UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ______________________ to ______________________
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including
area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| The |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| ☒ | Smaller reporting company | |||||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares of registrant’s common
stock outstanding as of August 19, 2026 was
Table of Contents
i
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING 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:
| ● | our ability to maintain adequate liquidity to meet our financial obligations and operational needs; |
| ● | our ability to meet the listing requirements of Nasdaq; |
| ● | our ability to consummate the acquisition of Uranex Tanzania Limited and Magnis Technologies (Tanzania) Limited, the sole holders of the Nachu Graphite Project, and to receive the anticipated benefits from such acquisition; |
| ● | our ability to compete successfully against competitors with significantly greater financial and relationship resources than us in the highly competitive industry in which we operate; |
| ● | our ability to maintain and enhance our brand; |
| ● | our ability to successfully implement our growth strategies related to launching new products; |
| ● | our ability to successfully enter new markets internationally; |
| ● | the effectiveness and efficiency of our marketing programs; |
| ● | our ability to manage current operations effectively; |
| ● | our future operating performance; |
ii
| ● | our ability to attract new customers or retain existing customers; |
| ● | our ability to protect and maintain our intellectual property; |
| ● | the government regulations to which we are subject; |
| ● | failure to obtain sufficient sales and distributions for our freeze dried product offerings; |
| ● | the potential for supply chain and shipping disruption and delay; |
| ● | the potential for transportation, labor, and raw material cost increases; |
| ● | international risks associated with our global operations, including geopolitical conflicts, tariffs or changes in trade policies; and |
| ● | other risks and uncertainties included in our “Risk Factors.” |
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. We have based these forward-looking statements and statements of belief on our current expectations and assumptions about future events as of the date of this report. 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. You should consider carefully the statements in “Item 1A. Risk Factors” and other sections of this report, which describe factors that could cause our actual results to differ from those set forth in the forward-looking statements.
Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. 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 United States Securities and Exchange Commission (the “SEC”) which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.
iii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
SOW GOOD INC.
CONDENSED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| ASSETS | (unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Accounts receivable - related party | ||||||||
| Other receivables | ||||||||
| Inventory, net | ||||||||
| Prepaid expenses | ||||||||
| Other receivables, related party | ||||||||
| Current assets of discontinued operations | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Security deposit | ||||||||
| Right-of-use asset | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | ||||||||
| Accrued interest | ||||||||
| Accrued severance | ||||||||
| Accrued expenses | ||||||||
| Advances – related party | ||||||||
| Accrued compensation, related parties | ||||||||
| Current portion of operating lease liabilities | ||||||||
| Convertible notes payable, net of $ | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total current liabilities | $ | $ | ||||||
| Notes payable | ||||||||
| Total liabilities | $ | $ | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ deficit: | ||||||||
| Series AA Preferred Stock, $ | ||||||||
| Common Stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
1
SOW GOOD INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses: | ||||||||||||||||
| Salaries and benefits | ||||||||||||||||
| Professional services | ||||||||||||||||
| Other general and administrative expenses | ||||||||||||||||
| Total general and administrative expenses | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expense: | ||||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on disposition of assets | ( | ) | ( | ) | ||||||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from continuing operations before tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax (benefit) provision | ||||||||||||||||
| Net loss from continued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding – basic and diluted | ||||||||||||||||
| Continuing loss per common share - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Discontinued loss, net of tax per common share - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per common share - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
2
SOW GOOD INC.
STATEMENT OF STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
| For the Three Months Ended June 30, 2026 | ||||||||||||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, April 1, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Net income for the three months ended June 30, 2026 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| For the Three Months Ended June 30, 2025 | ||||||||||||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, April 1, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Common stock issued to directors for services | - | |||||||||||||||||||||||||||
| Common stock options granted to directors and advisors for services | - | - | ||||||||||||||||||||||||||
| Common stock options granted to officers and employees for services | - | - | ||||||||||||||||||||||||||
| Additional paid in capital from exchange of related party debt, net | - | - | ||||||||||||||||||||||||||
| Net income for the three months ended June 30, 2025 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| For the Six Months Ended June 30, 2026 | ||||||||||||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, January 1, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Issuance of Series AAA Preferred Stock | ||||||||||||||||||||||||||||
| Conversion of Preferred AA Preferred Stock | ( | ) | ( | ) | ||||||||||||||||||||||||
| Conversion of Preferred AAA Preferred Stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Effect of Stock Split | ||||||||||||||||||||||||||||
| Capitalized legal costs | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Forfeiture of stock options | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Common stock issued to directors for services | ||||||||||||||||||||||||||||
| Common stock issued to advisors for services | ||||||||||||||||||||||||||||
| Conversion of convertible notes to common stock | ||||||||||||||||||||||||||||
| Net loss for the three months ended June 30, 2026 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| For the Six Months Ended June 30, 2025 | ||||||||||||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balance, January 1, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
| Common stock issued to directors for services | ||||||||||||||||||||||||||||
| Common stock issued to officers for services | ||||||||||||||||||||||||||||
| Common stock options granted to directors and advisors for services | - | - | ||||||||||||||||||||||||||
| Common stock options granted to officers and employees for services | - | - | ||||||||||||||||||||||||||
| Additional paid in capital from exchange of related party debt, net | - | - | ||||||||||||||||||||||||||
| Net loss for the six months ended June 30, 2025 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
3
SOW GOOD INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Net loss from discontinued operations | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of right-of-use asset | ||||||||
| Loss on disposal of asset | ||||||||
| Forfeited stock-based compensation | ( | ) | ||||||
| Amortization of debt discount | ||||||||
| Common stock issued to directors for services | ||||||||
| Payable to related party | ||||||||
| Accrued compensation, related parties | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Accounts receivable - related party | ||||||||
| Other receivables | ( | ) | ||||||
| Inventory | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Security deposits | ||||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued interest | ( | ) | ||||||
| Accrued severance | ( | ) | ||||||
| Accrued expenses | ||||||||
| Operating lease liability | ( | ) | ||||||
| Net cash used in continuing operations | ( | ) | ( | ) | ||||
| Net cash used in discontinued operations | ( | ) | ( | ) | ||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Cash paid for construction in progress | ( | ) | ||||||
| Net cash used in continuing operations | ( | ) | ||||||
| Net cash used in discontinued operations | ||||||||
| Net cash used in investing activities | $ | $ | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Payments on convertible notes | ( | ) | ||||||
| Proceeds from Advances – related party | ||||||||
| Proceeds from issuance of preferred stock, net of issuance costs | ||||||||
| Net cash provided by continuing operations | ||||||||
| Net cash provided by financing activities | $ | $ | ||||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | $ | ( | ) | $ | ( | ) | ||
| Cash and cash equivalents, beginning of period | $ | $ | ||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| SUPPLEMENTAL INFORMATION: | ||||||||
| Interest paid | $ | $ | ||||||
| Interest received | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Reclassification of construction in progress to property and equipment | $ | $ | ||||||
| Non-cash issuances of common stock (including note conversion) | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
4
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Note 1 – Organization and Nature of Business
Sow Good Inc. (“SOWG,” “Sow Good,” “us,” “our,” “we,” or the “Company”) is a U.S.-based company that, through a third-party distribution arrangement, participates in the commercialization of freeze-dried candy products. The Company historically operated as a manufacturer of freeze-dried consumer packaged goods, including candy, fruits, vegetables, and snack products.
Formerly Black Ridge Oil & Gas, Inc. (a business
that participated in the acquisition and development of oil and gas leases and was acquired by the Company on October 1, 2020), the Company
transitioned its focus to freeze-dried food products following the acquisition. At the time of the acquisition of Black Ridge Oil &
Gas, Inc., the Company’s common stock began to be quoted on the OTCQB under the trading symbol “SOWG,” from the former
trading symbol “ANFC.” Prior to April 2, 2012, Black Ridge Oil & Gas, Inc. was known as Ante5, Inc., a publicly traded
company since July 1, 2010. Effective
During December 2025, the Company completed a strategic shift away from direct manufacturing and product sales and entered into a distribution agreement pursuant to which a third-party distributor serves as the exclusive distributor of the Company’s freeze-dried candy products. Under this arrangement, the distributor is responsible for commercialization, sales, marketing, fulfillment, and customer relationships, and the Company earns a contractual percentage of distributor gross receipts. As a result of this strategic shift, the Company no longer operates a manufacturing business and does not directly sell products to customers.
In April 2026, Company entered into a share purchase agreement with Ryzon Materials Limited, an Australian unlisted public company (“Ryzon”),
Uranex Tanzania Limited (“Uranex”), Magnis Technologies (Tanzania) Limited (“Magnis Tech”), and Uranex ESIP Pty
Limited (“Uranex ESIP” and, together with Ryzon, Uranex and Magnis Tech, the “Sellers”), pursuant to which the
Company agreed to acquire
Note 2 – Summary of Significant Accounting Policies
The accompanying unaudited interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and stated in U.S. dollars, consistent in all material respects with those applied in our financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Because these financial statements address interim periods, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Such interim financial information is unaudited but reflects all adjustments that in the opinion of management are necessary for the fair presentation of the interim periods presented. The results of operations presented in this Quarterly Report on Form 10-Q are not necessarily indicative of the results that may be expected for the year ending December 31, 2026 or for any future periods. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited financial statements and footnotes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.
Reverse Stock Split
On April 17, 2026 the company effected a
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Segment Reporting
FASB ASC 280-10-50 requires annual and interim reporting for an enterprise’s operating segments and related disclosures about its products, services, geographic areas and major customers. An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and expenses, and about which separate financial information is regularly evaluated by the chief operating decision maker in deciding how to allocate resources. The Company operates as a single segment. Segment disclosures are included in Note 16 – Segment Reporting.
5
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Environmental Liabilities
The Company was formerly a direct owner of assets in the oil and gas industry. The oil and gas industry is subject, by its nature, to environmental hazards and clean-up costs. At this time, management knows of no substantial losses from environmental accidents or events which would have a material effect on the Company.
