Note 5 – Related Party

During the year ended March 31, 2026, the Company entered into a series of transactions with related parties in connection with a strategic restructuring of its operations and capitalization.

Severance Payment to Related Party

On December 31, 2025, the Company entered into a settlement agreement and general and mutual release (the “Officer Settlement Agreement”) with Ira Goldfarb, the Company’s former executive chairman. Pursuant to the terms of the Officer Settlement Agreement, Mr. Goldfarb was entitled to receive from the Company a cash settlement payment, upon the Stockholder Meeting, of $1,250,000, less all applicable taxes and withholdings (the “Officer Settlement Payment”), in exchange for waiving his rights to contractual severance pursuant to his employment agreement. Payment of $1,250,000 was made to Mr. Goldfarb on January 5, 2026.

On December 31, 2025, the Company entered into a settlement agreement and general and mutual release (the “Officer Settlement Agreement”) with Claudia Goldfarb, the Company’s former chief executive officer. Pursuant to the terms of the Officer Settlement Agreement, Mrs. Goldfarb is entitled to receive from the Company a cash settlement payment, upon the Stockholder Meeting, of $1,150,000, less all applicable taxes and withholdings (the “Officer Settlement Payment”), in exchange for waiving her rights to contractual severance pursuant to her employment agreement. Mrs. Goldfarb continued to be employed by the Company as its Chief Operations Officer until March 31, 2026, after which she transitioned to a consulting arrangement. 

Asset Sale to Related Party

On December 30, 2025, the Company entered into an Asset Purchase Agreement with Trea Grove, LLC (“Trea Grove”), a related party, pursuant to which the Company sold a significant portion of the assets related to its freeze-dried snacks and candy business, including real property improvements, proprietary and intellectual property rights, transferable governmental licenses and permits, and other specified assets. Trea Grove also assumed certain specified liabilities. Total cash consideration for the transaction was $1,500,000, payable in installments through March 31, 2026, the entire amount was recorded as a related party receivable at December 31, 2025. Subsequently, on January 5, 2026, $900,000 was netted from Mr. Goldfarb’s severance payment of $1,250,000. During the quarter ended March 31, 2026 the Company received cash payments of $200,000 resulting in a receivable balance of $400,000 as of March 31, 2026.

Distribution Agreement with Related Party

On December 31, 2025, the Company entered into a Distribution Agreement with Trea Grove, LLC (“Trea Grove”), an entity owned by Ira Goldfarb and Claudia Goldfarb, pursuant to which Trea Grove was appointed the primary distributor of certain Company products, including fruits, snacks, and candy, through July 31, 2026, unless extended. Under the Distribution Agreement, Trea Grove is responsible for customer communications, order management, billing, collections, shipping, logistics, and fulfillment. Trea Grove will remit to the Company ten percent (10%) of gross receipts from product sales. The agreement provides Trea Grove with a limited license to use the Company’s trademarks for distribution and marketing purposes.

Based on the terms of this Distribution Agreement, the Company has determined that it acts as an agent for purposes of revenue recognition under ASC 606, as the Company does not control the underlying products prior to transfer to end customers, does not have primary responsibility for fulfillment, and does not bear inventory or credit risk. Accordingly, the Company recognizes revenues related to the Distribution Agreement with Trea Gove on a net basis equal to the commission to which it is entitled. Subsequently, on March 18, 2026, the Company amended the Distribution Agreement to allow Sow Good to sell inventory independently as long as Trea Grove remained as the sole distributor.

Private Placement of Preferred Stock

On December 31, 2025, the Company entered into a Securities Purchase Agreement with David Lazar pursuant to which the Company agreed to issue and sell, in a private placement, shares of Series AA Convertible Non-Redeemable Preferred Stock and Series AAA Convertible Non-Redeemable Preferred Stock in two closings for aggregate gross proceeds of $6,000,000. The first closing consisted of the issuance and sale of 1,500,000 shares of Series AA Convertible Non-Redeemable Preferred Stock and occurred on December 31, 2025 for gross proceeds of $3,000,000. Mr. Lazar was appointed Chief Executive Officer and Chairman of the Board in connection with the transaction. The second closing consisted of the issuance and sale of 1,500,000 shares of Series AAA Convertible Redeemable Preferred Stock and occurred on March 31, 2026 for gross proceeds of $3,000,000. Mr Yisroel Goldberg was appointed Chief Executive Officer.

