SOW GOOD INC. - Q1 Revenue Increased 20% Sequentially to
- Commenced Trading on Nasdaq on
“We carried our momentum into the first quarter of 2024 and continued to address strong consumer demand for freeze dried candy,” said
“From a production perspective, we continued to build out our internal and external capacity to support our growth. In-house, our fifth freeze drier is now installed and operational, and we remain on track to activate our sixth freeze drier by the third quarter of this year. We have also supported the ongoing ramp of our co-manufacturing partnerships in
“To focus on expanding our production resources, we strategically paused new customer onboarding in the third quarter of 2023. Given our production capacity has grown as projected, we resumed our new customer launches and have significantly increased our store and SKU count with current partners. Reflecting our consistent outperformance across our retail base, we anticipate adding five new SKUs and
First Quarter 2024 Highlights vs.
- Revenue in the first quarter of 2024 increased significantly to
$11.4 million compared to approximately$198.9K for the same period in 2023. The increase was driven to the Company’s pivot to selling freeze dried candy in the prior year period, as well as the growing market for freeze dried candy. The increase also reflects the benefits of the Company’s expanded production capacity. - Gross profit in the first quarter of 2024 increased significantly to
$4.6 million compared to approximately$114.9K for the same period in 2023. Gross margin was 40.6% compared to 57.8% in the prior-year period. Relative to the prior-year period, gross margin in the first quarter of 2024 reflects higher labor and production costs associated with the Company’s increased scale. In order to meet growing demand, the Company expects to continue investing in its operations to increase production capacity, which is expected to constrain quarterly gross margins in the near term.
- Operating expenses in the first quarter of 2024 were
$3.7 million compared to$1.0 million for the same period in 2023. The increase was primarily driven by higher compensation and professional services expenses as we scaled up the business and invested in system and process improvements in anticipation of being listed on Nasdaq.
- Net income in the first quarter of 2024 was approximately
$510.6K compared to a net loss of$(1.4) million for the same period in 2023. The improvement reflects the higher level of gross profit generated during the quarter.
- Adjusted EBITDA (a non-GAAP financial measure defined and reconciled herein) in the first quarter of 2024 improved to
$2.45 million compared to approximately$171.3k for the same period in 2023.
- Cash and cash equivalents were
$6.8 million atMarch 31, 2024 , compared to$2.4 million atDecember 31, 2023 . The Company received$3.7 million in proceeds from the equity private placement completed in March of 2024.
For a reconciliation of Adjusted EBITDA to the nearest comparable GAAP metric, Net income, please see the tables below.
Subsequent Events
Balance Sheet and Liquidity
On
In
Nasdaq Uplisting
Goldfarb concluded: “Subsequent to the first quarter, we successfully uplisted our stock to the Nasdaq Capital Market, with our shares trading on the exchange as of
“As we progress further into 2024, we expect to continue growing and optimizing our production infrastructure, expanding our B2B customer base and retail presence, and advancing our product innovation. Through executing on each of these objectives, we aim to grow and maintain our leadership in the freeze dried candy and treats category.”