Cash and Cash Equivalents
Cash equivalents include money market accounts which have maturities of three months or less. Cash equivalents are stated at cost plus accrued interest, which approximates market value.
Cash in Excess of FDIC Insured Limits
The Company maintains its cash in bank deposit
accounts which, at times, may exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”)
and the Securities Investor Protection Corporation (“SIPC”) up to $
Accounts Receivable
Accounts receivable are carried at their estimated
collectible amounts. Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers
and their current financial condition. The Company had an allowance for credit losses of $
The Company estimates its reserve based on historical loss information. The Company believes that historical loss information is a reasonable basis on which to determine expected credit losses for trade receivables held at the reporting date because the composition of the trade receivables at the reporting date is consistent with that used in developing the historical credit-loss percentages. However, the Company will continue to monitor and adjust the historical loss rates to reflect the effects of current conditions and forecasted changes.
Other Receivables
Other accounts receivable was $
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. In addition, 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 inventory of $
6
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
As of June 30, 2026 and December 31, 2025, the
Company retained approximately $
Property and Equipment
Property and equipment are stated at the lower
of cost or estimated net recoverable amount.
| Software |
Construction in progress is stated at cost, which predominately relates to the cost of freeze driers and equipment not yet placed into service. No depreciation expense is recorded on construction-in-progress until such time as the relevant assets are completed and put into use.
Repairs and maintenance expenditures are charged to operations as incurred. Major improvements and replacements, which extend the useful life of an asset, are capitalized and depreciated over the remaining estimated useful life of the asset. When assets are retired or sold, the cost and related accumulated depreciation and amortization are eliminated and any resulting gain or loss is reflected in operations.
Depreciation expense included in continuing operations
was $
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606 - Revenue from Contracts with Customers (“ASC 606”). Following the Company’s strategic restructuring completed on December 31, 2025, including the sale of substantially all manufacturing and operating assets and the execution of the Distribution Agreement with Trea Grove LLC, the Company transitioned from a manufacturing and direct-sales business model to a commission-based distribution model. Under ASC 606, the Company recognizes revenue in accordance with a five-step model in which the Company evaluates the transfer of promised goods or services and recognizes revenue when customers obtain control of promised goods or services in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.
To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation.
Under the Distribution Agreement, Trea Grove LLC serves as a distributor of Sow Good-branded products and is responsible for invoicing customers, fulfillment activities, and collection of customer payments. The Company is entitled to receive a fixed percentage of gross receipts collected by the distributor from customer sales. The Company evaluated the arrangement under ASC 606 and concluded that it acts as an agent because it does not control the products prior to transfer to end customers, does not have primary responsibility for fulfillment, and does not bear primary inventory or customer credit risk. Accordingly, revenue is recognized on a net basis in an amount equal to the commission to which the Company expects to be entitled.
The Company’s performance obligation under the Distribution Agreement consists primarily of providing access to the Sow Good brand and related distribution rights. Revenue is recognized when the distributor completes the underlying customer sale and collects payment, as this represents the point at which the Company’s right to consideration becomes fixed and determinable in accordance with the contractual terms of the arrangement.
7
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
The Company has elected, as a practical expedient, to account for shipping and handling activities as fulfillment costs rather than as separate performance obligations. Because shipping, fulfillment, product handling, returns processing, and customer pricing adjustments are managed by the distributor, the Company does not separately recognize gross product sales revenue, shipping revenue, or related customer allowances associated with distributor sales activity.
Revenue is reported net of applicable provisions for discounts, returns, and allowances. Under the current commission-based operating structure, customer returns, promotional programs, discounts, and pricing adjustments are administered by the distributor and do not materially impact the Company’s recognized commission revenue. The Company evaluates the need for reserves related to variable consideration based on known facts and contractual terms at each reporting date.
For the six months ended June 30, 2026, the Company
recognized approximately $
Customer Concentration
Following the sale of substantially all manufacturing and operating assets and the transition to a capital-light distribution model, the Company earns revenue primarily from a single related party distribution partner pursuant to the Distribution Agreement entered into on December 31, 2025. Trea Grove LLC, a related party, serves as the primary distributor of Sow Good-branded products and is expected to represent substantially all of the Company’s revenue under the current operating structure. The Company may also sell remaining inventory independently from time to time.
For the six months ended June 30, 2026, the Company
recognized approximately $
Supplier Concentration
Following the sale of substantially all manufacturing and operating assets and the transition to a capital light sales through a distributor model, the Company earns revenue mainly from a single related party distribution partner pursuant to a long-term Distribution Agreement. Trea Grove LLC, a related party, is expected to be the Company’s primary distributor of Sow Good-branded products going forward. The Company may also sell inventory independently from time to time.
Purchases from vendors relate primarily to corporate overhead, professional services, and other administrative costs. Amounts related to the Company’s former manufacturing and direct-sales business model have been reclassified to loss from discontinued operations for all periods presented.
Basic and Diluted Earnings (Loss) Per Share
The basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding. Diluted net income (loss) per common share is computed by dividing the net income (loss) adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods where potential dilutive securities would have an anti-dilutive effect and they were not included in the calculation of diluted net loss per common share. There were no dilutive common shares for the periods ended June 30, 2026 and 2025 since the company was in a loss position for both periods.
For the six months ended June 30, 2026 and 2025, the Company incurred
net losses which cannot be diluted; therefore, basic and diluted loss per share of Common Stock is the same. Each share of Series AA
Preferred Stock and Series AAA Preferred Stock is convertible into
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Series AA Preferred Stock | ||||||||
| Series AAA Preferred Stock | ||||||||
| Shares excluded from the calculation of diluted loss per share | ||||||||
8
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation. Stock-based compensation for equity instruments issued to employees and non-employees is measured at fair value on the grant date and recognized as compensation expense over the requisite service period.
All transactions in which the consideration for goods or services is settled in equity instruments are accounted for based on the fair value of the equity instruments issued. The measurement date is the date at which the key terms and conditions of the award is reached.
The Company accounts for forfeitures as they occur. When an award is forfeited prior to completion of the requisite service period, any previously recognized compensation cost related to the unvested portion of the award is reversed in the period of forfeiture.
The fair value of service-based stock options
is estimated using the Black-Scholes option-pricing model, with expected terms ranging from
The Company uses a Monte Carlo simulation model to estimate the fair value of performance-based and market-based stock options. Stock option expense is recognized on a straight-line basis over the requisite service period or the implied service period, as applicable. Amortization of options granted to members of the Board of Directors is included in other general and administrative expense. Amortization of options granted to officers and employees is included in salaries and benefits.
Stock-based compensation costs reversed in respect
of forfeitures amounted to $
Income Taxes
The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. The Company provides a valuation allowance for deferred tax assets for which it does not consider realization of such assets to be more likely than not.
Uncertain Tax Positions
In accordance with ASC 740 – Income Taxes (“Topic 740”), the Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be capable of withstanding examination by the taxing authorities based on the technical merits of the position. These standards prescribe a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These standards also provide guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
Various taxing authorities can periodically audit the Company’s income tax returns. These audits include questions regarding the Company’s tax filing positions, including the timing and amount of deductions and the allocation of income to various tax jurisdictions. In evaluating the exposures connected with these tax filing positions, including state and local taxes, the Company records allowances for probable exposures. A number of years may elapse before a particular matter, for which an allowance has been established, is audited and fully resolved. The Company has not yet undergone an examination by any taxing authorities.
9
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
The assessment of the Company’s tax position relies on the judgment of management to estimate the exposures associated with the Company’s various filing positions.
Recent Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The ASU requires disclosures about specific types of expenses, including purchases of inventory, employee compensation, depreciation and amortization. The amendments in this ASU are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on its Consolidated Financial Statements and related disclosures.
No other new accounting pronouncements, issued or effective during the six months ended June 30, 2026, have had or are expected to have a significant impact on the Company’s financial statements.
Reclassifications
Certain amounts in the prior period financial statements have been reclassified to conform with the current period presentation.
Note 3 – Going Concern
As of June 30, 2026, the Company had an accumulated deficit of $
During December 2025, the Company completed the sale of substantially all manufacturing assets and transitioned to a commission-based, asset-light distribution model under a long-term Distribution Agreement. The transaction generated cash proceeds and significantly reduced the Company’s capital requirements and working capital needs by eliminating manufacturing operations and inventory ownership. While this transition is expected to lower ongoing operating and capital expenditures, the resulting reduction in cash requirements is not expected, by itself, to be sufficient to overcome the Company’s existing liquidity shortfall without additional capital contributions or debt financing.
Management has implemented and continues to evaluate plans intended to improve the Company’s financial position and liquidity. These actions include the sale of manufacturing assets to a related party, ongoing strategic cost reductions and headcount rationalization, finalizing exits for leases associated with unused facilities, which were completed as of January 31, 2026, and pursuing additional capital-raising transactions.
In addition, management is evaluating potential partnership arrangements and capital-raising transactions, including debt and/or equity financings and sales of shares under the Company’s at-the-market equity program. There can be no assurance that these plans will be successfully implemented or will generate sufficient liquidity to allow the Company to continue operations.
The accompanying financial statements have been prepared on a going concern basis and do not include any adjustments that might result from the outcome of this uncertainty. The financial statements do not include any adjustments relating to the recoverability or classification of recorded asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 4 – Discontinued Operations
On December 30, 2025, the Company sold substantially all of its manufacturing and operating assets to its former Executive Chairman and former Chief Executive Officer and exited its legacy manufacturing and direct-sales business. In connection with this transaction, the Company entered into a long-term Distribution Agreement pursuant to which the Company now operates as a commission-based distribution agent and no longer manufactures products, owns significant inventory, or incurs costs related to product sourcing, production, warehousing, or distribution.
