Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

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 March 31, 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 18,710,150 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 382,666 shares of common stock after giving effect to the 15-to-1 reverse stock split).

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.

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.

Our Ability to Consummate Our Acquisition and Subsequent Development of the Nachu Project

On April 20, 2026, SOWG Tanzania Inc., a Delaware corporation and wholly owned subsidiary of the Company Delaware corporation, and the Company entered into a share purchase agreement (the "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, pursuant to which the Company agreed to acquire 100% of the issued and outstanding shares (the "Acquisition") of Uranex and Magnis Tech, each a wholly owned Tanzanian subsidiary of Ryzon (collectively, the "Targets"). The Targets 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 (the "Nachu Project"). 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 Acquisition 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 Acquistion, 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.

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.

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 and $195,603, for the three months ended March 31, 2026 and 2025, respectively. The Company's effective tax rates for the three months ended March 31, 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 March 31, 2026 and 2025, we have determined that we have one operating segment and one reportable segment.

Results of Operations for the Three Months Ended March 31, 2026 and 2025.

The following table summarizes selected items from the statement of operations for the three-month periods ended March 31, 2026 and 2025:

		Three Months Ended
		March 31,								Increase/
		2026				2025				Decrease				% Change
Operating expenses:
General and administrative expenses:
Salaries and benefits			295,592				806,783				(511,191	)			-63	%
Professional services			1,125,140				192,323				932,817				485	%
Other general and administrative expenses			263,210				578,708				(315,498	)			-55	%
Total general and administrative expenses			1,686,942				1,577,814
Depreciation and amortization			2,500				8,584				(6,084	)			-71	%
Loss on impairment of long-lived assets			-				-				-
Total operating expenses			1,686,442				1,589,398
Net operating loss			(1,686,442	)			(1,586,398	)
Other income (expense):											-
Interest income (expense)			(243,594	)			(365,152	)			121,558				33	%
Net income (loss) from continued operations			(1,930,036	)			(1,951,550	)			21,514				-1	%
Income (loss) of discontinued operations			(559,717	)			(802,080	)			242,363				-30	%
Net loss		$	(2,489,753	)			(2,753,630	)			571,939

Comparison of the three months ended March 31, 2026 and 2025

Revenues

For the three months ended March 31, 2026, the Company recognized approximately $18 thousand of commission revenue under the Distribution Agreement. For the three months ended March 31, 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 March 31, 2026 and 2025.

Gross Profit

For the three months ended March 31, 2026, the Company recognized approximately $18 thousand of commission revenue under the Distribution Agreement and no associated cost of revenue, resulting in gross profit of approximately $18 thousand. For the three months ended March 31, 2025, the Company recognized no revenue or gross profit. The absence of gross profit in the 2025 period is due to the Company's former manufacturing and direct-sales operations being presented within discontinued operations following the Company's strategic restructuring completed on December 31, 2025.

Operating Expenses

Salaries and Benefits

Salaries and benefits expense for the three months ended March 31, 2026 was $295 thousand, compared to $807 thousand for the three months ended March 31, 2025, representing a decrease of $511 thousand, or 63%. The decrease was primarily attributable to reduced headcount and lower employee-related costs following the Company's transition away from manufacturing operations and related workforce reductions.

Professional Services

Professional services expense for the three months ended March 31, 2026 was $1.1 million, compared to $192 thousand for the three months ended March 31, 2025, representing an increase of $932 thousand, or 485%. The increase was primarily attributable to higher legal, accounting, consulting, and transaction-related expenses associated with the Company's strategic transition, financing activities, and ongoing public company compliance requirements.

Other General and Administrative Expenses

Other general and administrative expenses for the three months ended March 31, 2026 were $263 thousand, compared to $579 thousand for the three months ended March 31, 2025, representing a decrease of $315 thousand, or 55%. The decrease was primarily attributable to lower facilities, administrative, and overhead costs following the Company's exit from its manufacturing operations and facility reductions.

