to retain customers, attract new customers and consumers to our brand, and enhance the overall visibility of our brand in the market.
Maintaining, positioning, and enhancing our brand will depend in part on the success of our marketing efforts. As part of these efforts, we rely on social media and other digital marketing to retain customers, attract new customers and consumers to our brand, and enhance the overall visibility of our brand in the market.
In the years ended December 31, 2023 and 2022, we incurred net losses of approximately $3.1 million and $12.1 million, respectively.
In the years ended December 31, 2024 and December 31, 2023, we incurred net losses of approximately $3.6 million and $3.1 million, respectively.
Further, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the trading prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations may negatively impact the trading price of our common stock.
Further, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the trading prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies.
Our quarterly operating results may fluctuate significantly, period-to-period comparisons of our results may not be meaningful, and these fluctuations may cause the price of our common stock to decline. Our quarterly results, including our revenues, operating expenses, operating margins, and profitability, may fluctuate significantly in the future, and period-to-period comparisons of our results may not be meaningful.
Our quarterly operating results have fluctuated and may in the future fluctuate significantly, period-to-period comparisons of our results may not be meaningful, and these fluctuations may cause the price of our common stock to decline.
Accordingly, investors should rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment in our common stock.
Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors should rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment in our common stock.
These results could adversely affect our business, financial condition and results of operations. 26 Table of Contents Information security events, or real or perceived errors, failures, or bugs in our systems; other technology disruptions; or failure to comply with laws and regulations relating to information security could negatively impact our business, our reputation and our relationships with customers.
Information security events, or real or perceived errors, failures, or bugs in our systems; other technology disruptions; or failure to comply with laws and regulations relating to information security could negatively impact our business, our reputation and our relationships with customers.
If we face labor shortages or increased labor costs because of increased competition for employees from our competitors and other industries, higher employee-turnover rates, or increases in the federal- or state-mandated minimum wage, change in exempt and non-exempt status, or other employee benefits costs (including costs associated with health insurance coverage or workers’ compensation insurance), our operating expenses could increase and our business, financial condition and results of operations could be materially and adversely affected. 25 Table of Contents Our success depends in part on the effectiveness of our digital marketing strategy and the expansion of our social media presence, but there are risks associated with these efforts.
If we face labor shortages or increased labor costs because of increased competition for employees from our competitors and other industries, higher employee-turnover rates, or increases in the federal- or state-mandated minimum wage, change in exempt and non-exempt status, or other employee benefits costs (including costs associated with health insurance coverage or workers’ compensation insurance), our operating expenses could increase and our business, financial condition and results of operations could be materially and adversely affected.
As we look to expand our distribution and market, we may not be able to increase our sales prices to absorb these costs. We cannot provide assurances that we will be able to maintain profitability consistent with our goals.
We are also subject to a reduction in our profitability due to increased labor costs for our employees. As we look to expand our distribution and market, we may not be able to increase our sales prices to absorb these costs. We cannot provide assurances that we will be able to maintain profitability consistent with our goals.
An increase in pricing of any candy that we are going to use in our products could have a significant adverse effect on our profitability. We cannot assure you that we will be able to secure our candy supply.
An increase in pricing of any candy that we are going to use in our products could have a significant adverse effect on our profitability. We cannot assure you that we will be able to secure our candy supply. In addition, we may face limits on the ability to source some of the candy for our freeze dried treats.
Under-stocking can lead to missed sales opportunities, while over-stocking could result in inventory depreciation and decreased shelf space for products that are in higher demand.
Under-stocking can lead to missed sales opportunities, while over-stocking could result in inventory depreciation and decreased shelf space for products that are in higher demand. These results could adversely affect our business, financial condition and results of operations.
The costs of these products may also fluctuate based on a number of factors beyond our control, including changes in the competitive environment, availability of substitute materials, and macroeconomic conditions.
In addition, we purchase and use significant quantities of cardboard, film, and plastic to package our products. The costs of these products may also fluctuate based on a number of factors beyond our control, including changes in the competitive environment, availability of substitute materials, and macroeconomic conditions.
Shifts in consumer preferences away from products like ours, our inability to develop new items that appeal to a broad range of consumers, or changes in our offerings that eliminate products popular with some consumers could harm our business.
Shifts in consumer preferences, our ability to maintain shelf space in light of more powerful market entrants, our inability to develop new items that appeal to a broad range of consumers, or changes in our offerings that eliminate products popular with some consumers could harm our business.
We sell a substantial portion of our products through retailers such as Five Below, Target, Misfits Market/Imperfect Foods, TJX Canada, Big Lots, Hy-Vee, Cracker Barrel, and Circle K, and distributors such as Redstone Foods, CB Distributors and Alpine Foods, and online through our website.
We sell a substantial portion of our products through retailers such as Five Below, Misfits Market/Imperfect Foods, TJX Canada, Hy-Vee, Cracker Barrel, 7/11, H-E-B, Kroger and Albertsons, and distributors such as Redstone Foods, CB Distributors and Lipari Foods, and online through our website.
If we fail to manage our inventory effectively, we may be subject to a heightened risk of inventory obsolescence, a decline in inventory values, and significant inventory write-downs or write-offs. In addition, we may be required to lower sale prices in order to reduce inventory level, which may lead to lower gross margins.
If we fail to manage our inventory effectively, we may be subject to a heightened risk of inventory obsolescence, a decline in inventory values, and significant inventory write-downs or write-offs.
Our strategy envisions the expansion of our business. If we fail to effectively manage our growth, our financial results could be adversely affected. Our rapid growth has placed and may continue to place significant demands on our organizational, administrative and operational infrastructure, including manufacturing operations, quality control, technical support and customer service, sales force management and general and financial administration.
Our rapid growth has placed and may continue to place significant demands on our organizational, administrative and operational infrastructure, including manufacturing operations, quality control, technical support and customer service, sales force management and general and financial administration.
We believe that our ability to compete successfully in this market depends upon many factors both within and beyond our control, including: • the size and composition of our customer base; • the number of products that we feature on our website; • the quality and responsiveness of customer service; • our selling and marketing efforts; • the quality and price of the products that we offer; • the convenience of the shopping experience that we provide; • our ability to distribute our products and manage our operations; and • our reputation and brand strength. 20 Table of Contents Given the rapid changes affecting the global, national, and regional economies generally and the food and beverage industry, we may not be able to create and maintain a competitive advantage in the marketplace.
We believe that our ability to compete successfully in this market depends upon many factors both within and beyond our control, including: • the size and composition of our customer base; • the number of products that we feature on our website; • the quality and responsiveness of customer service; • our selling and marketing efforts; • the quality and price of the products that we offer; • the convenience of the shopping experience that we provide; • our ability to distribute our products and manage our operations; and • our reputation and brand strength.
Such inflationary pressures could be passed on to the customer and could cause the price of our products to increase, which may impact the attractiveness of our freeze dried treats relative to other candy or snack options with cost sensitive consumers. We are also subject to a reduction in our profitability due to increased labor costs for our employees.
Such inflationary pressures could be passed on to the customer and 17 Table of Contents could cause the price of our products to increase, which may impact the attractiveness of our freeze dried treats relative to other candy or snack options with cost sensitive consumers.
The largest four purchasers of our products for the year ended December 31, 2023 were Five Below, CB Distributors, Redstone Foods, and Alpine Foods, accounting for approximately 82% of our revenues for that period.
The largest four purchasers of our products for the year ended December 31, 2024 were Five Below, CB Distributors, Target, and H-E-B, accounting for approximately 72.5% of our revenues for that period.
As a result of continuing investments to expand our business, we may not achieve or sustain profitability. Sow Good was formed and commenced commercial sales of our products in 2021, and in 2023 we started producing and commercializing our freeze dried candy treats, including our Sow Good freeze dried candy line and our Crunch Cream line.
Sow Good was formed and commenced commercial sales of our products in 2021, and in 2023 we started producing and commercializing our freeze dried candy treats, including our Sow Good freeze dried candy line and our Crunch Cream line.
Our success will depend on our ability to respond to, among other things, changes in consumer preferences, laws and regulations, market conditions, and competitive pressures. Any failure by us to anticipate or respond adequately to such changes could have a material adverse effect on our financial condition, operating results, liquidity, cash flow and our operational performance.
Any failure by us to anticipate or respond adequately to such changes could have a material adverse effect on our financial condition, operating results, liquidity, cash flow and our operational performance.
If our available cash balances, net proceeds from anticipated offerings/or anticipated cash flow from operations are insufficient to satisfy our liquidity requirements because of lower demand for our products or due to other risks described herein, we may seek to sell common stock or other securities, enter into an additional credit facility or seek another form of third-party funding, including debt financing.
Our inability to obtain additional capital could have a material adverse effect on our ability to fully implement our business plan as described herein and grow our business, to a greater extent than we can with our existing financial resources. 12 Table of Contents If our available cash balances, net proceeds from anticipated offerings/or anticipated cash flow from operations are insufficient to satisfy our liquidity requirements because of lower demand for our products or due to other risks described herein, we may seek to sell common stock or other securities, enter into an additional credit facility or seek another form of third-party funding, including debt financing.
We anticipate that we will retain all of our future earnings if any, to service debt, fund growth, develop our business, fund working capital needs, and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors.
We have never declared or paid any dividends on our common stock and do not intend to pay any dividends in the foreseeable future. We anticipate that we will retain all of our future earnings if any, to service debt, fund growth, develop our business, fund working capital needs, and for general corporate purposes.