The sale of substantially all manufacturing and operating assets and the related exit of the legacy business represent a strategic shift that has a major effect on the Company’s operations and financial results. Accordingly, the results of the former manufacturing and direct-sales business have been classified as discontinued operations for all periods presented.
10
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
The assets and liabilities of the discontinued operations were disposed of or otherwise derecognized as of June 30, 2026, and no assets or liabilities of discontinued operations remain on the Company’s consolidated balance sheet as of that date.
Results of Discontinued Operations
The following table presents components of discontinued operations, net of tax for the six months ended June 30, 2026 and 2025:
| For
the Three Months Ended June 30, | For
the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Prior period discounts and refunds | ( | ) | ( | ) | ||||||||||||
| Net revenues | ( | ) | ( | ) | ||||||||||||
| Cost of goods sold | ||||||||||||||||
| Gross profit (loss) | ( | ) | ( | ) | ( | ) | ||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses: | ||||||||||||||||
| Other general and administrative expenses | ||||||||||||||||
| Total general and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Gain on termination of leases | ||||||||||||||||
| Loss on disposition of assets | ( | ) | ||||||||||||||
| Total other expense | - | |||||||||||||||
| Loss from discontinued operations before income tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax provision | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Cash received | $ | |||||||||||||||
| Liabilities assumed by Trea Grove LLC | ||||||||||||||||
| Less: | ||||||||||||||||
| Assets sold: | ||||||||||||||||
| Assets held for sale | ( | ) | ||||||||||||||
| Construction in process - freeze dryers | ( | ) | ||||||||||||||
| Freeze dryers, net | ( | ) | ||||||||||||||
| Leasehold improvements, net | ( | ) | ||||||||||||||
| Other property plant and equipment, net | ( | ) | ||||||||||||||
| Accumulated depreciation | ||||||||||||||||
| Net loss on disposition of assets | ( | ) | ||||||||||||||
| Severance expense | ( | ) | ||||||||||||||
| Deal costs | ( | ) | ||||||||||||||
| Loss on sale of assets | $ | ( | ) | |||||||||||||
11
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Balance Sheet
The asset and related liabilities related to the
discontinued operations were disposed or derecognized prior to June 30, 2026, therefore the assets and liabilities for the year ended
June 30, 2026 represent those of the ongoing operation.
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Assets of discontinued operations | ||||||||
| Accounts receivable, net | $ | $ | ||||||
| Current assets of discontinued operation | ||||||||
| Total assets of discontinued operation | $ | $ | ||||||
| June 30, 2026 | December 31, 2025 | |||||||
| Liabilities of discontinued operations | ||||||||
| Current portion of operating lease liabilities | $ | $ | ||||||
| Total liabilities of discontinued operation | $ | $ | ||||||
Revenue Reclassification
Revenue recognized in prior periods under the
Company’s former manufacturing and direct-sales business model has been reclassified to discontinued operations for all periods
presented as a result of the Company’s strategic restructuring and disposal of substantially all manufacturing operations. For
the three months ended June 30, 2026, the Company recognized approximately $
Total revenues for the three months ended June
30, 2026 is $
Cost of goods sold for the three months ended
June 30, 2026 was $
As a result, the Company recorded a gross loss
of $
Continuing Involvement
Following the disposition, the Company’s continuing involvement with the former business is limited to our role as an agent who receives commissions from Trea Grove in their role as a Distributor under the Distribution Agreement.
12
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Note 5 – Related Party
During the year ended June 30, 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 $
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 $
Asset Sale to Related Party
On December 30, 2025, the Company entered into an Asset Purchase Agreement
(“APA”) 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 $
Distribution Agreement with Related Party
On December 31, 2025, the Company entered into a Distribution Agreement
with 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 (
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 Grove on a net basis equal to the commission to which it is entitled. Subsequently, on June 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.
13
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
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 $
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 $
An aggregate principal amount of $
On February 12, 2026, the Goldfarbs exercised the option to convert
$
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 $
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 $
14
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
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 $
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 $
Related party payable to Claudia Goldfarb
During the quarter ended June 30, 2026, pursuant to the APA, the Company
received a schedule of amounts due to Trea Grove and to Claudia Goldfarb related to operating expenses advanced on behalf of the Company.
The Company has recorded a provision of $
15
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Compensation agreement with Officers and Directors
During the quarter ended June 30, 2026, the Company
established a compensation plan for officers and directors consisting of cash compensation and stock option awards, subject to formal
Board approval. Based on management’s assessment that the recipients had performed the related services and that the obligation
was probable and reasonably estimable, the Company recognized compensation expense and accrued liabilities of $
Common Stock Issued
Common Stock Issued to Officers and Directors for Services
On March 30, 2026,
On January 15, 2026, the Company issued
On August 1, 2025, the Company issued an aggregate
of
On February 6, 2025, the Company issued an aggregate
of
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
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
During the six months ended June 30, 2026, the
Company issued
16
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Common Stock Options Awarded to Officers and Directors
On June 3, 2025, the Company granted Donna Guy,
Chief Financial Officer, options to purchase
Related Party Balances
The components of the related party balances are as follows:
| June 30, 2026 | December 31, 2025 | |||||||
| Asset Purchase Agreement balance with Trea Grove | $ | $ | ||||||
| Tax withholdings receivable relating to Ira Goldfarb severance payment | ||||||||
| Total receivable balance, related parties | ||||||||
| Payable to Trea Grove | ( | ) | ||||||
| Credit card balance payable to Claudia Goldfarb | ( | ) | ||||||
| Total payable balance, related parties | ( | ) | ||||||
| Net receivable (payable) balance, related parties | $ | ( | ) | $ | ||||
Note 6 – Fair Value of Financial Instruments
The Company’s financial statements are prepared in accordance with ASC 820, “Fair Value Measurement,” which requires the measurement of certain financial instruments at fair value. The Company’s financial instruments primarily consist of cash and cash equivalents, and accounts receivable, which approximate fair value due to their short-term nature, and Term Loans issued in connection with detachable warrants, which are carried on the balance sheet net of the unamortized portion of the related discounts. For financial instruments or investments that are required to be reported at fair value on a recurring or nonrecurring basis under GAAP, the applicable guidance for fair value measurement requires the Company to include the determination of the appropriate fair value hierarchy level for each instrument. The fair value hierarchy levels consist of the following:
| Level 1: | Quoted Prices in Active Markets for Identical Assets or Liabilities - This level represents the highest degree of observability, where fair values are based on quoted market prices for identical assets or liabilities in active markets. |
| Level 2: | Inputs Other Than Quoted Prices Included within Level 1 - Fair values in this level are based on inputs other than quoted market prices but are still observable, such as quoted market prices for similar assets or liabilities, or inputs derived from market data. |
| Level 3: | Unobservable Inputs - This level includes fair values for which there are no observable inputs and relies on the reporting entity’s own assumptions and estimates. These fair values are considered the least reliable and most subjective. |
17
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Detachable common stock warrants issued in connection with debt may be recorded as either liabilities or equity depending on the applicable accounting guidance. The Company determined that warrants issued in connection with notes payable met the definition of a freestanding financial instrument and qualified for treatment as permanent equity. We utilized the Black-Scholes valuation model to estimate the fair value of warrants granted at issuance date. The initial measurement of the fair value of the notes considers the present value of future cash flows, discounted at the current market rate of interest at the issuance date, and time to liquidity. The Company allocated the value of warrants between the relative fair value of the notes payable without the warrants, and the warrants themselves at the time of issuance. The allocated portion of the warrants was treated as a debt discount, and amortized over the term of the note. The amortization of the debt discount is recognized as interest expense. When a notes payable are issued at a discount, wherein a significant portion of the issuance is between related parties, the valuation of the notes and the discount involve significant judgment and the use of unobservable inputs, classifying it into Level 3 of the fair value hierarchy, requiring a nonrecurring fair value measurement. Changes other than additions, settlements, or discount amortization, in the fair value of the notes payable, net of discounts do not impact net income or cash flows. The debt related to the issuance of the detachable warrants was fully retired during the three month period ended June 30, 2025.
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 $
On December 31, 2025, a portion of the net proceeds
from the preferred stock issuance was used to repay $
The convertible notes payable to related parties had an outstanding principal balance of $
The Outstanding Notes payable and related discounts on the detachable warrants were exchanged for the Convertible Notes. The Company determined that the conversion feature of the Convertible Notes is not bifurcated as a derivative and is therefore not within the scope of ASC 815 and ASC 820.
The following schedule summarizes the valuation of financial instruments at fair value on a nonrecurring basis in the balance sheet as of June 30, 2026 and December 31, 2025:
| June 30, 2026 | December 31, 2025 | |||||||||||||||
| Carrying Value | Estimated Fair Value | Carrying Value | Estimated Fair Value | |||||||||||||
| Liabilities | ||||||||||||||||
| Convertible notes payable, related parties, net of discounts | ||||||||||||||||
| Notes payable | ||||||||||||||||
| Total liabilities | $ | $ | $ | |||||||||||||
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.
18
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
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 $
As of June 30, 2026 and December 31, 2025, the
Company retained approximately $
Inventory at respective period ends is as follows:
| June 30, 2026 | December 31, 2025 | |||||||
| Finished goods | $ | $ | ||||||
| Total inventory from continuing operations | ||||||||
| Total inventory from discontinuing operations | ||||||||
Note 8 – Property and Equipment
Following the sale of substantially all manufacturing and operating assets and the transition to a commission-based distribution model, the Company no longer owns manufacturing facilities, production equipment, or construction-in-progress assets. Property and equipment as of June 30, 2026 and December 31, 2025 consists primarily of office equipment and software.