Conference Call
Date:
Time:
Registration Link: https://register.vevent.com/register/BI7a0e5e0068cb4e8fbef9f1e4833c0930
To access the call by phone, please register via the registration link above and you will be provided with dial-in instructions and details. If you have any difficulty connecting with the conference call, please contact
The conference call will be broadcast live and available for replay here and on the Company’s 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 income (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 income (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 income (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 | ||||||||
| 2024 | 2023 | |||||||
| ASSETS | (Unaudited) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 6,815,355 | $ | 2,410,037 | ||||
| Accounts receivable, net | 2,934,925 | 2,578,259 | ||||||
| Inventory | 5,138,229 | 4,123,246 | ||||||
| Prepaid inventory | 804,981 | 563,131 | ||||||
| Prepaid expenses | 512,155 | 563,164 | ||||||
| Total current assets | 16,205,645 | 10,237,837 | ||||||
| Property and equipment: | ||||||||
| Construction in progress | 1,242,627 | 1,522,465 | ||||||
| Property and equipment | 7,197,592 | 6,287,422 | ||||||
| Less accumulated depreciation | (1,134,597 | ) | (967,602 | ) | ||||
| Total property and equipment, net | 7,305,622 | 6,842,285 | ||||||
| Security deposit | 357,954 | 346,616 | ||||||
| Right-of-use asset | 3,999,151 | 4,061,820 | ||||||
| Other assets | 35,000 | - | ||||||
| Total assets | $ | 27,903,372 | $ | 21,488,558 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 894,011 | $ | 853,535 | ||||
| Accrued interest | 1,006,937 | 860,693 | ||||||
| Accrued expenses | 1,032,746 | 648,947 | ||||||
| Current portion of operating lease liabilities | 638,630 | 550,941 | ||||||
| Current maturities of notes payable, related parties, net of | 2,629,576 | 2,543,146 | ||||||
| Current maturities of notes payable, net of | 342,521 | 313,938 | ||||||
| Total current liabilities | 6,544,421 | 5,771,200 | ||||||
| Operating lease liabilities | 3,537,749 | 3,671,729 | ||||||
| Notes payable, related parties, net of | 4,314,038 | 4,171,142 | ||||||
| Notes payable, net of | 606,361 | 594,038 | ||||||
| Total liabilities | 15,002,569 | 14,208,109 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity: | ||||||||
| Preferred stock, | - | - | ||||||
| Common stock, | 6,576 | 6,029 | ||||||
| Additional paid-in capital | 71,123,634 | 66,014,415 | ||||||
| Accumulated deficit | (58,229,407 | ) | (58,739,995 | ) | ||||
| Total stockholders' equity | 12,900,803 | 7,280,449 | ||||||
| Total liabilities and stockholders' equity | $ | 27,903,372 | $ | 21,488,558 | ||||
CONDENSED STATEMENTS OF OPERATIONS | ||||||||
| For the Three Months Ended | ||||||||
| 2024 | 2023 | |||||||
| Revenues | $ | 11,406,320 | $ | 198,930 | ||||
| Cost of goods sold | 6,776,882 | 84,003 | ||||||
| Gross profit | 4,629,438 | 114,927 | ||||||
| Operating expenses: | ||||||||
| General and administrative expenses: | ||||||||
| Salaries and benefits | 2,350,557 | 511,588 | ||||||
| Professional services | 467,826 | 46,206 | ||||||
| Other general and administrative expenses | 872,260 | 384,109 | ||||||
| Total general and administrative expenses | 3,690,643 | 941,903 | ||||||
| Depreciation and amortization | 9,538 | 76,218 | ||||||
| Total operating expenses | 3,700,181 | 1,018,121 | ||||||
| Net operating income (loss) | 929,257 | (903,194 | ) | |||||
| Other expense: | ||||||||
| Interest expense | (418,669 | ) | (498,336 | ) | ||||
| Total other expense | (418,669 | ) | (498,336 | ) | ||||
| Income (loss) before income tax | 510,588 | (1,401,530 | ) | |||||
| Provision (benefit) for income tax | - | - | ||||||
| Net income (loss) | $ | 510,588 | $ | (1,401,530 | ) | |||
| Weighted average common shares outstanding - basic | 6,071,769 | 4,847,384 | ||||||
| Net income (loss) per common share - basic | $ | 0.08 | $ | (0.29 | ) | |||
| Weighted average common shares outstanding - diluted | 7,972,645 | 4,847,384 | ||||||
| Net income (loss) per common share - diluted | $ | 0.06 | $ | (0.29 | ) | |||
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY | ||||||||||||||||||||||||
| For the Three Months Ended March 31, 2024 | ||||||||||||||||||||||||
| Additional | Common | Total | ||||||||||||||||||||||
| Common Stock | Paid-in | Stock | Accumulated | Stockholders' | ||||||||||||||||||||
