Note 7 – Inventory

Inventory

On December 30 and December 31, 2025, the Company entered into an Asset Purchase Agreement and a Distribution Agreement, respectively. As a result of these transactions, the Company transitioned from operating as a manufacturer and omnichannel seller of freeze-dried candy to operating as a commission-based distribution agent, earning a fixed percentage of distributor gross receipts from sales of Sow Good-branded products. Pursuant to the Asset Purchase Agreement, the Company retained certain SKUs to market independently of the Distribution Agreement.

Inventory is stated at the lower of average cost or net realizable value, with cost determined using the first-in, first-out (“FIFO”) method. The Company evaluates inventory for potential obsolescence and excess quantities on a periodic basis.

In connection with the exit of its manufacturing and omnichannel distribution business, the Company recorded an impairment and write-off of finished goods and work in process materials of $13,737,675 during the year ended December 31, 2025. Because the impaired inventory related entirely to the former manufacturing and direct-sales business, the impairment expense has been included in loss from discontinued operations for all periods presented.

As of December 31, 2025, the Company retained approximately $22,871 of inventory related to certain SKUs that were not transferred in the Asset Purchase Agreement. Inventory of $20,313,315 was included in the current assets of discontinued operations on the balance sheet for the year ended December 31, 2024.