During the three months ended June 30, 2026, the
Company wrote off the remaining net book value of its capitalized enterprise resource planning software of $
Depreciation and amortization expense related to continuing operations was $
Property and equipment at consist of the following at June 30, 2026 and December 31, 2025:
| June 30, 2026 | December 31, 2025 | |||||||
| Software | $ | $ | ||||||
| Less: Accumulated depreciation and amortization | ( | ) | ||||||
| Total property and equipment, net | $ | $ | ||||||
19
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Note 9 – Leases
The Company determines if an arrangement is a finance lease or operating lease at inception and recognizes right-of-use (“ROU”) assets and lease liabilities at commencement date based on the present value of the lease payments over the lease term. For operating leases, our right-of-use assets are amortized on a straight-line basis over the lease term with rent expense recorded to operating expenses. The Company has elected the practical expedient of not separating lease components from non-lease components. The depreciable life of related leasehold improvements is based on the shorter of the useful life or the lease term.
The Company previously leased a
On May 22, 2024, the Company entered into an industrial
lease with USCIF Pinnacle Building B LLC. The Company leased approximately
On October 26, 2023, the Company entered into a lease
agreement with Prologis, Inc., a Maryland corporation. The Company leased approximately
On July 1, 2023, the Company entered into a lease for
a warehouse space in Irving, Texas, of approximately
The components of lease expense were as follows:
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Right-of-Use lease cost: | ||||||||
| Amortization of right-of-use asset related to continuing operations | $ | $ | ||||||
20
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Supplemental balance sheet information related to leases was as follows:
| June 30, 2026 | December 31, 2025 | |||||||
| Operating lease: | ||||||||
| Operating lease assets | $ | $ | ||||||
| Current portion of operating lease liability | $ | $ | ||||||
| Noncurrent operating lease liability related to discontinued operations | ||||||||
| Total operating lease liability | $ | $ | ||||||
| Weighted average remaining lease term: | ||||||||
| Operating leases (in years) | ||||||||
| Weighted average discount rate: | ||||||||
| Operating lease | % | % | ||||||
Supplemental cash flow and other information related to operating leases was as follows:
| For the Six Months Ended | ||||||||
| June, 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows used for operating leases - continuing operations | $ | $ | ||||||
| Operating cash flows used for operating leases - discontinued operations | ||||||||
The future minimum lease payments due under operating leases as of June 30, 2026 is as follows:
| Minimum Lease | ||||
| Fiscal Year Ending December 31, | Commitments | |||
| 2026 | $ | |||
| Total | $ | |||
| Less effects of discounting | ||||
| Lease liability recognized | $ | |||
Note 10 – Convertible Notes Payable, net
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 $
The combined $
21
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
The Convertible Notes are senior in right of payment to all existing and future indebtedness of the Company and are secured by a security interest in all existing and future assets of the Company. The Convertible Notes may be prepaid by the Company at any time upon ten days’ prior written notice.
The entry into the Exchange Agreement and the transactions contemplated thereby, including the issuance of the Convertible Notes, were approved unanimously by the disinterested members of the Company’s board of directors and the disinterested members of the Company’s audit committee in accordance with the Company’s related-party transaction policy.
Pursuant to Appendix C of the Securities Purchase
Agreement entered into on December 31, 2025, $
On December 31, 2025, a portion of the net proceeds
from the preferred stock issuance was used to repay $
Notes payable, related parties consist of the following at June 30, 2026 and December 31, 2025, respectively:
| June 30, 2026 | December 31, 2025 | |||||||
| Convertible Notes payable, bearing interest at | $ | $ | ||||||
| Convertible Notes payable, bearing interest at | ||||||||
| Total notes payable, related parties | ||||||||
| Less unamortized debt discounts: | ||||||||
| Convertible notes payable, net | $ | $ | ||||||
The Company used proceeds from the sale of manufacturing
assets to pay down certain notes payable. Interest related to notes payable which were paid down as part of the sale of assets and discontinued
operations were reclassified to loss from discontinued operations.
| For the Year Ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Interest on notes payable, related parties | $ | $ | ||||||
| Amortization of debt discounts on notes payable, related parties | ||||||||
| Interest on notes payable | ||||||||
| Amortization of debt discounts on notes payable | ||||||||
| Total interest expense | $ | $ | ||||||
Note 11 – Advances – Related Party
As of June 30, 2026, the Company received funds amounting to $
Note 12 – Notes Payable
On June 16, 2020, the Company entered into a loan authorization and loan agreement with the United States Small Business Administration
(the “SBA”), as lender, pursuant to the SBA’s Economic Injury Disaster Loan (“EIDL”) assistance program
in light of the impact of the COVID-19 pandemic on the Company’s business (the “EIDL Loan Agreement”) encompassing a
$
22
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Sagol Advisors Credit Facility
On May 5, 2026, the Company issued a press release
announcing that it had entered into a non-convertible private placement credit facility with Sagol Advisors providing for borrowings
of up to $
Note 13 – Stockholders’ Equity
Preferred Stock
The Company has
On December 31, 2025, in connection with a Securities
Purchase Agreement with an investor, the Company filed a Certificate of Designations, Preferences and Rights creating
The Preferred Stock ranks senior to the Company’s common stock and any junior securities with respect to dividends and distributions upon liquidation, dissolution or winding up of the Company, and on parity with any series of preferred stock expressly designated as ranking on parity with the Preferred Stock.
The Preferred Stock does not bear a stated dividend rate. However, if the Company declares a dividend on its common stock, holders of Preferred Stock are entitled to receive dividends on an as-converted basis in the same form and manner as holders of common stock.
Subject to receipt of stockholder approvals and
the filing of an amendment to the Company’s certificate of incorporation, each share of Series AA Preferred Stock is initially
convertible, at the option of the holder, into
On March 31, 2026, upon the issuance of the Series AAA Preferred Stock,
holders of
23
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
In the event of a liquidation, dissolution or
winding up of the Company, holders of Preferred Stock are entitled to receive, prior and in preference to any distributions to holders
of common stock, an amount per share equal to the greater of (i) the stated value of $
The Preferred Stock generally has no voting rights, except as required by Delaware law and for certain protective provisions requiring the consent of holders of a majority of the applicable series of the outstanding Preferred Stock.
Common Stock Sold for Cash
On April 13, 2026, the Company entered into a Sales Agreement (the “Sales Agreement”) with Craft Capital Management, LLC,
as sales agent (the “Sales Agent”), pursuant to which the Company may offer and sell from time to time, at its option through
the Sales Agent, shares of the Company’s common stock, having an aggregate offering price of up to $100 million in an at-the-market
program. The issuance and sale, if any, of shares of the Company’s common stock under the Sales Agreement will be made pursuant
to the Company’s registration statement on Form S-3 (File No. 333-
On December 31, 2024, Ira and Claudia Goldfarb
purchased
On November 14, 2024 the Company filed a shelf
registration to offer and sell from time to time in one or more offerings, up to $
On May 2, 2024, the Company priced its registered underwritten
public offering of
On June 28, 2024, the Company raised $
Common Stock Issued to Officers for Services
On June 5, 2025, the Board of Directors unanimously
approved a revision to the annual compensation of Claudia Goldfarb, the Company’s Chief Executive Officer, and Ira Goldfarb, the
Company’s Executive Chairman, whereby Ms. Goldfarb and Mr. Goldfarb would receive approximately
On March 31, 2025, the Board of Directors unanimously
approved a revision to the annual compensation of Claudia Goldfarb, the Company’s Chief Executive Officer, and Ira Goldfarb, the
Company’s Executive Chairman, whereby Ms. Goldfarb and Mr. Goldfarb would receive approximately
24
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Common Stock Issued to Directors for Services
On March 30, 2026,
On January 15, 2026, the Company issued
On August 1, 2025, the Company issued an aggregate
On February 6, 2025, the Company issued an aggregate
Sow Good Inc. Reverse Stock Split
On April 17, 2026, the board of directors of Sow Good Inc. determined to effect a reverse stock split of the Company’s common stock at a ratio of 1-for-15 (the “Reverse Stock Split”) and approved an amendment to the Company’s Certificate of Incorporation to effect the Reverse Stock Split. The impact of the reverse split was retroactively applied to all periods presented in the financial statements unless stated otherwise.
Effective April 23, 2026, the Company amended its Certificate of Incorporation to implement the Reverse Stock Split. The Company’s common stock began trading on a split-adjusted basis when the market opened on April 24, 2026 (the “Effective Date”).
As a result of the Reverse Stock Split on the
Effective Date, every
The Reverse Stock Split reduced the number of
shares of common stock outstanding from approximately
Note 14 – Options
During the six months ended June 30, 2026, all
outstanding options were forfeited and the Company recorded an expense reversal in the amount of $
Note 15 – Warrants
Outstanding Warrants
Warrants to purchase an aggregate total of
warrants were granted, exercised, cancelled, or expired during the three and six months ended June 30, 2026.
25
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
Note 16 – Segment Reporting
The Company operates as
On December 30, 2025, the Company sold substantially
all of its manufacturing assets to Trea Grove, a related party. In connection with this transaction, the Company entered into a Distribution
Agreement under which Trea Grove serves as the primary distributor of the Company’s finished goods inventory, and the Company receives
As a result, the Company no longer operates manufacturing facilities and has transitioned to a capital-light model for the term of the Distribution Agreement. The results of the former manufacturing and omnichannel sales operations have been reclassified to net income (loss) from discontinued operations in the consolidated Statement of Operations for all periods presented. The segment information presented below reflects only continuing operations.
The following table provides the operating financial results of our freeze-dried candy segment for the three months ended June 30, 2026 and 2025:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Less: Significant other segment expenses | ||||||||||||||||
| Cost of goods sold | ||||||||||||||||
| Salaries and benefits | ||||||||||||||||
| Professional services | ||||||||||||||||
| Other general and administrative expenses | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Interest expense, net | ||||||||||||||||
| Segment net (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Note 17 - Earnings Per Share
Basic and diluted earnings per share for the three months ended June 30, 2026 and 2025:
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss of discontinued operations, net of tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Basic and dilutive weighted average shares | ||||||||||||||||
| Basic and dilutive (loss) per share - continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and dilutive (loss) per share - discontinued operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
26
SOW GOOD INC.