In addition, changes to laws, regulations, or policies applicable to foods could leave us vulnerable to adverse governmental action and materially adversely affect our business, operating results, and financial condition.
In addition, changes to laws, regulations, or policies applicable to foods could leave us vulnerable to adverse governmental action and materially adversely affect our business, operating results, and financial condition. 25 Table of Contents Even inadvertent, non-negligent or unknowing violations of federal, state, or local regulatory requirements could expose us to adverse governmental action and materially adversely affect our business, operating results, and financial condition.
In addition, we may face limits on the ability to source some of the candy for our freeze dried treats. 21 Table of Contents In addition, our costs are affected by general inflationary pressures related to transportation and shipping costs, particularly to the extent we have additional retail sales and smaller order quantities.
In addition, our costs are affected by general inflationary pressures related to transportation and shipping costs, particularly to the extent we have additional retail sales and smaller order quantities.
Violations of laws or our policies by our employees, contractors, partners or agents could result in delays in revenue recognition, financial reporting misstatements, enforcement actions, disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences and increased costs, including the costs associated with defending against such actions, or the prohibition of the importation or exportation of our treats, each of which could adversely affect our business, results of operations and financial condition. 29 Table of Contents Risks Related to the Regulatory Environment Our operations are subject to regulation by the FDA and other federal, state, and local authorities in the U.S., and in any other jurisdictions in which we may sell our products, and there is no assurance that we will be in compliance with all laws and regulations.
Violations of laws or our policies by our employees, contractors, partners or agents could result in delays in revenue recognition, financial reporting misstatements, enforcement actions, disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences and increased costs, including the costs associated with defending against such actions, or the prohibition of the importation or exportation of our treats, each of which could adversely affect our business, results of operations and financial condition.
There is no assurance that we will be able to generate sufficient cash from operations or access the capital we need to grow our business.
Our long-term growth and success are dependent upon our ability ultimately to expand our manufacturing capacity and generate cash from operating activities. There is no assurance that we will be able to generate sufficient cash from operations or access the capital we need to grow our business.
Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history or had previously achieved profitability. 16 Table of Contents We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.
Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history or had previously achieved profitability. If we are unable to successfully manage new product launches, our business and financial results could be adversely affected.
The occurrence of foodborne illnesses or food safety issues could also adversely affect the price and availability of affected ingredients, which could result in disruptions in our supply chain, significantly increase costs and/or lower margins for us. 23 Table of Contents In addition, there is increasing consumer awareness of, and increased media coverage on, the alleged adverse health impacts of consumption of various food products globally.
The occurrence of foodborne illnesses or food safety issues could also adversely affect the price and availability of affected ingredients, which could result in disruptions in our supply chain, significantly increase costs and/or lower margins for us.
Any material decline in the amount of discretionary spending, leading cost-conscious consumers to be more selective in food products purchased, could have a material adverse effect on our revenue, results of operations, business and financial condition. The failure to successfully integrate newly acquired products or businesses could negatively impact our profitability.
Any material decline in the amount of discretionary spending, leading cost-conscious consumers to be more selective in food products purchased, could have a material adverse effect on our revenue, results of operations, business and financial condition. Global climate change, severe weather patterns and natural disasters may negatively affect our business, operating results, financial condition, cash flows and prospects.
If we are unable to compete effectively in our markets, our business could decline disproportionately to our competitors, and our results of operations and financial condition could be adversely affected. We can provide no assurance that we will be able to continue to compete successfully in any of our markets.
We can provide no assurance that we will be able to continue to compete successfully in any of our markets. Our inability to continue to compete successfully in any of our markets could have a material adverse effect on our business, prospects, liquidity, financial condition, and results of operations.
We may incur significant losses for a number of reasons, including as a result of the other risks and uncertainties described elsewhere in this filing.
We may incur significant losses for a number of reasons, including as a result of the other risks and uncertainties described elsewhere in this filing. We cannot assure you that we will continue to achieve profitability in the future or that we will sustain profitability over any particular period of time.
Our revenues grew from approximately $88.4 thousand for the year ended December 31, 2021 to approximately $428.1 thousand for the year ended December 31, 2022 and approximately $16.1 million for the year ended December 31, 2023. We expect that, in the future, as our revenue increases to higher levels, our revenue growth rate will decline.
Our revenues grew from approximately $88.4 thousand for the year ended December 31, 2021 to approximately $428.1 thousand for the year ended December 31, 2022 and approximately $16.1 million for the year ended December 31, 2023, and $32.0 million for the year ended December 31, 2024.
If our competitors are more successful or offer better value to consumers, our business could decline. We operate in a very competitive environment that is characterized by competition from a number of other retailers in the market in which we operate.
We operate in a very competitive environment that is characterized by competition from a number of other retailers in the market in which we operate.
The ongoing conflict is rapidly evolving and developing, and could disrupt our business and operations in Israel or hamper our ability to raise additional funds, among others. 32 Table of Contents Our business depends substantially on the continuing efforts of our senior management and other key personnel, including Ira and Claudia Goldfarb, our Executive Chairman and the Chief Executive Officer, respectively, and our business may be severely disrupted if we lose their services .
General Risks Our business depends substantially on the continuing efforts of our senior management and other key personnel, including Ira and Claudia Goldfarb, our Executive Chairman and the Chief Executive Officer, respectively, and our business may be severely disrupted if we lose their services .
We have been able to compete successfully by differentiating ourselves from our competitors by providing an expanding selection of freeze dried treats, competitive pricing and convenience.
We also compete with other employers in our markets for workers and may become subject to higher labor costs as a result of such competition. We have been able to compete successfully by differentiating ourselves from our competitors by providing an expanding selection of freeze dried treats, competitive pricing and convenience.
The failure to successfully integrate acquired products or businesses in a timely and cost-effective manner could materially adversely affect our business, prospects, results of operations and financial condition. The diversion of our management’s attention and any difficulties encountered in any integration process could also have a material adverse effect on our ability to manage our business.
The diversion of our management’s attention and any difficulties encountered in any integration process could also have a material adverse effect on our ability to manage our business.
New competitors may easily enter the freeze dried candy market on which we are focused. The competitors may offer an equivalent or superior product to that of the Company. We expect the number of companies offering products and services in our market segment to increase.
We have experienced a reduction in revenue due to the entrant of a significant competitor in 2024. New competitors may easily enter the freeze dried candy market on which we are focused. The competitors may offer an equivalent or superior product to that of the Company.
Overall, we may not be able to avoid significant product liability exposure. A product liability claim could hurt our financial performance.
Overall, we may not be able to avoid significant product liability exposure. A product liability claim could hurt our financial performance. Even if we ultimately avoid financial liability for this type of exposure, we may incur significant costs in defending ourselves that could hurt our financial performance and condition.
Accordingly, the results of any one quarter should not be viewed as a prediction or indication of our future performance. In addition, our quarterly results may not fully reflect the underlying performance of our business.
Our quarterly results, including our revenues, operating expenses, operating margins, and profitability, may fluctuate significantly in the future, and period-to-period comparisons of our results may not be meaningful. Accordingly, the results of any one quarter should not be viewed as a prediction or indication of our future performance.
As a result of continuing investments to expand our business, we may not achieve or sustain profitability. ● Our rapid growth may not be indicative of our future growth, and our limited operating history may make it difficult to assess our future viability. ● We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy. ● We have previously identified material weaknesses and significant deficiencies in our internal control over financial reporting for our financial year ended December 31, 2022.
As a result of continuing investments to expand our business, we may not achieve or sustain profitability. • Our rapid growth may not be indicative of our future growth, and our limited operating history may make it difficult to assess our future viability. • We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy. • The retail food and non-chocolate confectionary and freeze dried candy segments are highly competitive.
Our ability to adequately store, maintain, and deliver our products is critical to our business. Keeping our food products at specific temperatures and humidity levels maintains food safety and quality.
Our ability to adequately store, maintain, and deliver our products is critical to our business. Keeping our food products at specific temperatures and humidity levels maintains food safety and quality. For example, in 2024, our products suffered a melting issue during shipment that resulted in a loss of sales and additional costs related to remediation.
Our digital marketing strategy is integral to our business, as well as to the achievement of our growth strategies. Maintaining, positioning, and enhancing our brand will depend in part on the success of our marketing efforts.
Our success depends in part on the effectiveness of our digital marketing strategy and the expansion of our social media presence, but there are risks associated with these efforts. Our digital marketing strategy is integral to our business, as well as to the achievement of our growth strategies.
Failure to find a suitable replacement, even on a temporary basis, would have a material adverse effect on our ability to meet our current production targets, make it difficult to grow and would have an adverse effect on our results of operations. 19 Table of Contents During the year ended December 31, 2023, three key suppliers, Redstone Foods, Albanese and Jiangsu Shengifan Foodstuff accounted for approximately 61% of our total raw material and packaging purchases.
Failure to find a suitable replacement, even on a temporary basis, would have a material adverse effect on our ability to meet our production targets, make it difficult to grow and would have an adverse effect on our results of operations.
Even if we ultimately avoid financial liability for this type of exposure, we may incur significant costs in defending ourselves that could hurt our financial performance and condition. 24 Table of Contents Our ability to maintain and expand our distribution network and attract consumers, customers, distributors, retailers and brokers will depend on a number of factors, some of which are outside our control.
