SOWG 10-K & 10-Q changes, risk factors and insider trading

Our rapid growth may not be indicative of our future growth, and our limited operating history may make it difficult to assess our future viability.

We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.

Our ability to maintain and expand our distribution network and attract consumers, customers, distributors, retailers and brokers will depend on a number of factors, some of which are outside our control.

Our success depends in part on the effectiveness of our digital marketing strategy and the expansion of our social media presence, but there are risks associated with these efforts.

Our international sales and operations, including our planned business development activities outside of the United States, subject us to additional risks and challenges that can adversely affect our business, results of operations and financial condition.

The failure to successfully integrate newly acquired products or businesses could negatively impact our profitability.

Sow Good was formed and commenced commercial sales of our products in 2021, and in 2023 we started producing and commercializing our freeze dried candy treats, including our Sow Good freeze dried candy line and our Crunch Cream line. On October 1, 2020, we completed our acquisition of S-FDF, LLC (the “Seller”), a Texas limited liability company, pursuant to an Asset Purchase Agreement, between the Company and the Seller, dated June 9, 2020, as subsequently amended effective October 1, 2020 (the “Asset Purchase Agreement”). The assets we purchased under the Asset Purchase Agreement were of a development stage business without any major customers or history of operations upon which to forecast future business trends. As a result, we have a limited operating history and limited experience manufacturing and selling our products, establishing relationships with consumers, customers, suppliers, vendors and distributors and building our brand reputation. These and other factors combine to make it more difficult for us to accurately forecast our future operating results, which in turn makes it more difficult for us to prepare accurate budgets and implement strategic plans. We expect that this uncertainty will continue to exist in our business for the foreseeable future. If we do not address these risks and uncertainties successfully, our operating results could differ materially from our estimates and forecasts, and from the expectations of investors or analysts, which could harm our business and result in a decline in the trading price of our common stock.

As a developing company, we will need to adopt and implement a plan to increase awareness of our products, secure distribution channels, and foster and strengthen our supply, manufacturing and distribution relationships. It is likely our strategic priorities will need to evolve over time and our business would be materially and adversely affected if we do not properly adapt our strategies to our changing needs and changes in the market. As our operations develop and grow, we expect to experience significant increases in our working capital requirements. Even if we obtain additional capital and achieve profitability, given the competitive and evolving nature of the industry in which we operate, we may be unable to sustain or increase profitability and our failure to do so would adversely affect the Company’s business, including our ability to raise additional funds.

In the years ended December 31, 2024 and December 31, 2023, we incurred net losses of approximately $3.6 million and $3.1 million, respectively. We anticipate our operating expenses will increase in the foreseeable future as we seek to expand our retail distribution, invest in our approach to build brand awareness, leverage our product development capabilities, and invest in production capacity and automation. As a result of our continuing investments to expand our business in these and other areas, we expect our expenses to increase significantly, and we may not achieve profitability in the foreseeable future. Even if we are successful in broadening our consumer base, and increasing revenues from new and existing customers, we may not be able to generate additional revenues in amounts that are sufficient to cover our expenses. We may incur significant losses for a number of reasons, including as a result of the other risks and uncertainties described elsewhere in this filing. We cannot assure you that we will continue to achieve profitability in the future or that we will sustain profitability over any particular period of time.

increase awareness of our brand;

expand into international markets;

expand our existing channels of distribution;

develop additional channels of distribution;

grow our customer base;

cost-effectively increase online sales at our direct website and third-party marketplaces;

effectively introduce new products;

expand our production capacity, as necessary;

manufacture at a scale that satisfies future demand; and effectively source key raw materials.

We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.

Our strategy envisions the expansion of our business. If we fail to effectively manage our growth, our financial results could be adversely affected. Our rapid growth has placed and may continue to place significant demands on our organizational, administrative and operational infrastructure, including manufacturing operations, quality control, technical support and customer service, sales force management and general and financial administration. We must continue to refine and expand our business capabilities, including in sales, marketing, product development, information technology, equipment, facilities and personnel, as well as our systems and processes and our access to financing sources. We will also need to improve our operational, financial and management controls as well as our reporting systems and procedures. As we grow, we must continue to hire, train, supervise and manage new employees.

We cannot assure that we will be able to:

meet our capital needs;

expand our systems effectively or efficiently or in a timely manner;

allocate our human resources optimally;

identify and engage qualified employees and consultants, or retain valued employees and consultants; or incorporate effectively the components of any business that we may acquire in our effort to achieve growth.

If we are unable to manage our growth effectively, we may be unable to execute our business plan, which could have a material adverse effect on our business and our results of operations. Managing our planned growth effectively will require us to:

maintain a low cost of customer acquisition relative to customer lifetime value;

identify products that will be viewed favorably by customers;

enhance our facilities and purchase additional equipment at our facility in Irving, Texas; and successfully hire, train and motivate additional employees, including additional personnel for our production, sales and marketing efforts and our finance and accounting functions.

The expansion of our products and customer base may result in increases in our overhead and selling expenses. Any increase in expenditures in anticipation of future sales that do not materialize would adversely affect our profitability. In addition, if we are unable to effectively manage the growth of our business, the quality of our products may suffer and we may be unable to address competitive challenges, which would adversely affect our overall business, operations and financial condition.

The challenges of competing with other non-chocolate confectionary businesses may result in reductions in our revenue and operating margins.

The retail food industry is very competitive, and particularly so in the non-chocolate confectionary segment. We compete with many companies on the basis of taste, quality and price of product offered, market access and customer service. Our success depends, in part, upon the popularity of our products and our ability to develop new items that appeal to a broad range of consumers. Shifts in consumer preferences, our ability to maintain shelf space in light of more powerful market entrants, our inability to develop new items that appeal to a broad range of consumers, or changes in our offerings that eliminate products popular with some consumers could harm our business. In addition, aggressive pricing by our competitors or the entrance of new competitors into our markets could reduce our revenue and operating margins by forcing us to reduce our prices on similar product offerings in order to remain competitive. We also compete with other employers in our markets for workers and may become subject to higher labor costs as a result of such competition.

We have been able to compete successfully by differentiating ourselves from our competitors by providing an expanding selection of freeze dried treats, competitive pricing and convenience. If changes in consumer preferences decrease the competitive advantage attributable to these factors, or if we fail to otherwise positively differentiate our product offering or customer experience from our competitors, our business, financial condition, and results of operations could be materially and adversely affected.

Many of our current competitors have, and potential future competitors may have, longer operating histories, greater brand recognition, larger fulfillment infrastructures, greater technical capabilities, significantly greater financial, marketing, and other resources and larger customer bases than we do. These factors may allow our competitors to derive greater revenues and profits from their existing customer bases, acquire customers at lower costs or respond more quickly than we can to new or emerging technologies and changes in consumer preferences or habits. These competitors may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns, and adopt more aggressive pricing policies (including but not limited to predatory pricing policies and the provision of substantial discounts), which may allow them to build larger customer bases or generate revenues from those customer bases more effectively than we are able to execute upon. There can be no assurance that we will be able to successfully compete against these competitors.

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 confectioneries subcategory that we call freeze dried candy. We began commercializing our freeze dried candy products in the first quarter of 2023, and as of December 31, 2024, we have twenty-one stock keeping units (“SKUs”) in our Sow Good Candy line of treats and three SKUs in our Sow Good Crunch Cream line. We sell our treats using an omnichannel strategy primarily focused on the wholesale and retail channels with less than 2% of sales coming from e-commerce as of December 31, 2024. As of December 31, 2024, our treats are offered for sale in approximately 3,000 brick-and-mortar retail outlets in the United States.

We have custom-built a 20,945 square foot freeze drying facility in Irving, Texas. Freeze drying removes up to 99% of moisture from a product in its frozen state by applying a small amount of heat in an extremely low air pressure, near outer space-like environment, through the use of massive vacuum chambers, resulting in moisture being removed from the product at the speed of sound. This process of removing moisture from the product, which can take up to twenty-four hours, concentrates its flavor, creating a “hyper dried, hyper crunchy, and hyper flavorful” snackable treat. Our freeze drying process and expertise allow us to easily expand our manufacturing into other freeze dried snacks, such as yogurt snacks. Our commitment to providing the most flavorful and crunchy treats extends into the product packaging process, where our employees are dedicated to hand-packaging our treats through our precision packaging process in vigilantly managed low humidity conditions to protect our treats from reintroduction to moisture.

