SOW GOOD INC. Cautionary Statements
We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect our company and to take advantage of the "safe harbor" protection for forward-looking statements that applicable federal securities law affords.
From time to time, our management or persons acting on our behalf may make forward-looking statements to inform existing and potential security holders about our company. All statements other than statements of historical facts included in this report regarding our financial position, business strategy, plans and objectives of management for future operations and industry conditions are forward-looking statements. When used in this report, forward-looking statements are generally accompanied by terms or phrases such as "estimate," "project," "predict," "believe," "expect," "anticipate," "target," "plan," "intend," "seek," "goal," "will," "should," "may" or other words and similar expressions that convey the uncertainty of future events or outcomes. Items making assumptions regarding actual or potential future sales, market size, collaborations, trends or operating results also constitute such forward-looking statements.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements include the following:
· volatility or decline of our stock price;
· low trading volume and illiquidity of our common stock;
· potential fluctuation in quarterly results;
· inability to maintain adequate liquidity to meet our financial obligations;
· failure to obtain sufficient sales and distributions for our freeze dried
product offerings;
· supply chain disruption and delay;
· transportation, labor, and raw material cost increases;
· litigation, disputes and legal claims involving outside parties; and
· risks related to our ability to be traded on the OTCQB and meeting trading
requirements
We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made.
Readers are urged not to place undue reliance on these forward-looking
statements. We assume no obligation to update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of this
report, other than as may be required by applicable law or regulation. Readers
are urged to carefully review and consider the various disclosures made by us in
our reports filed with the
27 Overview and Outlook
We continue to sell our products online via our direct-to-consumer channels, in addition to our growing pipeline of business-to-business customers. In March of 2021, we completed the construction of our first freeze drier and, in anticipation of the increased production demands for our products and freeze drying expertise, we are in the development process of our second and third freeze driers.
During the second quarter of 2022, we saw a significant increase in demand for our products from large business-to-business customers. We expect our growing pipeline of business-to-business customers to drive sales growth in the coming quarters. We also continued the expansion of our 'Sustain Us' brand, which offers a line of granolas, snacks, and soups that are marketed toward outdoor adventure activities, everyday snacking and meal prep needs, and long-term food storage.
During 2021, we completed the build-out of our production facility and launched
our direct-to-consumer freeze dried consumer packaged goods (CPG) food brand,
under our Sow Good brand.
With the extensive freeze dried manufacturing and business development experience of our senior management team, we are confident that we are well positioned to lead the Company's growth and development in the freeze dried food industry.
Going Concern Uncertainty
As of
The Company has incurred recurring losses from operations resulting in an accumulated deficit, experienced net negative cash flows from operations, and, as set forth above, the Company's cash on hand may not be sufficient to sustain operations. We continue to pursue sources of additional capital through various financing transactions or arrangements, including equity financing or other means. We may not be successful in identifying suitable financing transactions in a sufficient time period or at all, and we may not obtain the capital we require by other means. If we do not succeed in raising additional capital, our resources may not be sufficient to fund our business. Our ability to scale production and distribution capabilities and further increase the value of our brands, is largely dependent on our success in raising additional capital.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. The unaudited financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
28
Results of Operations for the Three Months Ended
The following table summarizes selected items from the statement of operations
for the three months ended
Three Months Ended
June 30, Increase /
2022 2021 (Decrease)
Revenues $ 244,943 $ 7,076 $ 237,867
Cost of goods sold 150,603 4,899 145,704
Gross Profit 94,340 2,177 92,163
Operating expenses:
General and administrative expenses:
Salaries and benefits 1,242,900 916,957 325,943
Professional services 53,295 60,694 (7,399 )
Other general and administrative expenses 487,789 424,263 63,526
Total general and administrative expenses 1,783,984 1,401,914 382,070
Depreciation and amortization 67,693 60,056 7,637
Total operating expenses 1,851,677 1,461,970 389,707
Net operating loss (1,757,337 ) (1,459,793 ) 297,544
Other income (expense)
Interest expense (355,452 ) (1,222 ) 354,230
Loss on investment in Allied Esports
Entertainment, Inc. securities - (96,779 ) (96,779 )
Total other income (expense) (355,452 ) (98,001 ) 257,451
Net loss $ (2,112,789 ) $ (1,557,794 ) $ 554,995
Revenues
Revenues consist primarily of online freeze dried foods product sales. The
revenues were
29 Cost of Goods Sold
Cost of goods sold for the three months ended
General and administrative expenses
Salaries and benefits
Salaries and benefits for the three months ended
Professional services
Professional services were
Other general and administrative expenses
Other general and administrative expenses for the three months ended
Depreciation
Depreciation expense for the three months ended
Other income (expense)
In the three months ended
Net loss
Net loss for the three months ended
30
Results of Operations for the Six Months Ended
The following table summarizes selected items from the statement of operations
for the six months ended
Six Months Ended
June 30, Increase /
2022 2021 (Decrease)
Revenues $ 293,315 $ 7,076 $ 286,239
Cost of goods sold 198,094 4,899 193,195
Gross Profit 95,221 2,177 93,044
Operating expenses:
General and administrative expenses:
Salaries and benefits 2,159,055 1,674,101 484,954
Professional services 115,988 162,593 (46,605 )
Other general and administrative expenses 892,865 711,084 181,781
Total general and administrative expenses 3,167,908 2,547,778 620,130
Depreciation and amortization 132,919 65,052 67,867
Total operating expenses 3,300,827 2,612,830 687,997
Net operating loss (3,205,606 ) (2,610,653 ) 594,953
Other income (expense)
Interest expense (459,245 ) (2,734 ) 456,511
Gain on early extinguishment of debt - 113,772 (113,772 )
Gain on investment in Allied Esports
Entertainment, Inc. securities - 133,944 (133,944 )
Total other income (expense) (459,245 ) 244,982 (704,227 )
Net loss $ (3,664,851 ) $ (2,365,671 ) $ 1,299,180
31
Revenues
Revenues consist primarily of online freeze dried foods product sales. The
revenues were
Cost of Goods Sold
Cost of goods sold for the six months ended
General and administrative expenses
Salaries and benefits
Salaries and benefits for the six months ended
Professional services
Professional services were
Other general and administrative expenses
Other general and administrative expenses for the six months ended
Depreciation
Depreciation expense for the six months ended
32 Other income (expense)
In the six months ended
Net loss
Net loss for the six months ended
Liquidity and Capital Resources
The following table summarizes our total current assets, liabilities and working
capital at
June 30, December 31,
2022 2021
Current Assets $ 4,906,515 $ 4,891,264 Current Liabilities
Working Capital$ 3,548,603 $ 4,488,207
As of
The following table summarizes our cash flows during the six months ended
Six Months Ended
June 30,
2022 2021
Net cash used in operating activities
Net change in cash and cash equivalents
Net cash used in operating activities was
33
Net cash used in investing activities were
Net cash provided by financing activities were
Satisfaction of our cash obligations for the next 12 months
As of
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of financial conditions and results of
operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in
Our critical accounting policies are more fully described in Note 2 of the
footnotes to our financial statements appearing elsewhere in this Form 10-Q, and
Note 2 of the footnotes to the financial statements provided in our Annual
Report on Form 10-K for the fiscal year ended
34
© Edgar Online, source