Our ability to maintain and expand our distribution network and attract consumers, customers, distributors, retailers and brokers will depend on a number of factors, some of which are outside our control.
Even inadvertent, non-negligent or unknowing violations of federal, state, or local regulatory requirements could expose us to adverse governmental action and materially adversely affect our business, operating results, and financial condition. The FDCA, which governs the shipment of foods in interstate commerce, generally does not distinguish between intentional and unknowing, non-negligent violations of the law’s requirements.
The FDCA, which governs the shipment of foods in interstate commerce, generally does not distinguish between intentional and unknowing, non-negligent violations of the law’s requirements. Most state and local laws operate similarly.
We have never paid dividends on our common stock and we do not intend to pay dividends for the foreseeable future. We have never declared or paid any dividends on our common stock and do not intend to pay any dividends in the foreseeable future.
Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business. We have never paid dividends on our common stock and we do not intend to pay dividends for the foreseeable future.
From time to time, we may consider opportunities to acquire other products or businesses that may expand the breadth of our markets or customer base. The success of future acquisitions will be dependent upon our ability to effectively integrate the acquired products and operations into our business. Integration can be complex, expensive and time-consuming.
The success of future acquisitions will be dependent upon our ability to effectively integrate the acquired products and operations into our business. Integration can be complex, expensive and time-consuming. The failure to successfully integrate acquired products or businesses in a timely and cost-effective manner could materially adversely affect our business, prospects, results of operations and financial condition.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+1 added−1 removed8 unchanged
Biggest changeFurther, the Company’s Information Technology Manager is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents pursuant to reports prepared by consultants, auditors, and other third parties retained by the Company, if necessary, to investigate cybersecurity incidents. 34 Table of Contents The Company’s Information Technology Manager informs the Audit Committee of cybersecurity incidents that may be material pursuant to escalation criteria set forth in the Company’s incident response plan and related processes.
Biggest changeFurther, the Company’s Information Technology Manager is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents pursuant to reports prepared by consultants, auditors, and other third parties retained by the Company, if necessary, to investigate cybersecurity incidents.
ITEM 1C. CYBERSECURITY Risk Management and Strategy: The Company has processes for assessing, identifying, and managing material risks from cybersecurity threats. The Company has designed and implemented a cybersecurity incident response plan and related processes, which is overseen by an internal information technology specialist.
ITEM 1C. C YBERSECURITY Risk Management and Strategy: The Company has processes for assessing, identifying, and managing material risks from cybersecurity threats. The Company has designed and implemented a cybersecurity incident response plan and related processes, which is overseen by an internal information technology specialist.
The Audit Committee is responsible for establishing and monitoring the integrity and effectiveness of controls and other procedures, including controls and procedures related to managing material risks from cybersecurity threats, which are designed to ensure that (1) all information required to be disclosed is recorded, processed, summarized, and reported accurately and on a timely basis, and (2) all such information is accumulated and communicated to management and the Company’s board of directors, as appropriate, to allow for timely decisions regarding such disclosures.
The Audit Committee is responsible for establishing and monitoring the integrity and effectiveness of controls and other procedures, including controls and procedures related to managing material risks from cybersecurity threats, which are designed to ensure that (1) all information required to be disclosed is recorded, processed, summarized, and reported accurately and on a timely basis, and (2) all such information is accumulated and communicated to management and the Company’s board of directors, as appropriate, to allow for timely decisions regarding such disclosures. 30 Table of Contents The Company’s Information Technology Manager oversees the Company’s incident response plan and related processes designed to assess and manage material risks, if any, from cybersecurity threats.
The Company’s management also assess and manage material risks, if any, from cybersecurity threats.
The Company’s management team also assesses and manages material risks, if any, from cybersecurity threats.
The Company’s Information Technology Manager is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents pursuant to criteria set forth in the Company’s incident response plan and related processes.
The Information Technology Manager also coordinates with any consultants, auditors and other third parties to assess and manage material risks, if any, from cybersecurity threats. The Company’s Information Technology Manager is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents pursuant to criteria set forth in the Company’s incident response plan and related processes.
Cybersecurity threats are identified and escalated to a member of Management pursuant to criteria set forth in these processes. These processes also include overseeing and identifying risks from cybersecurity threats associated with the use of third-party service providers, if any.
Cybersecurity threats are identified and escalated to a member of management pursuant to criteria set forth in these processes.
Removed
The Company’s Information Technology Manager oversees the Company’s incident response plan and related processes designed to assess and manage material risks, if any, from cybersecurity threats. The Information Technology Manager also coordinates with any consultants, auditors and other third parties to assess and manage material risks, if any, from cybersecurity threats.
Added
The Company’s Information Technology Manager informs the Audit Committee of cybersecurity incidents that may be material pursuant to escalation criteria set forth in the Company’s incident response plan and related processes.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−1 removed2 unchanged
Biggest changeThe Company also subleases approximately 141 rentable square meters in Mexico City, Mexico, which the Company uses as office space. The term of the sublease is approximately seventeen months and does not have a renewal period. We believe that these facilities are sufficient to meet our current needs.
Biggest changeWe also lease approximately 324,000 additional square feet for industrial and manufacturing space, in Dallas, Texas. The Company also subleases approximately 141 rentable square meters in Mexico City, Mexico, which the Company uses as office space. The term of the sublease is approximately seventeen months and does not have a renewal period.
ITEM 2. PROPERTIES Executive Offices We do not own any real property.
ITEM 2. PRO PERTIES We do not own any real property.
We intend to expand our facilities or add new facilities as we grow, and we believe that suitable additional space will be available as needed to accommodate expansion of our operations. Delivery Commitments We do not currently have any delivery commitments under our plan of operation.
We believe that these facilities are sufficient to meet our current needs. We intend to expand our facilities or add new facilities as we grow, and we believe that suitable additional space will be available as needed to accommodate expansion of our operations.
Removed
We entered into the lease agreement in connection with the closing of the Asset Purchase Agreement in October 2020.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS From time to time in the ordinary course of business, we are a party to various types of legal proceedings. We do not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows.
Biggest changeITEM 3. LEGAL PR OCEEDINGS From time to time in the ordinary course of business, we are a party to various types of legal proceedings. We do not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+16 added−36 removed2 unchanged
Biggest changeOur ability to pay dividends in the future may also be limited by covenants of any future outstanding indebtedness we incur. 36 Table of Contents Equity Compensation Plan Information Effective February 15, 2024, the 2024 Stock Incentive Plan (the “2024 Plan”) was approved by the Board and certain stockholders who hold a majority of the aggregate issued and outstanding shares of the Company’s voting stock took action by written consent to approve the 2024 Plan.
Biggest changeOur ability to pay dividends in the future may also be limited by covenants of any future outstanding indebtedness we incur.
Investors in the private placement included Sow Good’s Chief Executive Officer and Executive Chairman, in addition to certain other Sow Good Board members and accredited investors. The proceeds were used in funding incremental capital expenditures and general operating expenses.
Investors in the private placement included Sow Good’s Chief Executive Officer and Executive Chairman, in addition to certain other Sow Good board members, related parties, and accredited investors. The proceeds were used in funding incremental capital expenditures and general operating expenses.
A total of 780,000 of the warrants were issued to officers or directors. 38 Table of Contents Unregistered Issuance of Equity Securities The following issuances of our securities during the year ended December 31, 2023 were exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof and/or Rule 506 of Regulation D promulgated thereunder.
Unregistered Issuance of Equity Securities The following issuances of our securities during the twelve months ended December 31, 2024 were exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof and/or Rule 506 of Regulation D promulgated thereunder.
On August 30, 2023, the Company raised $3.7 million of capital from the sale of 735,000 newly issued shares of common stock at a share price of $5.00 in a private placement exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof.
On March 28, 2024, the Company raised $3,738,078 of capital from the sale of 515,597 newly issued shares of common stock at a share price of $7.25 in a private placement exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof.
High Low Fiscal Year Ended December 31, 2023 First Quarter $ 4.40 $ 2.00 Second Quarter $ 7.00 $ 3.50 Third Quarter $ 7.80 $ 3.75 Fourth Quarter $ 10.05 $ 6.00 Fiscal Year Ended December 31, 2022 First Quarter $ 3.05 $ 1.71 Second Quarter $ 4.50 $ 1.85 Third Quarter $ 4.05 $ 1.91 Fourth Quarter $ 3.54 $ 1.75 As of March 20, 2024, there were approximately 378 record holders of our common stock, not including shares held in “street name” in brokerage accounts which is unknown, and 6,059,962 shares of common stock outstanding on record.
High Low Fiscal Year Ended December 31, 2024 First Quarter $ 10.50 $ 7.13 Second Quarter $ 23.68 $ 9.75 Third Quarter $ 23.56 $ 10.32 Fourth Quarter $ 11.50 $ 2.04 Fiscal Year Ended December 31, 2023 First Quarter $ 4.40 $ 2.00 Second Quarter $ 7.00 $ 3.50 Third Quarter $ 7.00 $ 3.75 Fourth Quarter $ 10.05 $ 6.19 As of March 25, 2025, there were approximately 346 record holders of our common stock, not including shares held in “street name” in brokerage accounts which is unknown, and 11,383,060 shares of common stock outstanding on record.