Depreciation

Depreciation and amortization expense for the three months ended March 31, 2026 was $3 thousand, compared to $9 thousand for the three months ended March 31, 2025, representing a decrease of $6 thousand, or 71%. The decrease was primarily attributable to the sale of substantially all manufacturing assets in December 2025.

Other Income (Expense)

Interest expense for the three months ended March 31, 2026 was $243 thousand, compared to $365 thousand for the three months ended March 31, 2025, representing an increase of $121 thousand, or 33%. The increase was primarily attributable to financing activities completed in connection with the Company's transition to an asset-light operating model.

Net Income (Loss)

Net loss from continuing operations for the three months ended March 31, 2026 was $1.9 million, compared to $1.9 million for the three months ended March 31, 2025, representing an improvement of $21 thousand, or 1%. The improvement was primarily attributable to lower operating expenses following the Company's exit from manufacturing operations.

Loss from discontinued operations for the three months ended March 31, 2026 was $559 thousand, compared to $802 thousand for the three months ended March 31, 2025, representing an improvement of $245 thousand, or 30%. Discontinued operations reflect the historical results of the Company's former manufacturing and direct-sales business, which was sold in December 2025.

Net loss for the three months ended March 31, 2026 was $2.5 million, compared to $2.7 million for the three months ended March 31, 2025, representing an improvement of $263 thousand, or 10%.

Provision for Income Taxes

The Company maintains a full valuation allowance related to our net deferred tax assets, primarily due to our historical net loss position. For the periods ended March 31, 2026 and 2025, the Company recognized federal income tax provisions of $0 and $195.6 thousand, respectively.

Liquidity, Going Concern and Capital Resources

The following table summarizes our total current assets, liabilities and working capital at March 31, 2026 and December 31, 2025.

		March 31				December 31,
		2026				2025
Current Assets		$	2,956,059			$	3,392,778
Current Liabilities		$	4,346,679			$	6,187,442
Working Capital		$	(1,390,620	)		$	(2,794,664	)

As of March 31, 2026, the Company had a working capital deficit of $1,390,620, compared to a working capital deficit of $2,794,664 as of December 31, 2025. The improvement in working capital was primarily attributable to reductions in accrued severance liabilities of $1,292,500 and convertible notes payable of $559,861, partially offset by decreases in accounts receivable - related party of $1,145,706.

As of March 31, 2026, cash and cash equivalents were $2,318,848, compared to $1,474,445 as of December 31, 2025. The increase in cash was primarily attributable to financing activities and working capital deficit during the period.

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.

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 March 31, 2026 and 2025, respectively.

		Three Months Ended
		March 31,
		2026				2025
Net cash used in operating activities, continuing operations		$	(843,354	)		$	(396,671	)
Net cash used in operating activities, discontinued operations		$	(845,265	)		$	(1,603,871	)
Net cash used in investing activities			-				(107,790	)
Net cash provided by financing activities			2,534,002				-
Net change in cash and cash equivalents		$	844,403			$	(2,108,332	)

Net cash used in operating activities, continuing operations was $843,354 for the three months ended March 31, 2026, compared to $396,671 for the three months ended March 31, 2025. The decrease in cash used in operating activities was primarily attributable to changes in working capital, including decreases in inventory and accounts receivable - related party, partially offset by increases in accrued expenses and other liabilities.

Net cash provided by investing activities was $0 for the three months ended March 31, 2026, compared to net cash used in investing activities of $107,790 for the three months ended March 31, 2025. The change was primarily due to a reduction in capital expenditures and a decrease in security deposits during the 2026 period.

Net cash provided by financing activities was $2,534,002 for the three months ended March 31, 2026, compared to $0 for the three months ended March 31, 2025. Cash provided by financing activities during 2026 was primarily attributable to proceeds from the issuance of preferred stock and net proceeds from convertible notes.

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 March 31, 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 March 31, 2026, the Company agreed with Prologis to exit the lease as of March 31, 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.