Convertible Notes Held by Related Parties Amended

During 2025, Claudia Goldfarb and Ira Goldfarb (the “Goldfarbs”) held Convertible Notes issued by the Company. In connection with the Securities Purchase Agreement executed on December 31, 2025, the Company and the Goldfarbs agreed to amend the conversion terms of the notes to provide for a conversion price of $0.35 per share, replacing prior conversion price ranges of approximately $0.62 to $0.63 per share.

An aggregate principal amount of $1,404,914 of notes held by the Ira and Claudia Goldfarb will remain outstanding as a backstop for the Company’s operations (the “Backstop Loan”). The Backstop Loan remains a bona fide debt obligation of the Company and is not reduced or otherwise affected by operating losses, restructuring costs, or transaction expenses. During the second quarter of 2026, the Company and the Goldfarbs are required to determine, in good faith, what portion of the outstanding balance, if any, will be repaid in cash and what portion, if any, will convert into shares of common stock at the agreed conversion price of $0.35 per share.

On February 12, 2026, the Goldfarbs exercised the option to convert $289,483 of the outstanding Convertible Notes to 55,140 shares.

Use of Proceeds to Pay Related Party Debt and Settlement with an Officer

A portion of the net proceeds from the Series AA Preferred Stock issuance was used to repay $943,868 of principal and $70,365 in interest outstanding under notes payable to Lyle Berman, a related party. A portion of the net proceeds from the Series AAA preferred stock issuance was used to repay $344,838, including accrued interest, to Lyle Berman, a related party, on March 31, 2026. A portion of the net proceeds from the Series AAA preferred stock issuance was used to repay $128,515 of principal and $96,485 in interest outstanding under notes payable to Ira and Claudia Goldfarb, who are related parties.

On December 31, 2025, the Company entered into a settlement agreement and mutual release with Ira Goldfarb, the Company’s former Executive Chairman, pursuant to which Mr. Goldfarb is entitled to receive a cash settlement payment of $1,250,000, less applicable taxes and withholdings, upon the Company’s stockholder meeting, in exchange for waiving his contractual severance rights. Of this amount, $900,000 was retained by the Company and applied as Mr. Goldfarb’s down payment toward the purchase price of the manufacturing assets acquired by Trea Grove, LLC, an entity owned by Mr. Goldfarb. Mr. Goldfarb received the remaining $350,000 in cash.

Settlement Agreements with Directors

On December 31, 2025, the Company entered into settlement agreements and mutual releases with Ira Goldfarb, Claudia Goldfarb, Lyle Berman, Jeff Rubin, Edward Shensky, Joe Mueller and Chris Ludeman, each former members of the Board of Directors, and such settlement agreements became effective in each case upon such director’s resignation.

Voting Agreements

On December 31, 2025, the Company entered into voting agreements with Ira Goldfarb, Claudia Goldfarb, and Lyle Berman, pursuant to which such parties agreed, for a two-year period, to vote their shares in favor of proposals recommended by the Company’s Board of Directors.

All related-party transactions were approved and authorized by a special committee consisting of disinterested members of the Company’s Board of Directors.

Related Party Debt Exchange

On April 28, 2025, the Company entered into an exchange agreement (the “Exchange Agreement”) with Lyle Berman, Claudia Goldfarb and Ira Goldfarb, as holders of the Company’s outstanding promissory notes (the “Outstanding Notes”) with an aggregate principal amount of $2,500,000, maturing August 23, 2025 at an interest rate of 8%. Pursuant to the Exchange Agreement, holders exchanged their Outstanding Notes for new senior convertible promissory notes (the “Convertible Notes”) in an amount equal to $2,563,890, the aggregate principal amount of the Outstanding Notes, plus accrued and unpaid interest thereunder. In addition, the Company issued Convertible Notes of $239,928 at an interest rate of 6%, for the repayment of the Notes which matured on April 8, 2025. The combined $2,803,818 of Convertible Notes have a maturity date of April 30, 2030 and will pay interest semiannually in arrears on May 1 and November 1 beginning on November 1, 2025. At the Company’s election, interest payable on an interest payment date may be added to the principal amount of the Convertible Notes on the applicable interest payment date and will no longer be owed to holders of the Convertible Notes. The Convertible Notes are convertible at the election of the holders, in whole or in part, into shares of common stock based on a price per share equal to the average closing price of such common stock for the five trading days immediately prior to the execution of and entry into the Convertible Notes, with such conversion prices ranging from $0.62 to $0.63. The Convertible Notes are senior in right of payment to all existing and future debt obligations of the Company and will be secured by all existing and future assets of the Company. The Convertible Notes are redeemable by the Company at any time upon ten days’ notice and at the option the holders for the principal amount thereof plus interest, beginning on January 1, 2026. The entry into the Exchange Agreement, and the transactions contemplated therein, including entering into the Convertible Notes, was approved unanimously by the disinterested members of the Company’s board of directors, as well as the disinterested members of the Company’s audit committee, pursuant to the Company’s related party transaction policy.