Notes to Condensed Financial Statements
(Unaudited)
The table below includes
information related to stock options and warrants that were outstanding at the end the three months ended June 30, 2026 and 2025 and
at the end of the six months ended June 30, 2026 and 2025, respectively.
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Weighted average stock options | ||||||||||||||||
| Weighted average price of exercisable stock options | $ | $ | $ | $ | ||||||||||||
| Weighted average warrants | ||||||||||||||||
| Weighted average price of warrants | $ | $ | $ | $ | ||||||||||||
| Average price of common stock | $ | $ | $ | $ | ||||||||||||
Note 18 – Income Taxes
The Company recognized income of tax
expense in the periods ended June 30, 2026 and 2025, respectively. The Company’s effective tax rates for the three months ended
June 30, 2026 and 2025 differed from the federal statutory tax rate of
The Company continually monitors and performs an assessment of the realizability of its deferred tax assets, including an analysis of factors such as future taxable income, reversal of existing taxable temporary differences, and tax planning strategies. In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of deferred tax assets using a “more likely than not” standard. In making such assessment, more weight was given to evidence that could be objectively verified, including recent cumulative losses. Based on the Company’s review of this evidence, management determined that a full valuation allowance against all of the Company’s net deferred tax assets at June 30, 2026 was appropriate.
Note 19 – Subsequent Events
Management has evaluated events and transactions subsequent to the balance sheet date through the date of this report (the day the financial statements were available to be issued) for potential recognition or disclosure in the financial statements.
Subsequent to June 30, 2026, the Company evaluated various financing alternatives in connection with its proposed strategic expansion into the critical minerals and battery materials sector, including potential equity-based financing transactions, private placements, and other capital raising initiatives to fund the development and advancement of the Nachu Graphite Project in Tanzania and related corporate initiatives. Such potential financing structures may include the issuance of common stock, preferred stock, convertible securities, warrants, or other equity-linked instruments, whether issued in one or more tranches and with or without registration rights.
Nachu Graphite Project Transaction
In August 2026, the holders of a majority of the outstanding shares of the Company’s common stock executed a written consent approving the issuance of shares and other matters necessary to consummate the Transactions, along with approving the entry into alternative structures to otherwise effectuate and consummate the Transaction.
27
Item 2. 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 Quarterly Report on Form 10-Q and our audited financial statements and the notes to those statements included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2026. Certain statements in the discussion contain forward-looking statements based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q titled “Risk Factors.” The information included herein represents our estimates and assumptions as of the date of this filing. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Factors that might cause or contribute to actual results or performance being materially different from those expressed or implied by such forward-looking statements include, but are not limited to, those set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q and in Item 1A. Risk Factors in the 2025 Annual Report on 10-K.
Overview and Outlook
Sow Good Inc. is a U.S.-based consumer packaged goods company that pioneered the freeze dried candy category. Since commencing commercial sales in the first quarter of 2023, Sow Good developed and scaled a proprietary freeze drying manufacturing operation dedicated to transforming traditional candy and snacks into novel, intensely flavorful treats it markets under the “hyper dried, hyper crunchy, hyper flavorful” brand positioning.
Recent Strategic Transactions
On December 30, 2025, the Company completed a series of strategic transactions that fundamentally changed the nature of its operations. The Company sold substantially all of its manufacturing assets - including six proprietary freeze drying machines and other property and equipment with an aggregate net book value of approximately $10 million - to Trea Grove, LLC, a related party, for total consideration of $1.5 million. Concurrently, the Company entered into a Distribution Agreement with Trea Grove, LLC, pursuant to which Trea Grove serves as the primary worldwide distributor of Sow Good’s remaining finished goods inventory, with the Company receiving 10% of gross receipts from customer sales. The Distribution Agreement has a term through July 31, 2026. Additionally, the Company completed a $3.0 million convertible preferred stock offering, the proceeds of which were used to pay down debt and for operational purposes.
As a result of these transactions, the Company no longer operates manufacturing facilities and has transitioned to a capital-light model for the duration of the Distribution Agreement. The Company’s board and management are evaluating strategic alternatives for the business going forward.
On December 31, 2025, the Company entered into a Securities Purchase Agreement with David Lazar for the private placement of two tranches of convertible preferred stock. The Company completed the sale of the first tranche by issuing 1,500,000 shares of Series AA Preferred Stock with proceeds to the Company of $3,000,000, which were used to pay down debt, reduce headcount, and for operational purposes. Pursuant to the Securities Purchase Agreement, the Company expects to consummated the sale of the second tranche with the issuance of 1,500,000 shares of Series AAA Preferred Stock for additional proceeds of $3,000,000 on March 31, 2026. The terms of the Series AAA Preferred Stock are substantially similar to the terms of the Series AA Preferred Stock, except that (i) the Series AAA Preferred Stock are redeemable at a price of $200 per share, (ii) each share of Series AA Preferred Stock is initially convertible into 14 shares of Common Stock where each share of Series AAA Preferred Stock is initially convertible into 250 shares of Common Stock (subject to adjustment as provided in the Series AAA certificate of designations), and (iii) there is no ownership limitation upon conversion.
In connection with the Private Placement the Company experienced a leadership transition with (i) Claudia Goldfarb stepping down as Chief Executive Officer while remaining with the Company as Chief Operating Officer and a member of the Company’s board of directors (the “Board”), (ii) members of the Board Chris Ludeman and Joe Mueller resigning from the Board in connection with the private placement and strategic asset sale, (iii) David Lazar being appointed Chief Executive Officer and elected to the Board, serving as the Board’s Chairman and (iv) David Natan being elected to the Board and serving as Audit Committee Chairman following Mr. Ludeman’s resignation.
On May 31, 2026, upon the issuance of the Series AAA Preferred Stock, holders of 1,122,609 shares of the Series AAA Preferred Stock converted their shares into 280,652,250 shares of common stock (or 18,756,593 shares of common stock after giving effect to the 15-to-1 reverse stock split). On the same date, Mr. David Lazar converted 410,000 shares of Series AA Preferred Stock into 5,740,000 shares of common stock (or 382,667 shares of common stock after giving effect to the 15-to-1 reverse stock split). In August 2026, Mr. David Lazar converted the remaining shares of Series AA Preferred Stock into 1,017,333 shares of common stock.
The Nachu Graphite Project Transaction
In April 2026, Company entered into a share purchase agreement with Ryzon Materials Limited, an Australian unlisted public company (“Ryzon”), Uranex Tanzania Limited (“Uranex”), Magnis Technologies (Tanzania) Limited (“Magnis Tech”), and Uranex ESIP Pty Limited (“Uranex ESIP” and, together with Ryzon, Uranex and Magnis Tech, the “Sellers”), pursuant to which the Company agreed to acquire 100% of the issued and outstanding shares (the “Transaction”) of Uranex and Magnis Tech, each a wholly owned Tanzanian subsidiary of Ryzon (collectively, the “Tanzanian Subsidiaries”). The Tanzanian Subsidiaries are the sole holders of the Nachu Graphite Project, an advanced-stage graphite development asset located in the Ruangwa District, Lindi Region of Southern Tanzania, intended to support the Company’s strategic expansion into the critical minerals and battery anode materials sector. The Transaction remains subject to the execution of definitive agreements, completion of due diligence, receipt of regulatory approvals, financing arrangements and other customary closing conditions.
28
Key Factors Affecting our Performance
Our future success is dependent upon many factors. While the factors and trends described below present opportunities for us, they also pose significant challenges that we must successfully address to enable us to sustain and grow of our business and improve our results of operations. 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.
Our Ability to Consummate Our Acquisition and Subsequent Development of the Nachu Project
In April 2026, Company entered into a share purchase agreement with Ryzon and the Tanzanian Subsidiaries, pursuant to which the Company agreed to acquire 100% of the issued and outstanding shares of the Tanzanian Subsidiaries. The Tanzanian Subsidiaries are the sole holders of the Nachu Graphite Project, an advanced-stage graphite development asset located in the Ruangwa District, Lindi Region of Southern Tanzania, intended to support the Company’s strategic expansion into the critical minerals and battery anode materials sector. The Transaction remains subject to the execution of definitive agreements, completion of due diligence, receipt of regulatory approvals, financing arrangements and other customary closing conditions. Upon closing, the Company intends to focus on advancing the acquired project toward construction and production, with its current consumer products operations managed as a separate business segment, and management believes the Transaction positions us as a burgeoning battery metals company with a platform for additional critical mineral acquisitions in the future. Our ability to consummate the Transaction and bring the Nachu Project to operational will depend on a number of factors and risks, including the time and attention of management, completion of due diligence and other closing conditions for the Acquisition, the ability to obtain additional financing, among many others. The consummation of the Acquisition and the development of the Nachu Project will have a significant impact on our financial position and results of operations.
The State of the Freeze Dried Candy Category
While we observed the freeze dried candy category experience a significant rise in popularity during 2024 and the first half of 2025, we have observed market data showing a significant decline in sales in the freeze dried candy category toward the end of 2025. This decline could be the result of a number of factors, including the disjointed nature of freeze dried candy providers and the variance in quality, the arrival of large multinational market entrants and their desire to reduce competition in the space, or the exhaustion of consumer appetite of freeze dried candy. As a result of the slowdown in the market for freeze dried candy, the Company has transitioned to a capital-light model for the duration of the Distribution Agreement.
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. 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. Our ability to keep our current customers, or grow our SKU portfolio on their shelves, and 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.
Components of Results of Operations
Revenues
We derive revenues primarily from commissions earned pursuant to the Distribution Agreement related to sales of Sow Good-branded products. The Company recognizes revenue when the underlying customer sale is completed and the amount due to the Company becomes determinable in accordance with the terms of the Distribution Agreement.
Cost of Goods Sold
Our cost of goods sold consists primarily of limited product-related costs associated with remaining inventory sales and costs incurred under the Distribution Agreement. Following the Company’s strategic restructuring and transition to a commission-based distribution model, substantially all historical manufacturing, labor, facilities, and inventory-related costs have been discontinued and reclassified to discontinued operations.
29
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.
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.
Provision for Income Taxes
The Company recognized a federal income tax expense of $0, for the three months ended June 30, 2026 and 2025. The Company’s effective tax rates for the three months ended June 30, 2026 and 2025 differed from the federal statutory tax rate of 21% primarily due to a valuation allowance for the Company’s deferred tax assets and permanent differences.
Segment Overview
Our chief operating decision maker is our Chief Executive Officer who reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance, as well as for strategic operational decisions and managing the organization. For each of the three months ended June 30, 2026 and 2025, we have determined that we have one operating segment and one reportable segment.
Results of Operations for the Three Months Ended June 30, 2026 and 2025.
The following table summarizes selected items from the statement of operations for the three-month periods ended June 30, 2026 and 2025:
| For the Three Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2026 | 2025 | Increase/decrease | % Change | |||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses: | ||||||||||||||||
| Salaries and benefits | 1,840,114 | 662,224 | 1,177,890 | 178 | % | |||||||||||
| Professional services | 1,666,285 | 258,230 | 1,408,055 | 545 | % | |||||||||||
| Other general and administrative expenses | 268,798 | 228,456 | 40,342 | 18 | % | |||||||||||
| Total general and administrative expenses | 3,775,197 | 1,148,910 | ||||||||||||||
| Depreciation and amortization | - | 8,583 | (8,583 | ) | 100 | % | ||||||||||
| Total operating expenses | 3,775,197 | 1,157,493 | ||||||||||||||
| Net operating loss | (3,775,197 | ) | (1,157,493 | ) | ||||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 43,871 | - | 43,871 | 100 | % | |||||||||||
| Interest expense | (105,219 | ) | (113,163 | ) | 7,943 | -7 | % | |||||||||
| Gain on termination of leases | - | - | - | |||||||||||||
| Loss on disposition of assets | (19,167 | ) | - | (19,167 | ) | -100 | % | |||||||||
| Total other (expense) | (80,515 | ) | (113,163 | ) | ||||||||||||
| - | ||||||||||||||||
| Loss from continuing operations before tax | (3,855,712 | ) | (1,270,656 | ) | (2,585,056 | ) | 203 | % | ||||||||
| Income tax (benefit) provision | - | - | - | |||||||||||||
| Net (loss) from continued operations | (3,855,712 | ) | (1,270,656 | ) | ||||||||||||
| Loss) from discontinued operations | (23,315 | ) | (2,915,856 | ) | 2,892,541 | 99 | % | |||||||||
| Net loss | (3,879,027 | ) | (4,186,512 | ) | ||||||||||||
30
Comparison of the three months ended June 30, 2026 and 2025
Revenues
For the three months ended June 30, 2026, the Company recognized approximately $0 of commission revenue under the Distribution Agreement. For the three months ended June 30, 2025, the Company recognized no revenue. The absence of revenue in the 2025 period within continuing operations is due to the Company’s former manufacturing and direct-sales business being presented within discontinued operations following the Company’s strategic restructuring completed on December 31, 2025. As a result, all revenue associated with the legacy operating model is excluded from continuing operations for comparative purposes.
Cost of Goods Sold
No cost of goods sold was recognized for the periods ended June 30, 2026 and 2025.
Gross Profit
No gross profit was recognized for the periods ended June 30, 2026 and 2025.
Operating Expenses
Salaries and Benefits
Salaries and benefits expense from continuing operations for the three months ended June 30, 2026 was $1.8 million, compared to $662 thousand for the three months ended June 30, 2025, representing an increase of $1.2 million, or 178%. The increase was primarily attributable to $1,012,832 of payroll wages, $747,021 of payroll taxes and $80,000 of accrued officer compensation recorded during the current quarter. Salaries and benefits attributable to the Company’s former manufacturing operations, including $1,154,273 of stock-based compensation recognized in the prior year period, are presented within discontinued operations for all periods presented and are therefore excluded from continuing operations.
Professional Services
Professional services expense for the three months ended June 30, 2026 was $1.7 million, compared to $258 thousand for the three months ended June 30, 2025, representing an increase of $1.4 million, or 545%. The increase was primarily attributable to $1,499,515 of legal fees, compared to $161,151 in the prior year period, incurred in connection with the Private Placement, the issuance of the Series AAA Preferred Stock, the reverse stock split, and the Company’s evaluation of strategic alternatives. Legal fees for the current quarter are net of $87,753 of costs capitalized to additional paid-in capital as issuance costs. Accounting fees were substantially unchanged at $65,970, compared to $67,935 in the prior year period, and other professional and consulting fees increased from $71,657 to $100,800.
Other General and Administrative Expenses
Other general and administrative expenses for the three months ended June 30, 2026 were $268,798 thousand, compared to $228,456 thousand for the three months ended June 30, 2025, representing an increase of $40,342 thousand, or 18%. The current quarter included $118,750 of director compensation, an increase of $115,191 over the prior year period, and insurance costs that were substantially unchanged year over year, which together offset substantial reductions in the legacy corporate cost base following the Company’s exit from manufacturing operations. Travel expense decreased $65,830, computer software and internet expense decreased $32,226, and bank service charges, office supplies, dues and subscriptions and other routine operating costs decreased by an aggregate of $37,042, in each case compared to the prior year period.
Depreciation
Depreciation and amortization expense for the three months ended June 30, 2026 was $0, compared to $8,583 for the three months ended June 30, 2025, a decrease of $6,083, or 71%. The decrease reflects the substantial elimination of the Company’s depreciable asset base following the December 2025 restructuring. Separately, the Company recorded a loss on disposal of assets of $16,667 during the quarter on the write-off of the remaining net book value of its capitalized software.
Other Income (Expense)
Interest expense for the three months ended June 30, 2026 was $80,515, compared to $113,163 for the three months ended June 30, 2025, representing a decrease of $28,370, or 10%. The decrease was primarily attributable to the repayment of outstanding indebtedness with a portion of the proceeds of the Private Placement completed in December 2025, partially offset by $60,255 of amortization of debt discount on the Company’s convertible notes payable recognized during the current quarter. Interest income for the three months ended June 30, 2026 was $43,871, compared to $0 for the three months ended June 30, 2025, representing an increase of $43,871, or 100%. The increase is solely attributable to interest received from certificates of deposit.
31
Net Income (Loss)
Net loss from continuing operations for the three months ended June 30, 2026 was $3.9 million, compared to $1.3 million for the three months ended June 30, 2025, representing an increase in loss of $2.6 million, or 203%. The increase was primarily attributable to a $1.4 million increase in professional services expense, driven principally by legal fees incurred in connection with the Private Placement, the issuance of the Series AAA Preferred Stock, the reverse stock split and the Company’s evaluation of strategic alternatives, and a $1.2 million increase in salaries and benefits, partially offset by an $8 thousand decrease in interest expense.
Income from discontinued operations for the three months ended June 30, 2026 was $23,315, compared to a loss of $2,915,856 for the three months ended June 30, 2025, representing a favorable change of $2,936,413. Discontinued operations reflect the results of the Company’s former manufacturing and direct-sales business, substantially all of the assets of which were sold in December 2025, together with commission revenue earned under the Distribution Agreement. The current period result reflects the absence of manufacturing operating losses recognized in the prior year period.
Net loss for the three months ended June 30, 2026 was $3,879,027, compared to $4,186,512 million for the three months ended June 30, 2025, representing a decrease of $307,485, or 7%. The decrease reflects the improvement in results of discontinued operations, more than offset in the ongoing business by the increase in loss from continuing operations described above.
Provision for Income Taxes
The Company maintains a full valuation allowance against its net deferred tax assets, primarily as a result of its historical net loss position and the uncertainty regarding the realization of those assets. The Company recognized no provision for or benefit from income taxes for the three months ended June 30, 2026 and 2025. The Company’s effective tax rate for each period differs from the federal statutory rate of 21% primarily due to the change in the valuation allowance.
Results of Operations for the Six Months Ended June 30, 2026 and 2025.
The following table summarizes selected items from the statement of operations for the three-month periods ended June 30, 2026 and 2025:
| For the Six Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2026 | 2025 | Increase/decrease | % Change | |||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses: | ||||||||||||||||
| Salaries and benefits | 2,135,706 | 1,469,007 | 666,699 | 45 | % | |||||||||||
| Professional services | 2,791,425 | 450,553 | 2,340,872 | 520 | % | |||||||||||
| Other general and administrative expenses | 532,008 | 807,162 | (275,154 | ) | -34 | % | ||||||||||
| Total general and administrative expenses | 5,459,139 | 2,726,722 | ||||||||||||||
| Depreciation and amortization | 2,500 | 17,167 | (14,667 | ) | -85 | % | ||||||||||
| Total operating expenses | 5,461,639 | 2,743,889 | ||||||||||||||
| Net operating loss | (5,461,639 | ) | (2,743,889 | ) | ||||||||||||
| Other (expense): | ||||||||||||||||
| Interest income | 43,871 | 43,871 | 100 | % | ||||||||||||
| Interest expense | (348,813 | ) | (295,739 | ) | (53,075 | ) | 18 | % | ||||||||
| Gain on termination of leases | - | - | - | |||||||||||||
| Loss on disposition of assets | (19,167 | ) | - | (19,167 | ) | -100 | % | |||||||||
| Total other income (expense) | (324,109 | ) | (295,739 | ) | ||||||||||||
| - | ||||||||||||||||
| Loss from continuing operations before tax | (5,785,748 | ) | (3,039,628 | ) | (2,746,120 | ) | 90 | % | ||||||||
| Income tax (benefit) provision | - | - | ||||||||||||||
| Net income (loss) from continued operations | (5,785,748 | ) | (3,039,628 | ) | (2,746,120 | ) | -90 | % | ||||||||
| Income (loss) of discontinued operations | (583,032 | ) | (3,717,938 | ) | 3,178,778 | 85 | % | |||||||||
| Net loss | (6,368,780 | ) | (6,757,566 | ) | ||||||||||||
32
Comparison of the six months ended June 30, 2026 and 2025
Revenues
The Company recognized no revenue from continuing operations for the six months ended June 30, 2026 and 2025. Commission revenue of approximately $18 thousand earned under the Distribution Agreement during the six months ended June 30, 2026 is presented within discontinued operations. For the three months ended June 30, 2026, the Company did not recognize any commission revenues. The absence of revenue in the 2025 period within continuing operations is due to the Company’s former manufacturing and direct-sales business being presented within discontinued operations following the Company’s strategic restructuring completed on December 31, 2025. As a result, all revenue associated with the legacy operating model is excluded from continuing operations for comparative purposes.