The following table sets forth, for the fiscal quarters indicated, the high and low bid information for our common stock, as reported on the OTC Markets. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
The following table sets forth, for the fiscal quarters indicated, the high and low bid information for our common stock, as reported on the The Nasdaq Capital Market or OTC Markets, as applicable.
Shares of our common stock trade on the over-the-counter market and are quoted on the OTCQB tier of the OTC Markets under the symbol “SOWG.” On March 20, 2024, the closing price of our common stock was $7.50. Quotations on the OTCQB reflect inter-dealer prices, without retail markup, mark-down, or commission and may not necessarily represent actual transactions.
During periods for which the shares were traded on the OTC Markets, the following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share, provided that the volume weighted average sale price per share of common stock equals or exceeds $9.00 per share for thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.
Due to a redemption feature in the Warrants allowing the Company to redeem the Warrants for $0.001 per Warrant if the daily volume weighted average price per share over thirty consecutive trading days is above $9.00, the Company received indications of intent to exercise Warrants from various Holders given the recent increase in trading price of the Company's common stock.
Removed
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock There is a limited public market for our common stock.
Added
MARKET FOR REGISTRANT ’ S COMMO N EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock On May 2, 2024, trading of the Company’s common stock commenced on the Nasdaq Capital Market stock exchange under the symbol “SOWG.” Prior to that, shares of our common stock traded on the over-the-counter market and were quoted on the OTCQB tier of the OTC Markets under the symbol “SOWG.” On March 25, 2025, the closing price of our common stock was $1.13.
Removed
The initial aggregate number of shares of the Company’s common stock available for issuance under the 2024 Plan is equal to 3,000,000 shares of common stock including the number of reserved shares not issued or subject to outstanding grants under each of the prior incentive plans as of the effective date.
Added
The Company sold 12,374 shares of its common stock, par value $0.001 at a price of $2.05 per share to Claudia and Ira Goldfarb pursuant to a Stock Purchase Agreement, dated as of December 31, 2024.
Removed
Effective December 5, 2019, the 2020 Stock Incentive Plan (the “2020 Plan”) was approved by our Board. Amongst other things, the 2020 Plan authorized a total of 320,000 shares of our common stock.
Added
On May 2, 2024, the Company priced its registered underwritten public offering of 1,200,000 shares of the Company’s common stock, par value $0.001 at a price of $10.00 per share.
Removed
Subsequently, on October 1, 2020, January 4, 2021 and again on March 19, 2021, the Board approved an increase in the number of shares of common stock reserved under the 2020 Plan, from 320,000 shares to a total of 814,150 shares.
Added
In addition, the Company granted the underwriters a 30-day overallotment option to purchase up to 180,000 additional shares of common stock and issued to the underwriters warrants to purchase 120,000 shares of Common Stock. On May 1, 2024, the Company received approval to list its common stock on the Nasdaq Capital Market stock exchange (“Nasdaq”).
Removed
On December 15, 2023, our Board approved an amendment to the 2020 Plan (the “2020 Plan Amendment”) to effect an increase in the number of shares that remain available for issuance under the 2020 Plan by an additional 2,150,000 shares up to an aggregate of 2,964,150 shares available for issuance under the 2020 Plan.
Added
Trading on Nasdaq commenced on May 2, 2024. On May 9, 2024, the underwriters purchased all of the additional shares 32 Table of Contents pursuant to the full exercise of their overallotment option. Including proceeds from the additional shares, the proceeds from the public offering were approximately $11,974,976 net of offering expenses and underwriting discounts and commissions.
Removed
The following table sets forth certain information regarding our 2020 Plan as of December 31, 2023: For the fiscal years ended December 31, 2023 and 2022, we issued 2,050,905 and 138,597 stock options pursuant to the 2020 Plan.
Added
The proceeds are currently anticipated to be used for general corporate purposes, which may include funding working and growth capital, the expansion of our sales and marketing function and the reduction of certain tranches of our indebtedness.
Removed
There were 45,233 and 60,975 options cancelled or forfeited pursuant to the 2020 Plan during the years ended December 31, 2023 and 2022, respectively.
Added
On April 15, 2024, the Company issued 2,186,250 shares of its common stock in connection with the exercise of warrants that were issued between December 2021 and May 2023 (the “Warrants”), with exercise prices varying from $2.21 to $2.60 (the “Warrant Exercise”). None of the Warrants were amended prior to or in connection with the Warrant Exercise.
Removed
Number of securities to be issued upon exercise of outstanding stock options Weighted-average exercise price of outstanding stock options Number of securities remaining available for future issuance under the 2020 Plan 2,617,814 $19.39 346,336 Effective December 12, 2016, the 2016 Non-Qualified Stock Option Plan (the “2016 Plan”) was approved by our Board.
Added
Each of the exercising holders of warrants (collectively, the “Holders”), received its warrants in connection with the incurrence by the Company of indebtedness pursuant to various tranches of promissory notes issued between December 2021 and May 2023 (collectively, the “Notes”). The Warrants were classified as permanent equity at inception.
Removed
Amongst other things, the 2016 Plan authorized a total of 12,712 shares of our common stock.
Added
With authorization from the Company's Board of Directors, each of the Holders was provided an opportunity to, and agreed to, amend certain of such Holder’s Notes (the “Notes Amendment”) to allow for the partial prepayment of principal in an aggregate amount equal to the exercise price of such Holder’s Warrants.
Removed
The following table sets forth certain information regarding our 2016 Plan as of December 31, 2023: Number of securities to be issued upon exercise of outstanding stock options Weighted-average exercise price of outstanding stock options Number of securities remaining available for future issuance under the 2016 Plan 2,000 $12.00 10,712 For the fiscal years ended December 31, 2023 and 2022, we issued no stock options pursuant to the 2016 Plan.
Added
In addition to the Notes Amendment, certain of the Holders elected use a portion of the accrued but unpaid interest under such Holder’s Notes to pay the exercise price of the Warrants.
Removed
There were 0 and 1,000 options cancelled or forfeited pursuant to the 2016 Plan during the years ended December 31, 2023 and 2022.
Added
Certain of the Notes were repaid in full as a result of the Warrant Exercise and thereby did not need to be amended pursuant to the Notes Amendment (the Warrant Exercise, whether by partial or full repayment of principal, or by election to use a portion of accrued but unpaid interest under the Notes, together with the Notes Amendment, the “Warrant Exercise Transaction”).
Removed
Effective March 2, 2012, the 2012 Amended and Restated Stock Incentive Plan (the “2012 Plan”) was approved by our Board and the holders of a majority of our outstanding shares, replacing the Ante5, Inc. 2010 Stock Incentive Plan.
Added
As a result of the Warrant Exercise Transaction, excluding the impact of deferred debt costs, the Company’s debt was reduced by $5,200,362, accrued interest payable was reduced by $98,750, common equity was increased by $5,299,112 and the Company issued an aggregate of 2,186,250 shares of common stock.
Removed
Amongst other things, the 2012 Plan increased the number of shares reserved under the Plan to a total of 25,000 shares of our common stock.
Added
During the twelve months ended December 31, 2024, the Company issued 50,459 shares of common stock upon the exercise of stock options by employees, directors, and consultants under its 2020 Stock Option Plan. The aggregate proceeds from the exercise of these options were approximately $163,854.
Removed
The following table sets forth certain information regarding the 2012 Plan as of December 31, 2023: Number of securities to be issued upon exercise of outstanding stock options Weighted-average exercise price of outstanding stock options Number of securities remaining available for future issuance under the 2012 Plan 999 $107.40 24,001 For the fiscal years ended December 31, 2023 and 2022, we issued no stock options pursuant to the 2012 Plan.
Added
The proceeds were used for general corporate purposes, which include capital expenditures for the expansion of our production capacity, funding working and growth capital, the expansion of our sales and marketing function and the reduction of certain tranches of our indebtedness.
Removed
There were 667 and 1,666 options cancelled or forfeited pursuant to the 2012 Plan during the years ended December 31, 2023 and 2022, respectively. 37 Table of Contents Warrants Outstanding Warrants Warrants to purchase an aggregate total of 2,291,250 shares of common stock at a weighted average strike price of $2.50, exercisable over a weighted average life of 8.51 years were outstanding as of December 31, 2023.
Added
During the twelve months ended December 31, 2024, the Company issued 52,500 shares of common stock upon the exercise of warrants by directors, and consultants under issued in 2020 as compensation for personal guarantees of debt. The aggregate proceeds from the exercise of these warrants were approximately $210,000.
Removed
As of December 31, 2023 , the unamortized debt discounts related to these warrants were $2.1 million, which will be expensed over the life of the outstanding debts, which mature from April 24, 2024 to August 23, 2025.
Added
The proceeds were used for general corporate purposes, which include capital expenditures for the expansion of our production capacity, funding working and growth capital, the expansion of our sales and marketing function and the reduction of certain tranches of our indebtedness.
Removed
Amortization of warrants included in interest expense was $1.2 million and $925.8 thousand for the years ended December 31, 2023 and 2022, respectively. The warrants are being expensed over the life of the loans.
Removed
Warrants Granted On May 11, 2023, we closed on an offering to sell $100,000 of promissory notes and warrants to purchase an aggregate 25,000 shares of the Company’s common stock, exercisable over a ten-year period at a price of $2.50 per share, representing 25,000 warrant shares per $100,000 of notes purchased. The notes mature on May 11, 2024.
Removed
On May 11, 2023, the Company received aggregate proceeds of $100.0 thousand from one of the Company’s Directors on the sale of these notes and warrants.