| Shares | Amount | Capital | Payable | Deficit | Equity | |||||||||||||||||||
| Balance, | 6,029,371 | $ | 6,029 | $ | 66,014,415 | $ | - | $ | (58,739,995 | ) | $ | 7,280,449 | ||||||||||||
| Common stock issued in private placement offering | 515,597 | 516 | 3,737,484 | - | - | 3,738,000 | ||||||||||||||||||
| Common stock issued to directors for services | 30,594 | 31 | 286,140 | - | - | 286,171 | ||||||||||||||||||
| Common stock options granted to officers and directors for services | - | - | 1,043,272 | - | - | 1,043,272 | ||||||||||||||||||
| Common stock options granted to employees and advisors for services | - | - | 42,323 | - | - | 42,323 | ||||||||||||||||||
| Net income for the three months ended | - | - | - | - | 510,588 | 510,588 | ||||||||||||||||||
| Balance, | 6,575,562 | $ | 6,576 | $ | 71,123,634 | $ | - | $ | (58,229,407 | ) | $ | 12,900,803 | ||||||||||||
| For the Three Months Ended March 31, 2023 | ||||||||||||||||||||||||
| Additional | Common | Total | ||||||||||||||||||||||
| Common Stock | Paid-in | 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 warrants granted to related parties pursuant to debt financing | - | - | 872,421 | - | - | 872,421 | ||||||||||||||||||
| Common stock options granted to officers and directors for services | - | - | 111,733 | - | - | 111,733 | ||||||||||||||||||
| Common stock options granted to employees and advisors for services | - | - | 15,103 | - | - | 15,103 | ||||||||||||||||||
| Net loss for the three months ended | - | - | – | - | (1,401,530 | ) | (1,401,530 | ) | ||||||||||||||||
| Balance, | 4,847,384 | $ | 4,847 | $ | 59,484,859 | $ | - | $ | (57,081,092 | ) | $ | 2,408,614 | ||||||||||||
CONDENSED STATEMENTS OF CASH FLOWS | ||||||||
| For the Three Months Ended | ||||||||
| 2024 | 2023 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | 510,588 | $ | (1,401,530 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Bad debts expense | 8,370 | 8,997 | ||||||
| Depreciation and amortization | 166,995 | 76,218 | ||||||
| Non-cash amortization of right-of-use asset and liability | 16,378 | 4,778 | ||||||
| Common stock issued to directors for services | 286,171 | - | ||||||
| Amortization of stock options | 1,085,595 | 126,836 | ||||||
| Amortization of stock warrants issued as a debt discount | 270,232 | 370,678 | ||||||
| Decrease (increase) in current assets: | ||||||||
| Accounts receivable | (365,036 | ) | 168,071 | |||||
| Prepaid expenses | 51,009 | 56,664 | ||||||
| Inventory | (1,256,833 | ) | (209,946 | ) | ||||
| Security deposits | (11,338 | ) | - | |||||
| Other assets | (35,000 | ) | - | |||||
| Increase (decrease) in current liabilities: | ||||||||
| Accounts payable | 40,476 | (163,065 | ) | |||||
| Accrued interest | 146,244 | 104,166 | ||||||
| Accrued expenses | 383,800 | (107,984 | ) | |||||
| Net cash provided by (used in) operating activities | 1,297,651 | (966,117 | ) | |||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | (142,467 | ) | - | |||||
| Cash paid for construction in progress | (487,865 | ) | (211,906 | ) | ||||
| Net cash used in investing activities | (630,332 | ) | (211,906 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from the issuance of common stock | 3,737,999 | - | ||||||
| Proceeds received from notes payable, related parties | - | 1,250,000 | ||||||
| Net cash provided by financing activities | 3,737,999 | 1,250,000 | ||||||
| NET CHANGE IN CASH AND CASH EQUIVALENTS | 4,405,318 | 71,977 | ||||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 2,410,037 | 276,464 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 6,815,355 | $ | 348,441 | ||||
| SUPPLEMENTAL INFORMATION: | ||||||||
| Interest paid | $ | 2,193 | $ | 23,492 | ||||
| Income taxes paid | $ | - | $ | - | ||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Reclassification of construction in progress to property and equipment | $ | 767,703 | $ | - | ||||
| Value of debt discounts attributable to warrants | $ | - | $ | 872,421 | ||||
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND ADJUSTED EBITDA | ||||||||
| Three Months Ended | ||||||||
| 2024 | 2023 | |||||||
| Net income (loss) | $ | 510,588 | $ | (1,401,530 | ) | |||
| Depreciation and amortization | 150,676 | 75,232 | ||||||
| Interest expense | 418,669 | 498,336 | ||||||
| EBITDA | 1,079,933 | (827,962 | ) | |||||
| Stock-based compensation expense | 1,371,735 | 999,257 | ||||||
| Adjusted EBITDA | $ | 2,451,668 | $ | 171,295 | ||||
2024 GlobeNewswire, Inc., source