On December 31, 2025, as part of the Securities Purchase Agreement, Ira and Claudia Goldfarb’s Convertible Notes were amended to change the conversion price to $0.35 per share, and Mr. Berman was repaid $943,868 of principal and $70,365 in interest outstanding related to his Convertible Notes. The remaining outstanding balance of approximately $344,838, including accrued quarterly interest, was repaid in full on March 31, 2026. Ira and Claudia Goldfarb converted 55,140 shares at a price of $0.35 per share on February 12, 2026.

Common Stock Issued

Common Stock Issued to Officers and Directors for Services

On March 30, 2026, 26,876 shares were issued to each of Edward Shensky, David Natan and Jeffery Rubin for quarterly director compensation with a fair value of $12,500.

On January 15, 2026, the Company issued 9,259 shares of common stock to each of Lyle Berman and Ira Goldfarb for annual Director services to be rendered. The aggregate fair value of the common stock was $100,000, based on the closing price of the Company’s common stock on the date of grant. The shares were expensed upon issuance.

On August 1, 2025, the Company issued an aggregate 3,831 shares of common stock to Jeffery Rubin for annual Director services to be rendered. The aggregate fair value of the common stock was $50,000, based on the closing price of the Company’s common stock on the date of grant. The shares were expensed upon issuance.

On February 6, 2025, the Company issued an aggregate 5,496 shares of common stock amongst its four non-employee Directors and two advisory Directors for annual services to be rendered. The aggregate fair value of the common stock was $230,000, based on the closing price of the Company’s common stock on the date of grant. The shares were expensed upon issuance.

On June 5, 2025, the Board of Directors unanimously approved a revision to the annual compensation of Claudia Goldfarb, as Company’s Chief Executive Officer, and Ira Goldfarb, the Company’s former Executive Chairman, whereby Ms. Goldfarb and Mr. Goldfarb would receive approximately 28% and 32%, respectively, of their annual cash salary in shares of the Company’s common stock under the Sow Good 2024 Stock Incentive Plan in lieu of cash payments. The number of shares issued in each case is calculated with a stock price equal to the most recent closing price of the Company’s common stock, on June 4, 2025. Ms. Goldfarb received 11,157 shares valued at $128,869. Mr. Goldfarb received 17,271 shares valued at $199,638. Mrs. Goldfarb continues to be employed by the Company as its Chief Operations Officer.

On March 31, 2025, the Board of Directors unanimously approved a revision to the annual compensation of Claudia Goldfarb, the former Company’s Chief Executive Officer, and Ira Goldfarb, the Company’s former Executive Chairman, whereby Ms. Goldfarb and Mr. Goldfarb would receive approximately 28% and 32%, respectively, of their annual cash salary in shares of the Company’s common stock under the Sow Good 2024 Stock Incentive Plan in lieu of cash payments. The number of shares issued in each case is calculated with a stock price equal to the most recent closing price of the Company’s common stock, on March 31, 2025. Ms. Goldfarb received 3,894 shares valued at $160,000. Mr. Goldfarb received 12,813 shares valued at $200,000. Mrs. Goldfarb continues to be employed by the Company as its Chief Operations Officer.

During the quarter ended March 31, 2026, the Company issued 23,894 shares to directors for director services rendered valued at $137,500. In addition, the Company issued 66,667 shares to advisors for services rendered valued at $465,100.

Common Stock Options Awarded to Officers and Directors

On June 3, 2025, the Company granted Donna Guy, Chief Financial Officer, options to purchase 500 shares of the Company’s stock at an exercise price of $0.77 per share. Options vest 60% on the third anniversary of the grant, and 20% on each anniversary thereafter.

Related Party Balances

The components of the related party balances are as follows: