SOW GOOD INC. - Q3 Revenue Increased to
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“Our outstanding third quarter performance highlights the strides we have made in rapidly scaling our production capacity to meet the surging demand for our innovative and flavorful freeze dried treats,” said
“Since debuting our
“Our primary focus entering the fourth quarter is on expanding our production capacity to grow SKU diversity and stock volume needed for our current retailers and launch with new retailers currently on our waitlist. We aim to continue leveraging our position as a first mover in the freeze dried candy space to further solidify Sow Good’s brand recognition and loyalty, optimize production efficiencies, anticipate new trends, and capture additional market share.”
Third Quarter 2023 Summary vs.
- Revenue in the third quarter of 2023 increased significantly to
$5.0 million compared to$87.7 thousand for the same period in 2022. The increase was attributable to the Company’s pivot to selling freeze-dried candy in the first quarter of 2023 and the expansion of business-to-business sales during the current period. The increase also reflects the benefits of the Company’s expanded production capacity after the addition of two new freeze driers in the second quarter of 2023. - Gross profit increased significantly to
$2.3 million , compared to$22.5 thousand in the year-ago quarter. Gross margin was 46% compared to 26% last year. The increased gross margin was due to higher margins on the Company’s candy relative to the original food product lines sold in the year-ago quarter, which are now discontinued. - Operating expenses in the third quarter of 2023 were
$2.0 million compared to$1.3 million for the same period in 2022. The increase reflects shifting to a 24/7 production work schedule, personnel expansion, and administrative infrastructure costs in support of ongoing sales strength. - GAAP net income for the quarter was $0.3 million compared to a net loss of
$1.6 million in the prior year period. The improvement was primarily due to the higher level of gross profit generated during the quarter, which was partially offset by increased operating and interest expenses. - Adjusted EBITDA (a non-GAAP financial measure defined and reconciled herein) improved to
$0.6 million compared to negative$1.1 million . - Cash and cash equivalents were
$2.1 million atSeptember 30, 2023 , compared to$0.3 million atDecember 31, 2022 . The Company’s third quarter cash balance includes$3.7 million in proceeds from the private placement completed onAugust 25, 2023 .
For a reconciliation of our GAAP to non-GAAP results, please see the tables below.
Conference Call
Date:
Time:
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The conference call will be broadcast live and available for replay here and on the Company’s investor updates website at sowginc.com.
About
Non-GAAP Financial Measures
This press release contains “non-GAAP financial measures” that are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with GAAP. Specifically, we make use of the non-GAAP financial measure “Adjusted EBITDA.” Adjusted EBITDA has been presented in this prospectus as a supplemental measure of financial performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is a supplemental measure of our performance that is not required by or presented in accordance with GAAP. We define Adjusted EBITDA as net loss before depreciation, interest expense, net and income tax benefit, adjusted to eliminate non-cash intangible asset impairment, goodwill impairment, inventory write-down and stock-based compensation. The most directly comparable GAAP measure is net loss. Adjusted EBITDA is not recognized terms under GAAP and should not be considered as an alternative to net income (loss) as a measure of financial performance or cash provided by operating activities as a measure of liquidity, or any other performance measure derived in accordance with GAAP. In addition, in evaluating Adjusted EBITDA, you should be aware that in the future, we may incur expenses similar to the adjustments in the presentation of Adjusted EBITDA. The presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Because not all companies use identical calculations, the presentations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies and can differ significantly from company to company.
We present this non-GAAP measure because we believe it assists investors and analysts in comparing our operating performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. Management believes Adjusted EBITDA is useful to investors in highlighting trends in our operating performance, while other measures can differ significantly depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which we operate, and capital investments. Management uses Adjusted EBITDA to supplement GAAP measures of performance in the evaluation of the effectiveness of our business strategies, to make budgeting decisions, to establish discretionary annual incentive compensation, and to compare our performance against that of other peer companies using similar measures. Management supplements GAAP results with non-GAAP financial measures to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone provide.
There are a number of limitations related to the use of Adjusted EBITDA rather than net loss, which is the most directly comparable financial measure calculated and presented in accordance with GAAP. Some of these limitations are:
- Adjusted EBITDA excludes stock-based compensation expense as it has recently been, and will continue to be for the foreseeable future, a significant recurring non-cash expense for our business;
- Adjusted EBITDA excludes depreciation and amortization expense and, although this is a non-cash expense, the assets being depreciated and amortized may have to be replaced in the future;
- Adjusted EBITDA does not reflect the cash requirements necessary to service interest on our debt which affects the cash available to us;
- Adjusted EBITDA does not reflect the monies earned from our investments since it does not reflect our core operations;
- Adjusted EBITDA does not reflect change in fair value of financial instruments since it does not reflect our core operations and is a non-cash expense;
- Adjusted EBITDA does not reflect income tax expense that affects cash available to us; and
- the expenses and other items that we exclude in our calculations of Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from Adjusted EBITDA when they report their operating results.
In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.
Forward-Looking Statements
This press release contains forward-looking statements. Statements other than statements of historical facts contained in this press release may be forward-looking statements. Statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding the offering, expected growth, and future capital expenditures, are forward-looking statements. In some cases, you can identify forward-looking statements by terms 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. Forward-looking statements contained in this press release include, but are not limited to statements about: (a) our ability to compete successfully in the highly competitive industry in which we operate; (b) our ability to maintain and enhance our brand; (c) our ability to successfully implement our growth strategies related to launching new products; (d) the effectiveness and efficiency of our marketing programs; (e) our ability to manage current operations and to manage future growth effectively; (f) our future operating performance; (g) our ability to attract new customers or retain existing customers; (h) our ability to protect and maintain our intellectual property; (i) the government regulations to which we are subject; (j) our ability to maintain adequate liquidity to meet our financial obligations; (k) failure to obtain sufficient sales and distributions for our freeze dried product offerings; (l) the potential for supply chain disruption and delay; (m) the potential for transportation, labor, and raw material cost increases; and (n) such other risks and uncertainties described more fully in documents filed with or furnished to the
Sow Good Investor Inquiries:
1-949-574-3860
SOWG@gateway-grp.com
Sow Good Media Inquiries:
1-214-623-6055
pr@sowginc.com
| CONDENSED BALANCE SHEETS | ||||||||
| 2023 | 2022 | |||||||
| ASSETS | (Unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 2,096,672 | $ | 276,464 | ||||
| Accounts receivable, net | 1,388,630 | 191,022 | ||||||
| Prepaid expenses | 148,452 | 137,692 | ||||||
| Inventory | 2,240,670 | 1,972,879 | ||||||
| Total current assets | 5,874,424 | 2,578,057 | ||||||
| Property and equipment: | ||||||||
| Construction in progress | 721,563 | 2,487,673 | ||||||
| Property and equipment | 6,147,965 | 3,055,579 | ||||||
| Less accumulated depreciation | (814,349 | ) | (508,257 | ) | ||||
| Total property and equipment, net | 6,055,179 | 5,034,995 | ||||||
| Security deposit | 36,309 | 24,000 | ||||||
| Right-of-use asset | 1,551,252 | 1,261,525 | ||||||
| Total assets | $ | 13,517,164 | $ | 8,898,577 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 709,697 | $ | 452,606 | ||||
| Accrued interest | 646,382 | 226,575 | ||||||
| Accrued expenses | 283,723 | 158,453 | ||||||
| Current portion of operating lease liabilities | 165,869 | 52,543 | ||||||
| Current maturities of notes payable, related parties, net of | 638,004 | - | ||||||
| Current maturities of notes payable, net of | 285,041 | - | ||||||
| Total current liabilities | 2,728,716 | 890,177 | ||||||
| Operating lease liabilities | 1,493,001 | 1,301,355 | ||||||
| Notes payable, related parties, net of | 5,843,882 | 3,502,243 | ||||||
| Notes payable, net of | 581,579 | 393,915 | ||||||
| Total liabilities | 10,647,178 | 6,087,690 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity: | ||||||||
| Preferred stock, | - | - | ||||||
| Common stock, | 4,942 | 4,847 | ||||||
| Additional paid-in capital | 62,933,052 | 58,485,602 | ||||||
| Accumulated deficit | (60,068,008 | ) | (55,679,562 | ) | ||||
| Total stockholders' equity | 2,869,986 | 2,810,887 | ||||||
| Total liabilities and stockholders' equity | $ | 13,517,164 | $ | 8,898,577 | ||||
| CONDENSED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | $ | 5,034,203 | $ | 87,741 | $ | 6,548,479 | $ | 381,056 | ||||||||
| Cost of goods sold | 2,717,254 | 65,195 | 5,046,434 | 263,289 | ||||||||||||
| Gross profit | 2,316,949 | 22,546 | 1,502,045 | 117,767 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses: | ||||||||||||||||
| Salaries and benefits | 1,262,332 | 788,450 | 2,644,087 | 2,947,505 | ||||||||||||
| Professional services | 294,720 | 61,209 | 404,256 | 177,197 | ||||||||||||
| Other general and administrative expenses | 350,082 | 403,429 | 1,265,056 | 1,296,294 | ||||||||||||
| Total general and administrative expenses | 1,907,134 | 1,253,088 | 4,313,399 | 4,420,996 | ||||||||||||
| Depreciation and amortization | 72,190 | 69,127 | 227,606 | 202,046 | ||||||||||||
| Total operating expenses | 1,979,324 | 1,322,215 | 4,541,005 | 4,623,042 | ||||||||||||
| Net operating income (loss) | 337,625 | (1,299,669 | ) | (3,038,960 | ) | (4,505,275 | ) | |||||||||
| Other expense: | ||||||||||||||||
| Interest expense | (3,641 | ) | (383,995 | ) | (1,349,486 | ) | (843,240 | ) | ||||||||
| Gain on disposal of property and equipment | - | 36,392 | - | 36,392 | ||||||||||||
| Total other expense | (3,641 | ) | (347,603 | ) | (1,349,486 | ) | (806,848 | ) | ||||||||
| Net income (loss) | $ | 333,984 | $ | (1,647,272 | ) | $ | (4,388,446 | ) | $ | (5,312,123 | ) | |||||
| Weighted average common shares outstanding - basic | 5,123,735 | 4,845,851 | 4,942,182 | 4,831,346 | ||||||||||||
| Net income (loss) per common share - basic | $ | 0.07 | $ | (0.34 | ) | $ | (0.89 | ) | $ | (1.10 | ) | |||||
| Weighted average common shares outstanding - diluted | 8,066,577 | 4,845,851 | 4,942,182 | 4,831,346 | ||||||||||||
| Net income (loss) per common share - diluted | $ | 0.04 | $ | (0.34 | ) | $ | (0.89 | ) | $ | (1.10 | ) | |||||
| STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| For the Nine Months Ended | ||||||||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||
| Common Stock | Paid-in | Common Stock | Accumulated | Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Payable | Deficit | Equity | |||||||||||||||||||
| Balance, | 4,847,384 | $ | 4,847 | $ | 58,485,602 | $ | - | $ | (55,679,562 | ) | $ | 2,810,887 | ||||||||||||
| Common stock issued in private placement offering | 735,000 | 74.00 | 3,674,926 | - | - | 3,675,000 | ||||||||||||||||||
| Common stock issued to officers and directors for services | 20,699 | 21 | 125,208 | - | - | 125,229 | ||||||||||||||||||
| Common stock warrants granted to related parties pursuant to debt financing | - | - | 197,198 | - | - | 197,198 | ||||||||||||||||||
| Common stock warrants granted to note holders pursuant to debt financing | - | - | 50,682 | - | - | 50,682 | ||||||||||||||||||
| Common stock options granted to officers and directors for services | - | - | 330,922 | - | - | 330,922 | ||||||||||||||||||
| Common stock options granted to employees and advisors for services | - | - | 68,514 | - | - | 68,514 | ||||||||||||||||||
| Net loss for the nine months ended | - | - | - | - | (4,388,446 | ) | (4,388,446 | ) | ||||||||||||||||
| Balance, | 5,603,083 | $ | 4,942 | $ | 62,933,052 | $ | - | $ | (60,068,008 | ) | $ | 2,869,986 | ||||||||||||
| For the Nine Months Ended | ||||||||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||
| Common Stock | Paid-in | Common Stock | Accumulated | Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Payable | Deficit | Equity | |||||||||||||||||||
| Balance, | 4,809,070 | $ | 4,809 | $ | 54,342,027 | $ | 26,066 | $ | (43,552,494 | ) | $ | 10,820,408 | ||||||||||||
| Common stock warrants granted to related parties pursuant to debt financing | - | - | 2,614,196 | - | - | 2,614,196 | ||||||||||||||||||