Cost of Goods Sold
No cost of goods sold was recognized for the periods ended June 30, 2026 and 2025.
Gross Profit
No gross profit for goods sold was recognized for the periods ended June 30, 2026 and 2025.
Operating Expenses
Salaries and Benefits
Salaries and benefits expense for the six months ended June 30, 2026 was $2,135,706, compared to $1,469,007 for the six months ended June 30, 2025, representing an increase of $666,699, or 45%. The increase was primarily attributable to $846,370 of payroll taxes, compared to $303,626 in the prior year period, and $1,234,901 of payroll wages, compared to $992,196, together with $80,000 of accrued officer compensation. These increases were partially offset by a $63,494 credit resulting from the forfeiture of previously recognized stock-based compensation and by the elimination of $93,284 of international payroll and benefits costs following the Company’s transition away from manufacturing operations and the related workforce reductions.
Professional Services
Professional services expense for the six months ended June 30, 2026 was $2,791,425, compared to $450,553 for the six months ended June 30, 2025, representing an increase of $2,340,872, or 520%. The increase was primarily attributable to $1,942,545 of legal fees, compared to $213,819 in the prior year period, incurred in connection with the Private Placement, the issuance of the Series AAA Preferred Stock, the reverse stock split and the Company’s evaluation of strategic alternatives, and net of $243,953 of costs capitalized to additional paid-in capital as issuance costs. Consulting fees increased $505,100, of which $465,100 represents the value of common stock issued to advisors for services during the first quarter. These increases were partially offset by a $75,571 decrease in accounting fees, to $125,400 from $200,971, and were accompanied by a $182,617 increase in other professional fees, to $218,380 from $35,763.
Other General and Administrative Expenses
Other general and administrative expenses for the six months ended June 30, 2026 were $532,008, compared to $807,162 for the six months ended June 30, 2025, representing a decrease of $275,154, or 34%. The decrease was primarily attributable to lower administrative and overhead costs following the Company’s exit from its manufacturing operations, including a $176,498 decrease in travel and entertainment expense, a $48,824 decrease in computer software and internet expense, a $27,859 decrease in office supplies, a $21,139 decrease in director compensation and a $15,235 decrease in bank service charges, together with an aggregate decrease of $44,450 in insurance, dues and subscriptions, fuel and ground transportation, payroll service fees and other routine operating costs.
Depreciation
The Company recorded $2,500 in depreciation and amortization expense within continuing operations for the six months ended June 30, 2026, compared to $17,167 for the six months ended June 30, 2025, respectively. The decrease reflects the December 2025 restructuring, which eliminated substantially all of the Company’s depreciable asset base.
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During the three months ended June 30, 2026, the Company wrote off the remaining net book value of its capitalized software. That write-off, together with the related depreciation recorded in the period, is presented as a loss on disposal of assets of $19,167 for the six months ended June 30, 2026, respectively, within other expense. No loss on disposal was recorded in the corresponding periods of 2025. The Company had no remaining property and equipment at June 30, 2026.
Depreciation associated with the Company’s former manufacturing assets is presented within discontinued operations for all periods presented and is therefore excluded from continuing operations.
Other Income (Expense)
Interest expense for the six months ended June 30, 2026 was $324,109, compared to $295,739 for the six months ended June 30, 2025, representing an increase of $32,648, or 29%. The composition of interest expense differed between periods. The current period includes $255,865 of amortization of debt discount on the Company’s convertible notes payable, compared to $165,997 in the prior year period, partially offset by a decrease in face interest to $92,949 from $129,742 following the repayment of outstanding indebtedness with a portion of the proceeds of the Private Placement completed in December 2025. Interest income for the six months ended June 30, 2026 was $43,871, compared to $0 for the six months ended June 30, 2025, representing an increase of $43,871, or 100%. The increase is solely attributable to interest received from certificates of deposit.
Net Income (Loss)
Net loss from continuing operations for the six months ended June 30, 2026 was $5,785,748, compared to $3,039,628 for the six months ended June 30, 2025, representing an increase in loss of $2,746,120, or 90%. The increase was primarily attributable to a $2,340,872 increase in professional services expense, driven principally by legal fees incurred in connection with the Private Placement, the issuance of the Series AAA Preferred Stock, the reverse stock split and the Company’s evaluation of strategic alternatives, and a $666,699 increase in salaries and benefits, partially offset by a $275,154 decrease in other general and administrative expenses.
Loss from discontinued operations for the six months ended June 30, 2026 was $583,032, compared to $3,717,938 for the six months ended June 30, 2025, representing a decrease of $3,134,906, or 84%. Discontinued operations reflect the results of the Company’s former manufacturing and direct-sales business, substantially all of the assets of which were sold in December 2025, together with commission revenue earned under the Distribution Agreement. The decrease reflects the absence of manufacturing operating losses recognized in the prior year period.
Net loss for the six months ended June 30, 2026 was $6,368,780, compared to $6,757,566 for the six months ended June 30, 2025, representing a decrease of $388,786, or 6%. The decrease reflects the improvement in results of discontinued operations, substantially offset by the increase in loss from continuing operations described above.
Provision for Income Taxes
The Company maintains a full valuation allowance against its net deferred tax assets, primarily as a result of its historical net loss position and the uncertainty regarding the realization of those assets. The Company recognized no provision for or benefit from income taxes for the six months ended June 30, 2026 and 2025. The Company’s effective tax rate for each period differs from the federal statutory rate of 21% primarily due to the change in the valuation allowance.
Liquidity, Going Concern and Capital Resources
The following table summarizes our total current assets, liabilities and working capital at June 30, 2026 and December 31, 2025.
| June 30 | December 31, | |||||||
| 2026 | 2025 | |||||||
| Current Assets | $ | 383,469 | $ | 3,392,778 | ||||
| Current Liabilities | $ | 5,600,588 | $ | 6,187,442 | ||||
| Working Capital | $ | (5,217,119 | ) | $ | (2,794,664 | ) | ||
As of June 30, 2026, the Company had a working capital deficit of $5,217,119, compared to a working capital deficit of $2,794,664 as of December 31, 2025. The increase of $2,422,455 was primarily attributable to a $3,009,309 decrease in current assets, including the collection or settlement of $1,651,471 of accounts receivable - related party and a $1,465,953 decrease in cash and cash equivalents, partially offset by a $586,854 decrease in current liabilities
As of June 30, 2026, cash and cash equivalents were $8,492, compared to $1,474,445 as of December 31, 2025. The decrease of $1,465,953 was primarily attributable to $4,452,345 of cash used in operating activities, partially offset by $2,986,392 of cash provided by financing activities, consisting of $2,999,990 of net proceeds from the issuance of Series AAA Preferred Stock and $452,390 of proceeds from notes payable, less $465,988 of payments on convertible notes. There were no investing activities during the period. The Company’s cash on hand at June 30, 2026 is not sufficient to fund its operations, and it will require additional financing — see the discussion of going concern below.
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Following the sale of substantially all of the Company’s operating assets in December 2025, the Company transitioned to an asset-light operating structure. Management believes existing cash on hand will be sufficient to fund operations in the near term; however, the Company may require additional financing in the form of equity or debt to support future operations and strategic initiatives. There can be no assurance that such financing will be available on acceptable terms, or at all.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the consolidated financial statements are issued. See Note 3- “Going Concern” to the consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information.
On April 13, 2026, the Company entered into a Sales Agreement (the “Sales Agreement”) with Craft Capital Management, LLC, as sales agent (the “Sales Agent”), pursuant to which the Company may offer and sell from time to time, at its option through the Sales Agent, shares of the Company’s common stock, having an aggregate offering price of up to $100 million in an at-the-market program. The issuance and sale, if any, of shares of the Company’s common stock under the Sales Agreement will be made pursuant to the Company’s registration statement on Form S-3 (File No. 333- 294799) for up to $1,000,000,000 of the Company’s securities, which became effective on April 9, 2025, and the related prospectus supplement dated April 13, 2026. As of June 30, 2026, no shares of common stock have been issued under this at-the-market program.
On November 14, 2024 the Company filed a shelf registration to offer and sell from time to time in one or more offerings, up to $50.0 million in aggregate of common stock, preferred stock, debt securities, warrants, and units, including an at-the-market program for up to $20 million of our common stock. As of June 30, 2026, 888,591 shares of our common stock have been issued under the at-the-market program.
Indebtedness
On April 28, 2025, the Company restructured its outstanding current debt through the issuance of Convertible Notes in a dollar-for-dollar exchange. On April 28, 2025, the Company entered into an exchange agreement (the “Exchange Agreement”) with related party holders of the Company’s outstanding promissory notes (the “Outstanding Notes”) with an aggregate principal amount of $2.7 million, maturity dates ranging from April 8, 2025 to August 23, 2025 and interest rates ranging from 6% to 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 $2.8 million, the aggregate principal amount of the Outstanding Notes, plus accrued and unpaid interest thereunder. The 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 Note 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. On December 31, 2025, a portion of the net proceeds from the 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. The remaining outstanding balance of approximately $344,838, including accrued quarterly interest, was repaid in full on March 31, 2026.
Cash Flows
The following table summarizes our cash flows during the three months ended June 30, 2026 and 2025, respectively.
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net cash (used in) operating activities, continuing operations | $ | (3,426,585 | ) | $ | (1,656,419 | ) | ||
| Net cash (used in) operating activities, discontinued operations | $ | (869,560 | ) | $ | (858,465 | ) | ||
| Net cash (used in) investing activities | - | (249,140 | ) | |||||
| Net cash provided by financing activities | 2,830,192 | - | ||||||
| Net change in cash and cash equivalents | $ | (1,465,953 | ) | $ | (2,764,024 | ) | ||
Net cash used in operating activities from continuing operations was $3,426,585 for the six months ended June 30, 2026, compared to $1,656,419 for the six months ended June 30, 2025. The increase in cash used was primarily attributable to the $2,789,992 increase in loss from continuing operations and the payment of $1,292,500 of accrued severance, partially offset by the collection of $1,343,545 of accounts receivable – related party, a $1,236,653 increase in accrued expenses and the return of $257,663 of security deposits. Net cash used in operating activities from discontinued operations increased to $869,560 from $858,465, reflecting the wind-down of the Company’s former manufacturing operations and capitalized costs incurred in prior periods.
The Company had no cash flows from investing activities for the six months ended June 30, 2026, compared to net cash used in investing activities of $249,140 for the six months ended June 30, 2025. The decrease was attributable to the absence of capital expenditures in the current period following the sale of substantially all of the Company’s manufacturing assets in December 2025. Cash used in investing activities in the prior year period consisted of amounts paid for construction in progress.
Net cash provided by financing activities was $2,830,192 for the six months ended June 30, 2026, compared to no cash flows from financing activities for the six months ended June 30, 2025. Cash provided by financing activities during the 2026 period consisted of $2,843,790 of proceeds from the issuance of the Series AAA Preferred Stock and $452,390 of net proceeds from notes payable, partially offset by $465,988 of net payments on convertible notes.
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Contractual Obligations and Commitments
On July 1, 2023, the Company entered into a lease for additional warehouse space in Irving, Texas, of approximately 9,000 feet under a 37-month lease at a rate of $8,456 per month, with approximately a 4% annual escalation of lease payments. The facility lease contains provisions requiring payment of property taxes, utilities, insurance, maintenance and other occupancy costs applicable to the leased premise. As the Company’s leases do not provide implicit discount rates, the Company uses an incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate for the lease at the time of commencement was 8%.
On May 22, 2024, the Company entered into an industrial lease (the “Lease”) with USCIF Pinnacle Building B LLC, a Delaware limited liability company. Pursuant to the terms of the Lease, the Company will lease approximately 324,000 rentable square feet from the Lessor at 4024 Rock Quarry Road, Dallas, Texas for a term of approximately 62 months, which the Company intends to use as industrial and manufacturing space. The term of the Lease commenced on May 22, 2024. The Lease provides for graduated rent payments starting at $122,175 per month, and increasing up to $297,289.14 per month by the end of the Lease, plus taxes, insurance and common area maintenance costs. The Company was required to provide a security deposit in the amount of $1,000,000 in connection with the Lease. Effective June 30, 2026, the Company agreed with Pinnacle to exit the facility on January 31, 2026. As a result of reducing the lease term by 42 months, the company reduced the related right-of-use asset by $10,397,922 and the lease liability by $11,829,536, resulting in a noncash gain $1,431,614.
On October 26, 2023, the Company entered into a lease agreement (the “2023 Lease Agreement”) with Prologis, Inc., a Maryland corporation. 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. The 2023 Lease Agreement provides for base rent payments starting at approximately $42.5 thousand per month (taking into consideration an initial phase-in of the base rent obligation) in the first year of the Initial Term, and increase each year, up to approximately $51.7 thousand per month during the last year of the Initial Term. 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. Effective June 30, 2026, the Company agreed with Prologis to exit the lease as of June 30, 2026. As a result of reducing the lease term by 39 months, the company derecognized the related right-of-use asset $2,325,675 and the lease liability of $2,673,619, resulting in a noncash gain of $347,943.
Off-Balance Sheet Arrangements
None.
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 the United States, or GAAP. The preparation of these financial statements required us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate these estimates and judgments. We base our estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results and experiences may differ materially from these estimates.
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 December 31, 2025.
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Item 3. 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.
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.
Foreign Currency Risk
We did not hold a material amount of cash in foreign jurisdictions as of June 30, 2026.
Item 4. Controls and Procedures.
Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2025, as such term is defined in Rules 13a-15(e) and 15d-15(e) under Securities Exchange Act of 1934, as amended (the “Exchange Act”). We maintain disclosure controls and procedures that are designed to ensure the information we are required to disclose in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation as of June 30, 2026, our Chief Executive Officer, Claudia Goldfarb, and our Chief Financial Officer, Donna Guy concluded that our disclosure controls and procedures are effective.
There have been no changes in the Company’s internal control over financial reporting during the three months ended June 30, 2026 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. 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.
Item 1A. Risk Factors.
There is substantial doubt about our ability to continue as a going concern.
Our financial statements as of June 30, 2026 have been prepared under the assumption that we will continue as a going concern for the next twelve months. As of June 30, 2026, we had cash and cash equivalents of $8 thousand and an accumulated deficit of $4.4 million. We do not believe that our cash and cash equivalents are sufficient to fund operations and capital expenditures to reach larger scale revenue generation from our product offerings. As a result of our financial condition and other factors described herein, there is substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern will depend on our ability to obtain additional funding, as to which no assurances can be given. We continue to analyze various alternatives, including potentially obtaining debt or equity financings or other arrangements. Our future success depends on our ability to raise capital. We cannot be certain that raising additional capital, whether through selling additional debt or equity securities or obtaining a line of credit or other loan, will be available to us or, if available, will be on terms acceptable to us, and, to the extent it is obtained, it would likely have rights, preferences, and privileges senior to those of holders of our common stock and would further dilute our current stockholders. Our ability to raise capital is also constrained by the price of and demand for our common stock. The inclusion of disclosures expressing substantial doubt about our ability to continue as a going concern could also materially adversely affect our stock price and our ability to raise new capital. If we are unable to obtain funds when needed or on acceptable terms, we may be required to curtail our current development programs, cut operating costs, forgo future development and other opportunities, or even terminate our operations in which case our investors could lose some or all of their investment.
We have recently undergone a significant transition in our executive leadership and Board of Directors, which may adversely affect our business and operations.
On March 31, 2026, David Lazar resigned as our Chief Executive Officer and Donna Guy informed our Board that she would be resigning as our Chief Financial Officer. Upon these resignations, our Board appointed Yisroel Goldberg as our Chief Executive Officer and Chief Financial Officer.
On the same date, our Board accepted the resignations of Claudia Goldfarb, Ira Goldfarb, Edward Shensky, Lyle Berman and Jeff Rubin from our Board. The Board elected Yisroel Goldberg, Binyomin Posen, Joseph Labkowski and Jack Wortzman to serve on the Board effective upon those resignations.
This simultaneous transition of our executive officers and Board of Directors represents a significant change that may adversely affect our company as a result of concentration of executive authority in a single individual, impairment of our ability to maintain effective disclosure controls and procedures, failure to execute our business strategy and ability to retain institutional knowledge critical to our operations. There can be no assurance that our new management team and Board will successfully manage these responsibilities, and any failure to do so could have a material adverse effect on our business, financial condition, results of operations and the market price of our common stock.
There can be no assurance that our new management team and Board of Directors will be able to successfully manage our operations, maintain effective internal controls and disclosure procedures, and oversee our business strategy. Any failure to do so could have a material adverse effect on our business, financial condition, results of operations and the market price of our common stock.
Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our securities.
Our common stock is currently listed for trading on Nasdaq. We must satisfy Nasdaq’s continued listing requirements. A delisting of our common stock from Nasdaq could materially reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities.
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We have in the past, and may in the future, be unable to comply with certain of the listing standards that we are required to meet to maintain the listing of our common shares on Nasdaq.
There is no assurance that we will maintain compliance with the minimum listing requirements with all applicable requirements for continued listing on Nasdaq. If our common stock were delisted from Nasdaq, trading of our common stock would most likely take place on an over-the-counter market established for unlisted securities, such as the OTCQB or the Pink Market maintained by OTC Markets Group Inc. An investor would likely find it less convenient to sell, or to obtain accurate quotations in seeking to buy, our common stock on an over-the-counter market, and many investors would likely not buy or sell our common stock due to difficulty in accessing over-the-counter markets, policies preventing them from trading in securities not listed on a national exchange or other reasons. In addition, as a delisted security, our common stock would be subject to SEC rules as a “penny stock,” which impose additional disclosure requirements on broker-dealers. The regulations relating to penny stocks, coupled with the typically higher cost per trade to the investor of penny stocks due to factors such as broker commissions generally representing a higher percentage of the price of a penny stock than of a higher-priced stock, would further limit the ability of investors to trade in our common stock. In addition, delisting could harm our ability to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities. For these reasons and others, delisting would adversely affect the liquidity, trading volume and price of our common stock, causing the value of an investment in us to decrease and having an adverse effect on our business, financial condition and results of operations, including our ability to attract and retain qualified employees and to raise capital.
These are not the only risks we face. You should carefully consider these risk factors, together with the risk factors set forth in Item 1A of our Annual Report on Form 10-K. There have been no other material changes from the risk factors previously disclosed in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
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Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None of the Company’s directors or officers
Item 6. Exhibits.
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| * | Filed herewith. |
| ** | The certifications attached as Exhibit 32.1 and 32.2 accompanying this Quarterly Report on Form 10-Q are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of the Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SOW GOOD INC. | ||
| Date: August 19, 2026 | By: | /s/ Yisroel Goldberg |
| Yisroel Goldberg, Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer) | ||
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