Removed
On April 25, 2023, we closed on an offering to sell up to $1.2 million of promissory notes and warrants to purchase an aggregate 300,000 shares of the Company’s common stock, exercisable over a ten-year period at a price of $2.50 per share, representing 25,000 warrant shares per $100,000 of notes purchased. The notes mature on April 25, 2024.
Removed
The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share, provided that the volume weighted average sale price per share of common stock equals or exceeds $9.00 per share for thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.
Removed
On April 25, 2023, the Company received aggregate proceeds of $800.0 thousand from two of the Company’s Directors and $400.0 thousand from one accredited investor on the sale of these notes and warrants.
Removed
On April 11, 2023, warrants to purchase an aggregate 62,500 shares of common stock were issued to a director pursuant to a private placement debt offering in which aggregate proceeds of $250,000 were received in exchange for promissory notes and warrants to purchase an aggregate 62,500 shares of common stock, representing 25,000 warrant shares per $100,000 of promissory notes.
Removed
The warrants are fully vested and exercisable over a period of 10 years at a price of $2.60 per share.
Removed
The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $9.00 per share for thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.
Removed
On December 21, 2022, the Company closed a private placement and concurrently entered into a note and warrant purchase agreement with related parties to sell an aggregate $2.075 million of promissory notes and warrants to purchase an aggregate 311,250 shares of common stock, representing 15,000 warrant shares per $100,000 of promissory notes.
Removed
The warrants are exercisable at a price of $2.21 per share over a ten-year term.
Removed
On August 23, 2022, we closed on an offering to sell up to $2.5 million of promissory notes and warrants to purchase an aggregate 625,000 shares of the Company’s common stock, exercisable over a ten-year period at a price of $2.60 per share, representing 25,000 warrant shares per $100,000 of notes purchased. The notes mature on August 23, 2025.
Removed
Loans may be advanced to the Company from time to time from August 23, 2022 to the Maturity Date.
Removed
The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share, provided that the volume weighted average sale price per share of common stock equals or exceeds $9.00 per share for thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.
Removed
On various dates from September 29, 2022 through March 7, 2023, the Company received aggregate proceeds of $2.25 million from two of the Company’s Directors on the sale of these notes and warrants.
Removed
On April 8, 2022, warrants to purchase an aggregate 925,000 shares of common stock were issued pursuant to a private placement debt offering in which aggregate proceeds of $3.7 million were received in exchange for promissory notes and warrants to purchase an aggregate 925,000 shares of common stock, representing 25,000 warrant shares per $100,000 of promissory notes.
Removed
The warrants are fully vested and exercisable over a period of ten years at a price of $2.35 per share.
Removed
The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share, provided that the volume weighted average sale price per share of common stock equals or exceeds $9.00 per share for thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.
Removed
On November 20, 2023 the Company entered into a stock purchase agreement with multiple accredited investors to sell and issue to the purchasers, thereunder, an aggregate of 426,288 shares of the Company’s common stock at a price of $6.50 per share in a private placement exempt from the registration requirements of the Securities Act of 1933 pursuant to Section 4(a)(2) thereof.
Removed
Proceeds to the Company from the sale of the shares were $2.8 million. Investors in the private placement included Sow Good’s Chief Executive Officer and Executive Chairman, in addition to certain other Sow Good Board members and accredited investors. The proceeds were used in funding incremental capital expenditures and general operating expenses.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

57 edited+42 added−72 removed15 unchanged
Biggest changeThe decreased use of cash was primarily due to increased revenues of $15.6 million, partially offset by changes in working capital from operating activities which resulted in an increased use of cash of $5.4 million during the year ended December 31, 2023, as compared to $294.1 thousand for the same period in the previous year, mainly due to increased use of cash for inventory of $3.1 million and increased accounts receivable of $2.4 million.
Biggest changeThe increase in cash used in operating activities of $4.6 million was primarily due to increased inventory. Net cash used in investing activities was $5.93 million for twelve months ended December 31, 2024, compared to $2.3 million for the twelve months ended December 31, 2023, an increase of $3.7 million.
Indebtedness Promissory Notes and Warrants On May 11, 2023, the Company received proceeds of $100,000 from Bradley Berman, one of the Company’s directors, on behalf of the Bradley Berman Irrevocable Trust, from the sale of notes and warrants pursuant to an offering to sell up to $1,500,000 of promissory notes and warrants to purchase an aggregate 375,000 shares of the Company’s common stock, exercisable over a ten-year period at a price of $2.50 per share, representing 25,000 warrant shares per $100,000 of notes purchased.
Indebtedness Promissory Notes and Warrants On May 11, 2023, the Company received proceeds of $100,000 from Bradley Berman, one of the Company’s former directors, on behalf of the Bradley Berman Irrevocable Trust, from the sale of notes and warrants pursuant to an offering to sell up to $1,500,000 of promissory notes and warrants to purchase an aggregate 375,000 shares of the Company’s common stock, exercisable over a ten-year period at a price of $2.50 per share, representing 25,000 warrant shares per $100,000 of notes purchased.
The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share, provided that the volume weighted average sale price per share of common stock equals or exceeds $9.00 per share for thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.
The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share, provided that the volume weighted average sale price per share of common stock equals or exceeds $9.00 per share for 30 consecutive trading days ending on the third business day prior to the mailing of notice of such redemption.
Pursuant to the terms of the 2023 Lease Agreement, beginning on November 1, 2023 the Company leases approximately 51,264 rentable square feet at Stemmons 10, 308 Mockingbird Lane, Dallas, TX 75247 for a term of approximately five years and two months (the “Initial Term”), which the Company intends to use as warehousing and distribution space.
Pursuant to the terms of the 2023 Lease Agreement, beginning on November 1, 2023 the Company leases approximately 51,264 rentable square feet at Stemmons 10, 308 Mockingbird Lane, Dallas, TX 75247 for a term of approximately five years and two months, which the Company intends to use as warehousing and distribution space.
On December 21, 2022, the Company closed a private placement and concurrently entered into a note and warrant purchase agreement with related parties to sell an aggregate $2.075 million of promissory notes and warrants to purchase an aggregate 311,250 shares of common stock, representing 15,000 warrant shares per $100,000 of promissory notes.
On December 31, 2022, the Company closed a private placement and concurrently entered into a note and warrant purchase agreement with related parties to sell an aggregate $2.075 million of promissory notes and warrants to purchase an aggregate 311,250 shares of common stock, representing 15,000 warrant shares per $100,000 of promissory notes.
Sow Good has harnessed the power of our proprietary freeze drying technology and product-specialized manufacturing facility to transform traditional candy into a novel and exciting everyday confectionaries subcategory that we call freeze dried candy.
Sow Good has harnessed the power of our proprietary freeze drying technology and product-specialized manufacturing facility to transform traditional candy into a novel and exciting everyday confectioneries subcategory that we call freeze dried candy.
We believe this strategy will capture the attention of new consumers, further educate and attract current consumers, and ultimately, increase sales for our retailers. Our highly differentiated omnichannel distribution strategy has three key components: retailers, e-commerce, and distributors.
We believe this strategy will capture the attention of new consumers, further educate and attract current consumers, and ultimately, increase sales for our retailers. Our omnichannel distribution strategy has three key components: retailers, e-commerce, and distributors.
Accrued interest on the notes was payable semi-annually beginning September 30, 2022 at the rate of 6% per annum, but on August 23, 2022, the notes were amended to update the terms of the interest payment to be payable at the earlier of the maturity date or January 1, 2025, rather than being paid semi-annually.
Accrued interest on the notes was payable semi-annually beginning September 30, 2022 at the rate of 6% per annum, but on August 23, 2022, the notes were amended to update the terms of the interest 39 Table of Contents payment to be payable at the earlier of the maturity date or January 1, 2025, rather than being paid semi-annually.
Bolstering our distribution will be a key growth driver for Sow Good so more of our products are available wherever our consumers choose to shop, whether it be a retail store, convenience store, or directly online.
Bolstering our distribution and sales force will be a key growth driver for Sow Good so more of our products are available wherever our consumers choose to shop, whether it be a retail store, convenience store, or directly online.
On August 23, 2022, the Company closed on an offering to sell up to $2.5 million of promissory notes and warrants to purchase an aggregate 625,000 shares of the Company’s common stock, exercisable over a ten-year period at a price of $2.60 per share, representing 25,000 warrant shares per $100,000 of notes purchased. The notes mature on August 23, 2025.
On August 23, 2022, the Company closed on a private placement for up to $2.5 million of promissory notes and warrants to purchase an aggregate 625,000 shares of the Company’s common stock, exercisable over a ten-year period at a price of $2.60 per share, representing 25,000 warrant shares per $100,000 of notes purchased. The notes mature on August 23, 2025.
On April 25, 2023, we closed on an offering to sell up to $1,500,000 of promissory notes and warrants to purchase an aggregate 375,000 shares of the Company’s common stock, exercisable over a ten-year period at a price of $2.50 per share, representing 25,000 warrant shares per $100,000 of notes purchased. The notes mature on April 25, 2024.
On April 25, 2023, we closed on a private placement for up to $1,500,000 of promissory notes and warrants to purchase an aggregate 375,000 shares of the Company’s common stock, exercisable over a ten-year period at a price of $2.50 per share, representing 25,000 warrant shares per $100,000 of notes purchased. The notes mature on April 25, 2024.
ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated historical financial statements and the notes to those statements that appear elsewhere in this report.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated historical financial statements and the notes to those statements that appear elsewhere in this report.
In aggregate, this omnichannel strategy provides us with a diverse set of consumers and customer partners, leading to a larger TAM opportunity than is normally available to products sold only in grocery stores, along with an opportunity to develop a direct relationship with our customers at our website, www.thisissowgood.com .
In aggregate, this omnichannel strategy provides us with a diverse set of consumers and customer partners, leading to a larger total addressable market opportunity than is normally available to products sold only in grocery stores, along with an opportunity to develop a direct relationship with our customers at our website, www.thisissowgood.com and our social medial pages.
The 2023 Lease Agreement may be extended for a period of five years, at the option of the Company, at a rate to be based on a fair market rent rate determined at the time of the extension.
The 2023 Lease Agreement may be extended for a period of five years, at the option of the Company, at a rate to be based on a fair market rent rate determined at the time of the extension. Off-Balance Sheet Arrangements None.
We began commercializing our freeze dried candy products in the first quarter of 2023, and as of December 31, 2023, we have fourteen stock keeping units (“SKUs”) in our Sow Good Candy line of treats and four SKUs in our Sow Good Crunch Cream line.
We began commercializing our freeze dried candy products in the first quarter of 2023, and as of December 31, 2024, we have twenty-one stock keeping units (“SKUs”) in our Sow Good Candy line of treats and three SKUs in our Sow Good Crunch Cream line.
We sell our treats using an omnichannel strategy primarily focused on the wholesale and retail channels with less than 2% of sales coming from e-commerce as of December 31, 2023. As of December 31, 2023, our treats are offered for sale in over 5,850 brick-and-mortar retail outlets in the United States.
We sell our treats using an omnichannel strategy primarily focused on the wholesale and retail channels with less than 2% of sales coming from e-commerce as of December 31, 2024. As of December 31, 2024, our treats are offered for sale in approximately 3,000 brick-and-mortar retail outlets in the United States.
The Sublease Agreement provides for rent payments at fixed price of $5.25 thousand per month plus the corresponding Value Added Tax (“VAT”) for the duration of the Term. The Company is also responsible for operating expenses of the Premises, which includes a maintenance fee, electricity and internet services.
The Term of the Lease Agreement will commence on February 1, 2024. The Sublease Agreement provides for rent payments at fixed price of $5.25 thousand per month plus the corresponding Value Added Tax for the duration of the Term. The Company is also responsible for operating expenses of the Premises, which includes a maintenance fee, electricity and internet services.
Contractual Obligations and Commitments Upon closing of the Asset Purchase Agreement, the Company assumed the Seller’s obligations under a real property lease for its 20,945 square foot facility at 1440 N. Union Bower Rd., Irving, TX 75061, under which an entity owned entirely by Ira Goldfarb is the landlord.
Contractual Obligations and Commitments The Company is a party to a real property lease for its 20,945 square foot facility at 1440 N. Union Bower Rd., Irving, TX 75061, under which an entity owned entirely by Ira Goldfarb is the landlord.
Our commitment to providing the most flavorful and crunchy treats extends into the product packaging process, where our 194 employees dedicated to hand-packaging, as of December 31, 2023 put our treats through our hand-packed precision packaging process in vigilantly managed low humidity conditions to protect our treats from reintroduction to moisture.
Our commitment to providing the most flavorful and crunchy treats extends into the product packaging process, where our employees are dedicated to hand-packaging our treats through our precision packaging process in vigilantly managed low humidity conditions to protect our treats from reintroduction to moisture.
While the factors and trends described below present significant opportunities for us, they also pose important challenges that we must successfully address to enable us to sustain the growth of our business and improve our results of operations.
Key Factors Affecting our Performance We believe the growth of our business and our future success is dependent upon many factors. While the factors and trends described below present significant opportunities for us, they also pose important challenges that we must successfully address to enable us to sustain the growth of our business and improve our results of operations.
Our products have launched in retailers nationwide from convenience and grocery stores to big-box retailers, such as Five Below, Target, Misfits Market/Imperfect Foods, TJX Canada, Big Lots, Hy-Vee, Cracker Barrel, and Circle K. In addition, we sell a substantial portion of our products through distributors such as Redstone Foods, CB Distributors and Alpine Foods.
Our products have launched in retailers nationwide from convenience and grocery stores to big-box retailers, such as Five Below, Misfits Market/Imperfect Foods, TJX Canada, Hy-Vee, Cracker Barrel, 7/11, H-E-B, Kroger and Albertsons. In addition, we sell a substantial portion of our products through distributors such as Redstone, CB Distributors and Lipari Foods.
We continue to increase our shelf presence, SKU portfolio and number of stores with existing customers. In addition, given the nascent state of the freeze dried candy segment and the number of potential retailer and wholesaler customers, we also believe there is a significant growth opportunity with customer acquisition in both the retail and wholesale channels.
Given the nascent state of the freeze dried candy segment and the number of potential retailer and wholesaler customers, we also believe there is a significant growth opportunity with customer acquisition in both the retail and wholesale channels, domestically and internationally.
On December 21, 2022 and September 29, 2022, the Company received aggregate proceeds of $0.25 million and $0.75 million from two of the Company’s directors on the sale of these notes and warrants.
On December 21, 2022 and September 29, 2022, the Company received aggregate proceeds of $0.25 million and $0.75 million from two of the Company’s directors on the sale of these notes and warrants. The fair value of the warrants was allocated as a debt discount and amortized over the life of the loan.
For many of these customers, we launched with a limited number of SKUs and are now significantly outpacing initial sales projections. As we scale production, we will have the ability to increase the availability of our products to these customers in current locations and distribution to more of their stores, while also broadening our SKU portfolio offerings.
As we scale production, we will have the ability to increase the availability of our products to these customers in current locations and distribution to more of their stores, while also broadening our SKU portfolio offerings.
This process of removing moisture from the product, which can take up to twenty-four hours, concentrates its flavor, creating a “hyper dried, hyper crunchy, and hyper flavorful” snackable treat.
This process of removing moisture from the product, which can take up to twenty-four hours, concentrates its flavor, creating a “hyper dried, hyper crunchy, and hyper flavorful” snackable treat. Our freeze drying process and expertise allow us to easily expand our manufacturing into other freeze dried snacks, such as yogurt snacks.
We believe the commercialization of these new products will require us to hire additional employees within our product design and commercialization team, thereby increasing our marketing expense, as well as research and development costs within our administrative expense. Impact of inflation on operations.
Our pace of growth will be partially affected by the cadence and magnitude of new product launches over time. We believe the commercialization of any new products will require us to hire additional employees within our product design and commercialization team, thereby increasing our marketing expense, as well as research and development costs within our administrative expense.
Gutierrez Living Trust, as beneficially controlled by the brother of the Company’s CEO, respectively, on the sale of these notes and warrants.
Gutierrez Living Trust, as beneficially controlled by the brother of the Company’s CEO, respectively, on the sale of these notes and warrants. The fair value of the warrants was allocated as a debt discount and amortized over the life of the loan.
Roble 660, Valle del Campestre, 66265 San Pedro Garza García Municipality, Nuevo León, 66269 (the “Premises”) for a term of approximately seventeen months (the “Term”), which the Company intends to use as office space. The Term of the Lease Agreement will commence on February 1, 2024 (the “Sublease Commencement Date”).
Pursuant to the terms of the Sublease Agreement, the Company will sublease approximately 141 rentable square meters at Av. Roble 660, Valle del Campestre, 66265 San Pedro Garza García Municipality, Nuevo León, 66269 for a term of approximately seventeen months, which the Company intends to use as office space.
While any evidence of seasonality is currently not discernable because of our growth, we anticipate certain holiday cycles such as Halloween, Christmas, Easter and Valentine’s Day contributing to revenue fluctuations within a given year. 41 Table of Contents Components of Results of Operations Revenues We derive revenues from the sales of our freeze dried treats.
While evidence of any demand seasonality is currently difficult to assess because of our growth, we anticipate certain holiday cycles such as Halloween, Christmas, Easter and Valentine’s Day contributing to revenue fluctuations within a given year.
We expect supplies and prices of the ingredients that we are going to use to be affected by a variety of factors, such as weather, seasonal fluctuations, demand, politics and economics in the producing countries. These factors subject us to shortages or interruptions in product supplies, which could adversely affect our revenue and profits.
Impact of inflation and other factors on our supply chain and operations. We expect supplies and prices of the ingredients that we are going to use to be affected by a variety of factors, such as weather, seasonal fluctuations, demand, politics and economics in the producing countries.
The Company is required to provide a deposit of guarantee in the amount of $5.25 thousand in connection with the Sublease Agreement. The Sublease Agreement does not have a renewal period. Off-Balance Sheet Arrangements None.
The Company is required to provide a deposit of guarantee in the amount of $5.25 thousand in connection with the Sublease Agreement. The Sublease Agreement does not have a renewal period. On October 26, 2023, the Company entered into a lease agreement with Prologis, Inc., a Maryland corporation.
These factors and trends in our business have driven fluctuations in revenues over the periods presented and are expected to be key drivers of our results of operations and liquidity position for the foreseeable future. Ability to Meet Customer Demand through Production Capacity Expansion Our customers consistently seek higher quantities of our treats than we can supply.
