# Sow Good Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Sow Good Inc.](/companies/sowg.md) (CIK 1490161)
- Form: 10-Q
- Filed: 2023-11-14
- Accepted by EDGAR: Nov 14, 2023, 08:31 ET
- Period: 2023-09-30
- Accession: 0001437749-23-031769
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1490161/000143774923031769/sowg20230930_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1490161/000143774923031769/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $5.0m | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $6.5m | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $2.7m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $5.0m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $2.3m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $1.5m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $1.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $4.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $337.6k | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$3.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $3.6k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $1.3m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $334.0k | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$4.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.04 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.89 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.07 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.89 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 8,066,577 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 4,942,182 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$3.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2023-09-30 | $2.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $5.9m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $13.5m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $2.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $10.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $2.9m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 27,335 characters.

### Cautionary Statements

This Form 10-Q contains forward-looking statements. We also provide forward-looking statements in other materials we release to the public, as well as public oral 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,” “forecast,” “predict,” “believe,” “expect,” “anticipate,” “target,” “plan,” “ongoing,” “intend,” “seek,” “goal,” “will,” “should,” “could,” “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:

- volatility or decline of our stock price;
- low trading volume and illiquidity of our common stock;
- potential fluctuation in quarterly results;
- inability to maintain adequate liquidity to meet our financial obligations;
- failure to obtain sufficient sales and distributions for our freeze-dried product offerings;
- supply chain disruption and delay;
- transportation, labor, and raw material cost increases;
- litigation, disputes and legal claims involving outside parties; and
- risks related to our ability to be traded on the OTCQB and meeting trading requirements

We have based these forward-looking statements on our current expectations and assumptions about future events. 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, actual results may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made.

Therefore, readers are urged not to place undue reliance on these forward-looking statements. We assume no obligation to update any forward-looking statements 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 SEC which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation 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. These forward-looking statements may be affected by underlying assumptions that may prove inaccurate or incomplete, or by known or unknown risks and uncertainties, including those described in this section and in the Item *1A. Risk Factors* section in our 2022 Form 10-K.

### Overview and Outlook

Sow Good is a trailblazing U.S.-based freeze-dried candy and snack manufacturer dedicated to providing consumers with innovative and explosively flavorful freeze-dried treats. Sow Good has harnessed the power of our proprietary freeze drying technology and product-specialized manufacturing facility to transform traditional candy into a novel and exciting everyday confectionaries subcategory that we call freeze-dried candy. We began commercializing our freeze-dried candy products in the first quarter of 2023, and as of September 30, 2023, we have twelve stock keeping units (“SKUs”) in our Sow Good Candy line of treats and eight SKUs in our Sow Good Crunch Cream line. We sell our treats across retail, wholesale distributors, and online e-commerce channels, which comprise 57%, 24%, and 9% of our sales through the second quarter of 2023, respectively. As of September 30, 2023, our treats are offered for sale in over 5,857 brick-and-mortar retail outlets in the United States, Canada, and Israel. The rapid demand growth for our delectable treats since their retail debut in March 2023 highlights our consumers’ excitement for our novel and explosively flavorful treats that “satisfy your sweet tooth in fewer bites.”

Sow Good is led by co-founders Claudia and Ira Goldfarb, who have over a decade of manufacturing experience with an extensive freeze-drying background, dedication to job creation, and proven track record of identifying and growing niche trends into everyday categories. Under their leadership, revenues have grown from $428,132 during the year ended December 31, 2022 to $5,034,203 for the nine-month period ended September 30, 2023.

We believe the candy category is stale, repetitive, and in need of revitalization to reengage and captivate consumers seeking innovative ways to satisfy their sweet cravings. We see our market opportunity as existing at the intersection of two burgeoning categories: freeze-dried candy and non-chocolate confections. According to the NCA, the non-chocolate confections market grew 13.8% in sales in 2022, exceeding $15 billion, and according to Grand View Research is forecasted to grow at a compounded annual growth rate of 5.8% from 2023 to 2030. We believe the nascent freeze-dried candy market is poised for exponential growth given increasing consumer preferences for novel and distinctive candy products. According to the NCA, approximately 61% of shoppers occasionally or frequently seek out products they have never purchased before. Given our exceptional performance in retail launches, surging customer demand, and increasing production capacity, we are confident that we can catapult freeze-dried candy from a trendy spark on social media to a stable, top-performing consumer confectionary in retail.