| Common stock warrants granted to note holders pursuant to debt financing | - | - | 444,330 | - | - | 444,330 | ||||||||||||||||||
| Common stock issued to officers and directors for services | 26,059 | 26 | 76,038 | (26,066 | ) | - | 49,998 | |||||||||||||||||
| Common stock issued to advisory board for services | 12,255 | 12 | 29,988 | - | - | 30,000 | ||||||||||||||||||
| Common stock options granted to officers and directors for services | - | - | 530,908 | - | - | 530,908 | ||||||||||||||||||
| Common stock options granted to employees and advisors for services | - | - | 120,593 | - | - | 120,593 | ||||||||||||||||||
| Net loss for the nine months ended | - | - | - | - | (5,312,123 | ) | (5,312,123 | ) | ||||||||||||||||
| Balance, | 4,847,384 | $ | 4,847 | $ | 58,158,080 | $ | - | $ | (48,864,617 | ) | $ | 9,298,310 | ||||||||||||
| CONDENSED STATEMENTS OF CASH FLOWS | ||||||||
| (Unaudited) | ||||||||
| For the Nine Months Ended | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (4,388,446 | ) | $ | (5,312,123 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 306,092 | 223,887 | ||||||
| Non-cash amortization of right-of-use asset and liability | 15,245 | 16,816 | ||||||
| Gain on disposal of property and equipment | - | (36,392 | ) | |||||
| Impairment of obsolete inventory | 2,075,080 | 129,162 | ||||||
| Common stock issued to officers and directors for services | 125,229 | 49,998 | ||||||
| Common stock awarded to advisors and consultants for services | - | 30,000 | ||||||
| Amortization of stock options | 399,436 | 651,501 | ||||||
| Amortization of stock warrants issued as a debt discount | 900,228 | 607,320 | ||||||
| Decrease (increase) in current assets: | ||||||||
| Accounts receivable | (1,197,608 | ) | (213,509 | ) | ||||
| Prepaid expenses | (10,760 | ) | (37,333 | ) | ||||
| Inventory | (2,342,871 | ) | (577,788 | ) | ||||
| Security deposits | (12,309 | ) | (14,000 | ) | ||||
| Increase (decrease) in current liabilities: | ||||||||
| Accounts payable | 257,091 | 208,486 | ||||||
| Accrued interest | 419,807 | - | ||||||
| Accrued expenses | 125,270 | 124,929 | ||||||
| Net cash used in operating activities | (3,328,516 | ) | (4,149,046 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Proceeds received from disposal of property and equipment | - | 63,957 | ||||||
| Purchase of property and equipment | (1,326,276 | ) | (154,853 | ) | ||||
| Cash paid for construction in progress | - | (2,175,241 | ) | |||||
| Cash paid for intangible assets | - | (5,929 | ) | |||||
| Net cash used in investing activities | (1,326,276 | ) | (2,272,066 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from the issuance of common stock | 3,675,000 | - | ||||||
| Proceeds received from notes payable, related parties | 2,400,000 | 3,870,000 | ||||||
| Proceeds received from notes payable | 400,000 | 580,000 | ||||||
| Net cash provided by financing activities | 6,475,000 | 4,450,000 | ||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 1,820,208 | (1,971,112 | ) | |||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 276,464 | 3,345,928 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 2,096,672 | $ | 1,374,816 | ||||
| SUPPLEMENTAL INFORMATION: | ||||||||
| Interest paid | $ | 27,878 | $ | 134,444 | ||||
| Income taxes paid | $ | - | $ | - | ||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Reclassification of construction in progress to property and equipment | $ | 1,766,110 | $ | - | ||||
| Value of debt discounts attributable to warrants | $ | 247,880 | $ | 3,058,526 | ||||
| RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net income (loss) | $ | 333,984 | $ | (1,647,272 | ) | $ | (4,388,446 | ) | $ | (5,312,123 | ) | |||||
| Depreciation and amortization | 150,676 | 75,232 | 306,092 | 223,887 | ||||||||||||
| Interest expense | 3,641 | 383,995 | 1,349,486 | 843,240 | ||||||||||||
| EBITDA | 488,301 | (1,188,045 | ) | (2,732,868 | ) | (4,244,996 | ) | |||||||||
| Stock-based compensation expense | 140,759 | 155,868 | 524,665 | 731,499 | ||||||||||||
| Gain on disposal of Property | - | (36,392 | ) | - | (36,392 | ) | ||||||||||
| Inventory write down | - | - | 1,919,686 | - | ||||||||||||
| Adjusted EBITDA | $ | 629,060 | $ | (1,068,569 | ) | $ | (288,517 | ) | $ | (3,549,889 | ) | |||||
2023 GlobeNewswire, Inc., source