These factors and trends in our business have driven 34 Table of Contents fluctuations in revenues over the periods presented and are expected to be key drivers of our results of operations and liquidity position for the foreseeable future.
The lease term is through September 15, 2025, with two five-year options to extend, at a monthly lease term of $10.0 thousand, with approximately a 3% annual escalation of lease payments commencing September 15, 2021. On October 26, 2023, the Company entered into a lease agreement (the “2023 Lease Agreement”) with Prologis, Inc., a Maryland corporation (the “Landlord”).
The lease term is through September 15, 2025, with two five-year options to extend, at a monthly lease term of $10.0 thousand, with approximately a 3% annual escalation of lease payments commencing September 15, 2021. On May 22, 2024, the Company entered into an industrial lease with USCIF Pinnacle Building B LLC, a Delaware limited liability company.
In addition, we may face limits on the ability to source some of the candy for our freeze dried candy products. Seasonality Because we are early in our lifecycle of growth, it is difficult to discern the exact magnitude of seasonality affecting our business.
Seasonality Because we are early in our lifecycle of growth, it is difficult to discern the exact magnitude of seasonality affecting our business from a demand standpoint.
Cash Flows The following table summarizes our cash flows during the years ended December 31, 2023 and 2022, respectively.
These notes mature on April 8, 2025. Cash Flows The following table summarizes our cash flows during the twelve months ended December 31, 2024 and 2023, respectively.
Years Ended December 31, 2023 2022 Net cash used in operating activities $ (4,845,640 ) $ (5,146,635 ) Net cash provided by (used in) investing activities (2,266,635 ) (2,622,829 ) Net cash provided by financing activities 9,245,848 4,700,000 Net change in cash and cash equivalents $ 2,133,573 $ (3,069,464 ) Net cash used in operating activities was $4.8 million and $5.1 million for the years ended December 31, 2023 and 2022, respectively, a decrease of $301.0 thousand.
Year Ended December 31, 2024 2023 Net cash used in operating activities $ (9,426,745 ) $ (4,845,640 ) Net cash used in investing activities (5,927,876 ) (2,266,635 ) Net cash provided by financing activities 16,668,024 9,245,848 Net change in cash and cash equivalents $ 1,313,403 $ 2,133,573 Net cash used in operating activities was $9.4 million for the twelve months ended December 31, 2024, compared to $4.8 million of cash used in operating activities twelve months ended December 31, 2023.
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.
Our ability to scale production and distribution capabilities and further increase the value of our brands is largely dependent on our success in deploying additional capital. Our plan for satisfying our cash requirements for the next twelve months is through cash on hand and additional financing in the form of equity or debt as needed.
We expect our general and administrative expenses will increase as our business grows. Interest Expense Interest expense consists primarily of the cash interest expense on outstanding debt and the amortization of the debt discount created upon the issuance of warrants in connection with debt.
Interest Expense Interest expense consists primarily of the cash interest expense on outstanding debt and the amortization of the debt discount created upon the issuance of warrants in connection with debt. Interest Income Interest income consists primarily of the interest on short-term U.S Treasury Bonds.
Ability to Expand Our Product Line Our goal is to substantially expand our product line over time to increase our growth opportunity and reduce product-specific risks through SKU diversification into multiple products. Our pace of growth will be partially affected by the cadence and magnitude of new product launches over time.
Ability to Expand Our Product Line Our goal is to substantially expand our product line over time to increase our growth opportunity and reduce product-specific risks through SKU diversification into multiple products, including freeze dried products beyond our freeze dried treats, such as yogurt snacks and jerky.
The increased working capital is mainly attributable to increases in cash, accounts receivable, and inventory, partially offset by increased accounts payable. As of December 31, 2023, our balance of cash and cash equivalents was $2.4 million and we had total working capital of $4.5 million.
The increased working capital is mainly attributable to increases in inventory of $16.2 million, accounts receivable of $2.1 million, and cash of $1.3 million, partially offset by the increase in the current portion of our lease liability of $2.0 million.
Net cash provided by financing activities the year ended December 31, 2023 consisted of $2.8 million of proceeds from notes payable, $2.4 million of which were related parties, and $6.4 million of proceeds from private placement offerings to accredited investors and related parties in August and November.
Net cash provided by financing activities for the twelve months ended December 31, 2023 was comprised of debt financing received from our officers, directors and other non-related parties of $2.8 million, and cash proceeds from the issuance of 1,161,288 shares of common stock under private placement offerings to accredited investors and related parties of $6.4 million.
Provision for Income Taxes The Company had no income tax expense in the 2023 or 2022 periods, as we maintain a full valuation allowance related to our net deferred tax assets, primarily due to our historical net loss position.
Provision for Income Taxes The Company maintains a full valuation allowance related to our net deferred tax assets, primarily due to our historical net loss position. For each of the twelve months ended December 31, 2024 and 2023, the Company recognized federal income tax expense of $123,579, and $0, respectively.
On January 19, 2024, the Company entered into a sublease agreement (the “Sublease Agreement”) with Papsa Merx S. de R.S. de C.V., a corporation registered in Mexico City, Mexico (the “Sublessor”). Pursuant to the terms of the Sublease Agreement, the Company will sublease approximately 141 rentable square meters at Av.
The Lease may be renewed upon the extension in writing between the Company and the Lessor for a period of up to 60 months. On January 19, 2024, the Company entered into a sublease agreement with Papsa Merx S. de R.S. de C.V., a corporation registered in Mexico City, Mexico.
Professional Services General and administrative expenses related to professional services were $688.0 thousand for the year ended December 31, 2023, compared to $245.5 thousand for the year ended December 31, 2022, an increase of $442.5 thousand, or 180%.
Professional services Professional services were $1.6 million for the twelve months ended December 31, 2024, compared to $688.0 thousand for the twelve months ended December 31, 2023, an increase of $901.3 thousand, or 131%.
Net cash used in investing activities was $2.3 million for the year ended December 31, 2023, compared to $2.6 million for the year ended December 31, 2022, a decrease of $356.2 thousand. During the year ended December 31, 2023, cash used in investing activities consisted of $2.3 million used for additional freezers.
Net loss Pretax net loss for the twelve months ended December 31, 2024 was $3.6 million, compared to a pretax net loss of $3.1 million during the twelve months ended December 31, 2023, an increased loss of $518.2 thousand.
Customer acquisition in these channels depends on, among other things, our go-to-market function and our ability to meet the demand of customers who require large volumes of products. 40 Table of Contents Ability to Optimize Our Liquidity Position While Scaling Our primary focus is developing our production capacity, which requires significant working capital for inventory and supply chain management, and capital expenditures for additional freeze driers domestically and our expansion outside the United States.
Customer acquisition in these channels depends on, among other things, our go-to-market function and our ability to meet the demand of customers who require large volumes of products.
The warrants are exercisable at a price of $2.21 per share over a ten-year term.
The warrants are exercisable at a price of $2.21 per share over a ten-year term. On April 15, 2024, in connection with the Warrant Exercise Transaction, the promissory note’s aggregate principal amount was reduced to $679,138.
Our products have launched in retailers nationwide from convenience and grocery stores to big-box retailers, such as Five Below, Target, Misfits Market/Imperfect Foods, TJX Canada, Big Lots, Hy-Vee, Cracker Barrel, and Circle K. In addition, we sell a substantial portion of our products through distributors such as Redstone, CB Distributors and Alpine Foods.
Beyond product innovation, we are committed to job creation and positive community impact, making Sow Good a forward-thinking force in the industry. Our products have launched in retailers nationwide from convenience and grocery stores to big-box retailers, such as Five Below, Misfits Market/Imperfect Foods, TJX Canada, Hy-Vee, Cracker Barrel, 7/11, H-E-B, Kroger and Albertsons.
We have built four bespoke freeze driers using proprietary technology tailored specifically to our products, creating a truly state-of-the-art facility in Irving, Texas. We are in the process of fabricating and operationalizing two additional freeze driers, which we anticipate will come online in our Irving, Texas facility in the third quarter of 2024.
We have built six bespoke freeze driers using proprietary technology tailored specifically to our products which allows us to freeze dry up to 24 million units of freeze dried candy per year, creating a truly state-of-the-art facility in Irving, Texas. We also have six additional freeze driers, which we can have operational by the end of 2025, as needed.
Due to our history of operating losses and expectation of future operating losses, we do not expect any significant income tax expenses or benefits for the foreseeable future. Liquidity and Capital Resources The following table summarizes our total current assets, liabilities and working capital at December 31, 2023 and 2022.
Liquidity and Capital Resources The following table summarizes our total current assets, liabilities and working capital at December 31, 2024 and December 31, 2023.
Video reviews of Sow Good’s products that are organically generated by TikTok users have amassed over 4.5 million views as of December 31, 2023. We believe there is a significant growth opportunity in increasing our shelf presence, SKU portfolio, and number of stores with our existing customers.
In addition, we sell a substantial portion of our products through distributors such as Redstone Foods, CB Distributors and Lipari Foods. We believe there is a significant growth opportunity in increasing our shelf presence, SKU portfolio, and number of stores with our existing customers.
December 31, 2023 2022 Current Assets $ 10,237,837 $ 2,578,057 Current Liabilities $ 5,771,200 $ 890,177 Working Capital $ 4,466,637 $ 1,687,880 45 Table of Contents As of December 31, 2023, we had working capital of $4.5 million, compared to working capital of $1.7 million as of December 31, 2022.