Our products have launched in retailers nationwide from convenience and grocery stores to big-box retailers, such as Five Below, Target, Hy-Vee, FYE, Big Lots, Snackmagic, and Misfits Market/Imperfect Foods. In addition, we sell a substantial portion of our products through distributors such as Redstone Foods, C.B. Distributors and Alpine Foods. Video reviews of Sow Good’s products that are organically generated by TikTok users have amassed over 4 million views as of September 30, 2023. Many of our existing customers launched with a limited number of SKUs, which are now significantly outpacing initial sales projections. We believe there is a significant growth opportunity in increasing our shelf presence, SKU portfolio, and number of stores with our existing customers. As we scale production, we will be able to increase the availability of our products to existing customers in current locations and add distribution to more of their stores, while also broadening our SKU portfolio offerings. Bolstering our distribution will be a key growth driver for Sow Good, so more of our products are available wherever our consumers choose to shop, whether it be a retail store, convenience store, or directly online. To further enhance our visibility in current stores and support our retail launches with existing customers, while strengthening our brand name, we are introducing our product displays with distinctive designs and product highlights to educate new consumers on the advantages of freeze-dried treats. We believe this strategy will capture the attention of new consumers, further educate and attract current consumers, and ultimately increase sales for our retailers.

Our highly differentiated omnichannel distribution strategy has three key components: retailers, e-commerce, and distributors. In aggregate, this omnichannel strategy provides us with a diverse set of consumers and customer partners, leading to a larger TAM opportunity than is normally available to products sold only in grocery stores, along with an opportunity to develop a direct relationship with our customers at our website, www.thisissowgood.com. This platform is already set up but with some items set as out of stock until we have additional production capacity.

### Going Concern Uncertainty

As of September 30, 2023, the Company had an accumulated retained deficit of $60,068,008 and net losses for both the quarter and year to date periods ended September 30, 2023, along with $2,096,672 of cash on hand, and working capital of $ 3,145,708. We are too early in our development to be able to project operating results with the necessary level of certainty; our plans for growth include significant capital expenditures, which we may not be able to fund through operating cash flows; therefore, we may not have sufficient funds to sustain our operations for the next twelve months while also executing our plan for growth. These factors raise substantial doubt about our Company's ability to continue as a going concern.

During the current third quarter of 2023, the Company achieved a significant improvement in its operating results. This improvement was primarily driven by increased sales of our freeze-dried candy to large retail customers, coupled with increased margins in the third quarter of 2023, related to our pivot away from slower selling products to focus on our customers demand for freeze-dried candy.

Management has developed and implemented a comprehensive plan to improve the Company's financial position. In the third quarter of 2023, to support its ongoing operations, the Company secured additional capital of $3,675,000 through a share offering. Management plans to use this additional capital investment to reduce our production constraints through additional freeze-driers and necessary warehouse space. Our ability to scale production and distribution capabilities and further increase the value of our brands is largely dependent on our success in raising additional capital.

The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Company’s ability to continue as a going concern. The financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.

### Results of Operations for the Three Months Ended September 30, 2023 and 2022

The following table summarizes selected items from the statement of operations for the three months ended September 30, 2023 and 2022, respectively.

|  | Three Months Ended September 30, 2023 | 2022 | Increase / (Decrease) |
| --- | ---: | ---: | ---: |
| Revenues | $5,034,203 | $87,741 | $4,946,462 |
| Cost of goods sold | 2,717,254 | 65,195 | 2,652,059 |
| Gross profit (loss) | 2,316,949 | 22,546 | 2,294,403 |
| Operating expenses: |  |  |  |
| General and administrative expenses: |  |  |  |
| Salaries and benefits | 1,262,332 | 788,450 | 473,882 |
| Professional services | 294,720 | 61,209 | 233,511 |
| Other general and administrative expenses | 350,082 | 403,429 | (53,347) |
| Total general and administrative expenses | 1,907,134 | 1,253,088 | 654,046 |
| Depreciation and amortization | 72,190 | 69,127 | 3,063 |
| Total operating expenses | 1,979,324 | 1,322,215 | 657,109 |
| Net operating loss | 337,625 | (1,299,669) | 1,637,294 |
| Other expense: |  |  |  |
| Interest expense | (3,641) | (383,995) | 380,354 |
| Gain on disposal of property and equipment | - | 36,392 |  |
| Total other expense | (3,641) | (347,603) | 343,962 |
| Net loss | $333,984 | $(1,647,272) | $1,981,256 |

25

### Revenues

Revenues of $ 5,034,203 for the three months ended September 30, 2023, consist primarily of online freeze-dried candy product sales, compared with $ 87,741 for the three months ended September 30, 2022, an increase of $ 4,946,462, or 5,638%. This growth is attributed to our pivot to sales of our freeze-dried candy and the expansion of our business-to-business sales during the current period, compared to the same period in the prior year, and the additional capacity for production after the addition of two new freeze driers in the second quarter of 2023.

### Cost of Goods Sold

Cost of goods sold for the three months ended September 30, 2023 were $2,717,254, compared to $65,195 for the three months ended September 30, 2022, an increase of $2,652,059, or 4,068%. Cost of goods sold, in the third quarter of 2023 primarily consisted of material costs and labor on the sales of freeze-dried candy products, while the third quarter of 2022 mainly consisted of costs and labor related to our food product lines. Our gross profit margin was 49% during the quarter, compared to 26% during the comparative period of 2022. The increased profit margin is due to higher margins on candy versus our food product lines, which are now discontinued.

### General and administrative expenses

#### Salaries and benefits

Salaries and benefits for the three months ended September 30, 2023 were $1,262,332, compared to $788,450 for the three months ended September 30, 2022, an increase of $473,882 or 60%. Salaries and benefits included stock-based compensation expense for the three months ended September 30, 2023 of $140,759 compared to $130,868 for the three months ended September 30, 2022, a decrease of $15,109, or 9.7%. Stock-based compensation consists of stock options expense of $140,759 and $130,868 incurred in the three months ended September 30, 2023 and 2022, respectively, and $25,000 of expense related to shares of common stock issued to officers and consultants for services rendered in the three months ended September 30, 2022. The increase in salaries and benefits was primarily due to increased personnel necessitated by our rapid growth.

#### Professional services

Professional services were $294,720 for the 2023 period, compared to $61,209 for the 2022 period, an increase of $233,511 or 381%. The increase was primarily due to advisory fees related to raising capital for future expansion plans.

#### Other general and administrative expenses

Other general and administrative expenses for the three months ended September 30, 2023 was $350,082, compared to $403,429 for the three months ended September 30, 2022, a decrease of $53,347, or 13%. The increase is primarily attributable to increased administrative infrastructure as we continue to grow.

### Depreciation

Depreciation expense for the three months ended September 30, 2023 was $72,190 compared to $69,127 for the three months ended September 30, 2022, an increase of $3,063, or 4.4%.

### Other expense

In the three months ended September 30, 2023, other expense was $3,641, consisting of interest expense. During the comparative three months ended September 30, 2022, other expense was $347,603, which included $98,473 of interest expense, including interest on our EIDL loan with the SBA and loans from our officers and directors, and $285,522 related to the amortization of warrants issued as a debt discount on the loans from our officers and directors, partially offset by a gain in asset of disposal of $36,392. Interest expense decreased by $380,354.0, or 99.1%, primarily due to the decreased amortization of warrants issued in-the-money on loans from our officers and directors in the current period.

### Net loss

Net income for the three months ended September 30, 2023 was $333,984, compared to net loss $1,647,272 during the three months ended September 30, 2022, a positive change of $1,981,256, or 120%. The positive change was due primarily to increased gross profit of $2,294,403 and decreased interest expense of $380,354, related to the amortization of warrants issued as a debt discount, partially offset by increased operating expenses of $657,109.

### Results of Operations for the Nine Months Ended September 30, 2023 and 2022

The following table summarizes selected items from the statement of operations for the nine months ended September 30, 2023 and 2022, respectively.

|  | Nine Months Ended September 30, 2023 | 2022 | Increase / (Decrease) |
| --- | ---: | ---: | ---: |
| Revenues | $6,548,479 | $381,056 | $6,167,423 |
| Cost of goods sold | 5,046,434 | 263,289 | 4,783,145 |
| Gross profit (loss) | 1,502,045 | 117,767 | 1,384,278 |
| Operating expenses: |  |  |  |
| General and administrative expenses: |  |  |  |
| Salaries and benefits | 2,644,087 | 2,947,505 | (303,418) |
| Professional services | 404,256 | 177,197 | 227,059 |
| Other general and administrative expenses | 1,265,056 | 1,296,294 | (31,238) |
| Total general and administrative expenses | 4,313,399 | 4,420,996 | (107,597) |
| Depreciation and amortization | 227,606 | 202,046 | 25,560 |
| Total operating expenses | 4,541,005 | 4,623,042 | (82,037) |
| Net operating loss | (3,038,960) | (4,505,275) | 1,466,315 |
| Other expense: |  |  |  |
| Interest expense | (1,349,486) | (843,240) | (506,246) |
| Gain on disposal of property and equipment | - | 36,392 |  |
| Total other expense | (1,349,486) | (806,848) | (542,638) |
| Net loss | $(4,388,446) | $(5,312,123) | $923,677 |

27

### Revenues

Revenues were $6,548,479 for the nine months ended September 30, 2023, compared to $381,056 for the nine months ended September 30, 2022, an increase of $6,167,423, or 1,619%. Nine-month revenues consist primarily of $5,034,203 in the third quarter of 2023, of freeze-dried candy sales. Revenues increased as we pivoted to sales of our freeze-dried candy, put additional freezers into production, and expanded our business-to-business sales during the current period, compared to the same period in the prior year.

### Cost of Goods Sold

Cost of goods sold for the nine months ended September 30, 2023 were $5,046,434, compared to $263,289 for the nine months ended September 30, 2022, an increase of $4,783,145, or 1,817%. Cost of goods sold, primarily consisting of material costs and labor on the sales of freeze-dried candy products and a one-time inventory write down of $2,075,080 as we disposed of non-candy freeze-dried products to pivot exclusively to our better selling candy products. Our gross profit margin was approximately 23% during the current period, compared to 31% during the comparative period.

### General and administrative expenses

#### Salaries and benefits

Salaries and benefits for the nine months ended September 30, 2023 were $2,644,087, compared to $2,947,505 for the nine months ended September 30, 2022, a decrease of $303,418, or 10%. Salaries and benefits included stock-based compensation expense for the nine months ended September 30, 2023 of $524,696, compared to $731,499 for the nine months ended September 30, 2022, a decrease of $206,803, or 28%. Stock-based compensation consists of $399,436 and $651,501of stock options expense incurred in the nine months ended September 30, 2023 and 2022, respectively, and $125,229 and $79,998 of expense related to shares of common stock issued to officers and consultants for services rendered in the nine months ended September 30, 2023 and 2022, respectively. The decrease in salaries and benefits was primarily due to accelerated vesting and severance paid to an executive in the nine months ended September 30, 2022, partially offset by increases in headcount to support operations in the current nine-month period.

#### Professional services

Professional services were $404,256 for the 2023 period, compared to $177,197 for the 2022 period, an increase of $227,059, or 128%. The increase was primarily due to advisory fees related to capital raises for expansion plans and other costs related to rapid growth compared to the prior year period.

#### Other general and administrative expenses

Other general and administrative expenses for the nine months ended September 30, 2023 was $1,265,056, compared to $1,296,294 for the nine months ended September 30, 2022, a decrease of $31,238, or 2%. The increase is primarily attributable to increased administrative infrastructure as we continue to scale the production and sales of our freeze-dried products.

### Depreciation

Depreciation expense for the nine months ended September 30, 2023 was $306,092, compared to $223,887 for the nine months ended September 30, 2022, an increase of $82,205, or 37%. The increase is due to the addition of two new freeze driers which were put into production during the nine months ended September 30, 2023.

### Other expense

In the nine months ended September 30, 2023, other expense was $1,349,486, consisting of $444,639 of interest expense, including interest on our EIDL loan with the SBA and loans from our officers and directors, and $900,226 related to the amortization of warrants issued as a debt discount on the loans from our officers and directors. During the comparative nine months ended September 30, 2022, other expense was $806,848, consisting of $235,920 of interest expense on our EIDL loan with the SBA and loans from our officers and directors, and $607,320 related to the amortization of warrants issued as a debt discount on the loans from our officers and directors, partially offset by a gain on disposal of property of $36,392. Interest expense increased by $506,246 or 60%, primarily due to the increased amortization of warrants issued in-the-money on loans from our officers and directors in the current period.

### Net loss

Net loss for the nine months ended September 30, 2023 was $4,388,446, compared to $5,312,123 during the nine months ended September 30, 2022, an increased net loss of $923,677, or 17%. Included in the nine months ended September 30, 2023 net loss was $2,075,080 of inventory impairment and of $292,906 increased interest expense on debt financing issued with in-the-money warrants during the current period, as offset by increased gross profit of $1,384,278.

### Liquidity and Capital Resources

The following table summarizes our total current assets, liabilities and working capital as of September 30, 2023 and December 31, 2022, respectively.

|  | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Current Assets | $5,874,424 | $2,578,057 |
| Current Liabilities | $2,728,716 | $890,177 |
| Working Capital | $3,145,708 | $1,687,880 |

As of September 30, 2023, we had working capital of $ 3,145,708.

The following table summarizes our cash flows during the nine months ended September 30, 2023 and 2022, respectively.

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(3,328,516) | $(4,149,046) |
| Net cash used in investing activities | (1,326,276) | (2,272,066) |
| 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) |

29

Net cash used in operating activities was $3,328,516 and $4,149,046 for the nine months ended September 30, 2023 and 2022, respectively, a period over period decrease of $820,530. Cash used in operations during the current nine month period included $1,197,608 of increases in accounts receivable, all of which were due within 30 days, and $2,342,871 of increases in cash paid for inventory, partially offset by increases in accounts payable and accrued expenses. The decrease in cash used in operating activities is due to increased gross margins, partially offset by increased non-cash items impacting our net operating loss.

Net cash used in investing activities were $1,326,276 and $2,272,066 for the nine months ended September 30, 2023 and 2022, respectively, a period over period decrease of $945,790. Cash used in investing activities were comprised of $1,326,276 of fixed asset additions, as we completed our 2nd and 3rd freezers and finalized our office leasehold improvements during the nine months ended September 30, 2023, compared to $2,266,137 of fixed asset purchases during the nine months ended September 30, 2022.

Net cash provided by financing activities were $6,475,000 for the nine months ended September 30, 2023, which was comprised of cash proceeds from the issuance of 735,000 shares of common stock of $3,675,000 and $2,400,000 of debt financing received from our officers and directors and $400,000 received from others under the same terms, compared to $4,450,000, comprised of $3,870,000 of debt financing received from our officers and directors and $580,000 received from others under the same terms, for the nine months ended September 30, 2022.

### Satisfaction of our cash obligations for the next 12 months

As of September 30, 2023, our balance of cash was $ 2,096,672 and we had total working capital of $ 3,145,708. Based on projections of cash expenditures in the Company’s current business plan, the cash on hand as of September 30, 2023 would be sufficient to sustain operations over the next year. We expect to incur significant costs related to the development and operation of our freeze-dried candy business. Our plan for satisfying our cash requirements for the next twelve months is through cash on hand and additional financing in the form of equity or debt as needed. Our ability to scale production and distribution capabilities and further increase the value of our brands is largely dependent on our success in raising additional capital.

### Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

### 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, 2022.

## Market risk

As filed, 151 characters.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.

## Controls and procedures

As filed, 1,139 characters.

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. Based on her evaluation as of September 30, 2023, our Chief Executive Officer and Interim Chief Financial Officer, Claudia Goldfarb, concluded that our disclosure controls and procedures are effective to accomplish their objectives and to ensure the information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in the Company’s internal control over financial reporting during the three-month period ended September 30, 2023 that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

Filed Nov 14, 2023.
Source: SEC EDGAR, the filing index for accession 0001437749-23-031769. Last ingested by Listed: Oct 30, 2026, 16:40 ET. No prices; not investment advice.