December 31, December 31, 2024 2023 Current Assets $ 25,076,140 $ 10,378,639 Current Liabilities $ 7,364,541 $ 5,771,200 Working Capital $ 17,711,599 $ 4,607,439 As of December 31, 2024, we had working capital of $17.7 million, compared to working capital of $4.6 million as of December 31, 2023.
Other General and Administrative Expenses Other general and administrative expenses for the year ended December 31, 2023 were $1.9 million, compared to $1.6 million for the year ended December 31, 2022, an increase of $228.2 thousand, or 14.0%.
Cost of Goods Sold Cost of goods sold for the twelve months ended December 31, 2024 were $19.0 million, compared to $12.8 million for the twelve months ended December 31, 2023, an increase of $6.2 million, or 49%. Labor, materials, occupancy, reserves, and freight costs increased year over year.
Salaries and benefits included stock-based compensation expense of $836.3 thousand for the year ended December 31, 2023, compared to $888.1 thousand for the year ended December 31, 2022, a decrease of $51.9 thousand, or 5.8%.
Salaries and benefits included amortization of stock options granted to employees and officers for the twelve months ended December 31, 2024 of $4.4 million, compared to $599.9 thousand for the twelve months ended December 31, 2023, an increase of $3.8 million, or 638%, mainly due to the amortization of performance shares granted December 15, 2023.
Cost of Goods Sold Our cost of goods sold consists primarily of material costs and labor on the production of freeze dried treats. Operating Expenses Our operating expenses consist of general and administrative expenses, which includes salaries and benefits expenses, professional services expenses and other general and administrative expenses, intangible asset impairment losses and goodwill impairment losses.
Operating Expenses Our operating expenses consist of general and administrative expenses, which includes salaries and benefits expenses, professional services expenses and other general and administrative expenses. We expect our general and administrative expenses will increase as our business grows.
During the year ended December 31, 2022, cash used in investing activities primarily consisted of $2.6 million of payments for the construction of the Company’s second and third freeze dryers and expansion of its operations facility. 46 Table of Contents Net cash provided by financing activities was $9.2 million and $4.7 million for the years ended December 31, 2023 and 2022, respectively, an increase of $4.5 million.
Net cash provided by financing activities was $16.7 million and $9.2 million for the twelve months ended December 31, 2024 and 2023, respectively.
For each of the years ended December 31, 2023 and 2022, we have determined that we have one operating segment and one reportable segment. We earned $16.1 million of revenue in 2023, primarily through sales to distributors and big box retailers. Our general and administrative expenses totaled $5.9 million in 2023, including salaries and benefits expenses of $3.4 million.
For each of the years ended December 31, 2024 and 2023, we have determined that we have one operating segment and one reportable segment. 36 Table of Contents Results of Operations for the Years Ended December 31, 2024 and December 31, 2023.
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The rapid demand growth for our delectable treats since their retail debut in March 2023 highlights our consumers’ excitement for our novel and explosively flavorful treats that “satisfy your sweet tooth in fewer bites.” We have custom-built a 20,945 square foot freeze drying facility in Irving, Texas, and have entered into additional co-manufacturing arrangements in China and Colombia, that together allow us to freeze dry fourteen million units per year to our demanding quality and safety specifications.
Added
We have custom-built a 20,945 square foot freeze drying facility in Irving, Texas.
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In addition, due to strong customer demand, we have entered into co-manufacturing arrangements with third-party manufacturers whose freeze drying facilities meet our exacting production, sanitation and allergen control requirements, as well as our food quality and safety standards. Currently, all of our products manufactured by third parties are shipped to our facilities in Texas for packaging.
Added
Sow Good, co-founded by Claudia and Ira Goldfarb, brings over a decade of manufacturing expertise to the consumer packaged goods (“CPG”) sector, specializing in advanced freeze-drying technology. Leveraging our proprietary technology, Sow Good delivers innovative, high-quality products with a long shelf life and natural preservation.
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However, we are actively searching for additional packaging facilities and additional internal freeze driers for further increased capacity. Sow Good is led by co-founders Claudia and Ira Goldfarb, who have over a decade of manufacturing experience with an extensive freeze drying background, dedication to job creation, and proven track record of identifying and growing niche trends into everyday categories.
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Ability to Compete Against Competitors with Greater Resources and Market Clout We operate in a highly competitive industry against competitors with significantly greater financial and other resources.
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Under their leadership, our revenues have grown from $428.1 thousand during the year ended December 31, 2022 to approximately $16.1 million for the year ended December 31, 2023, with approximately $14.6 million of that being recorded in the six-month period ended December 31, 2023. 39 Table of Contents We believe the candy category is stagnant, repetitive, and in need of revitalization to reengage and captivate consumers seeking innovative ways to satisfy their sweet cravings.
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We have become aware of certain of our competitors using their status in the market and marketing spend to limit our current and future customers from purchasing our products or reducing our shelf space. This caused the loss of significant customers with resulted in a significant reduction in revenue and an increase in our inventory.
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We see our market opportunity as existing at the intersection of two burgeoning categories: freeze dried candy and non-chocolate confections. According to the NCA, the non-chocolate confections market grew 13.8% in sales in 2022, exceeding $10 billion, and according to Grand View Research is forecasted to grow at a compounded annual growth rate of 5.8% from 2023 to 2030.
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Our ability to keep our current customers, or grow our SKU portfolio on their shelves, and continue to expand our sales with new customers will depend on our competitors’ ability to leverage their market status and financial resources to limit our access to consumers and our ability to compete with these larger competitors.
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We believe the nascent freeze dried candy market is poised for exponential growth given increasing consumer preferences for novel and distinctive candy products. According to the NCA, approximately 61% of shoppers occasionally or frequently seek out products they have never purchased before.
Added
These factors subject us to shortages or interruptions in product supplies, which could adversely affect our revenue and profits. In addition, we may face limits on the ability to source some of the candy for our freeze dried candy products.
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Given our exceptional performance in retail launches, surging customer demand, and increasing production capacity, we are confident that we can catapult freeze dried candy from a trendy spark on social media to a stable, top-performing consumer confectionary category in retail.
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In addition, candy purchasing in summer months may be reduced due to a variety of factors including greater levels of health consciousness during warm weather. Operationally, heat waves from July through October of 2024 presented challenges in transporting our freeze-dried treats in the summer months. These conditions led to reduced shipments, higher inventory levels, and a decline in revenue.
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This platform is already set up but with some items set as out of stock until we have additional production capacity. Key Factors Affecting our Performance We believe the growth of our business and our future success is dependent upon many factors.
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Additionally, some candy transported via external distribution channels during the extreme summer heat melted, impacting its shelf performance. We worked to remove affected products from shelves and replace them promptly to support recovery in product velocity. In the short term, these measures have impacted our market reputation, sell-through rates, and operational results.
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In order for us to meet existing demand, we are actively expanding our internal production capacity and co-manufacturing arrangements. The speed and efficiency at which we are able to expand our production capacity, either internally or through co-manufacturing arrangements, will impact our results of operations.
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As a result, we anticipate an annual temporary decrease in shipments of our treats during summer months, which we believe is consistent with the greater candy industry trend. Components of Results of Operations Revenues We derive revenues from the sales of our freeze dried treats.
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Our ability to grow and meet future demand will be affected by our ability to properly plan for additional production capacity and co-manufacturing arrangements. Consumer Trends We compete in the freeze dried candy and non-chocolate confections segments of the greater food industry.
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The Company recognizes revenues when orders are shipped to customers. 35 Table of Contents Cost of Goods Sold Our cost of goods sold, which may include inventory write-downs, consists primarily of facilities costs, material costs, and labor on the production of freeze dried treats.
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According to the NCA, the non-chocolate confections market grew 13.8% in sales in 2022, exceeding $10 billion, and according to Grand View Research is forecasted to grow at a compounded annual growth rate of 5.8% from 2023 to 2030.
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Provision for Income Taxes The Company recognized federal income tax of $123.6 thousand, and $0, for the twelve months ended December 31, 2024 and 2023, respectively.
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We believe the nascent freeze dried candy market is poised for exponential growth given increasing consumer preferences for novel and distinctive candy products. According to the NCA, approximately 61% of shoppers occasionally or frequently seek out products they have never purchased before.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInterest Rate Risk We are not a party to agreements that subject us to floating rates of interest and do not anticipate entering into any transactions that would expose us to any direct interest rate risk. Foreign Currency Risk We did not hold any cash in foreign jurisdictions as of December 31, 2023.
Biggest changeQUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Commodity Price Risk We do not expect any significant effects from commodity price risk outside of inherent inflationary risks. 41 Table of Contents Interest Rate Risk We are not a party to agreements that subject us to floating rates of interest and do not anticipate entering into any transactions that would expose us to any direct interest rate risk.
However, we anticipate that as our foreign operations grow, we will hold more cash in foreign jurisdictions, particularly Mexico, Colombia and China, and thereby expose ourselves to greater currency fluctuation risk than we currently experience. 49 Table of Contents
Foreign Currency Risk We did not hold any significant cash balances in foreign jurisdictions as of December 31, 2024. However, we anticipate that as our foreign operations grow, we will hold more cash in foreign jurisdictions, and thereby expose ourselves to greater currency fluctuation risk than we currently experience. 42 Table of Contents
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Commodity Price Risk We do not expect any significant effects from commodity price risk outside of inherent inflationary risks.

Other SOWG 10-K year-over-year comparisons