We have built six bespoke freeze driers using proprietary technology tailored specifically to our products which allows us to freeze dry up to 24 million units of freeze dried candy per year, creating a truly state-of-the-art facility in Irving, Texas. We also have six additional freeze driers, which we can have operational by the end of 2025, as needed.

Sow Good, co-founded by Claudia and Ira Goldfarb, brings over a decade of manufacturing expertise to the consumer packaged goods (“CPG”) sector, specializing in advanced freeze-drying technology. Leveraging our proprietary technology, Sow Good delivers innovative, high-quality products with a long shelf life and natural preservation. Beyond product innovation, we are committed to job creation and positive community impact, making Sow Good a forward-thinking force in the industry.

Our products have launched in retailers nationwide from convenience and grocery stores to big-box retailers, such as Five Below, Misfits Market/Imperfect Foods, TJX Canada, Hy-Vee, Cracker Barrel, 7/11, H-E-B, Kroger and Albertsons. In addition, we sell a substantial portion of our products through distributors such as Redstone Foods, CB Distributors and Lipari Foods. 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 have the ability to increase the availability of our products to these customers in current locations and distribution to more of their stores, while also broadening our SKU portfolio offerings. Bolstering our distribution and sales force 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 support our retail launches with existing customers and strengthen our brand name, we are also introducing our product displays with distinctive designs and product highlights to enhance our visibility in current stores and 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 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 total addressable market 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 and our social medial pages.

Ability to Expand Our Product Line

Our goal is to substantially expand our product line over time to increase our growth opportunity and reduce product-specific risks through SKU diversification into multiple products, including freeze dried products beyond our freeze dried treats, such as yogurt snacks and jerky. Our pace of growth will be partially affected by the cadence and magnitude of new product launches over time. We believe the commercialization of any new products will require us to hire additional employees within our product design and commercialization team, thereby increasing our marketing expense, as well as research and development costs within our administrative expense.

Seasonality

Because we are early in our lifecycle of growth, it is difficult to discern the exact magnitude of seasonality affecting our business from a demand standpoint. While evidence of any demand seasonality is currently difficult to assess because of our growth, we anticipate certain holiday cycles such as Halloween, Christmas, Easter and Valentine’s Day contributing to revenue fluctuations within a given year. In addition, candy purchasing in summer months may be reduced due to a variety of factors including greater levels of health consciousness during warm weather. Operationally, heat waves from July through October of 2024 presented challenges in transporting our freeze-dried treats in the summer months. These conditions led to reduced shipments, higher inventory levels, and a decline in revenue. Additionally, some candy transported via external distribution channels during the extreme summer heat melted, impacting its shelf performance. We worked to remove affected products from shelves and replace them promptly to support recovery in product velocity. In the short term, these measures have impacted our market reputation, sell-through rates, and operational results. As a result, we anticipate an annual temporary decrease in shipments of our treats during summer months, which we believe is consistent with the greater candy industry trend.

Cost of Goods Sold

Our cost of goods sold, which may include inventory write-downs, consists primarily of facilities costs, material costs, and labor on the production of freeze dried treats.

The Company recognized federal income tax of $123.6 thousand, and $0, for the twelve months ended December 31, 2024 and 2023, respectively.

Sales of freeze dried candy were $32.0 million for the twelve months ended December 31, 2024, compared to $16.1 million for the twelve months ended December 31, 2023, an increase of $15.9 million, or 99%. Revenues increased over the comparative period due to the pivot to freeze dried candy for the full twelve months ended December 31, 2024 compared to the majority of candy sales occurring the last six months of 2023, the increased capacity from the installation of 3 new freezers during 2024, and addition of new retail customers.

Cost of goods sold for the twelve months ended December 31, 2024 were $19.0 million, compared to $12.8 million for the twelve months ended December 31, 2023, an increase of $6.2 million, or 49%. Labor, materials, occupancy, reserves, and freight costs increased year over year. Our gross profit margin was 40.56% during the current period, compared to 20.4% during the comparative period.

Professional services were $1.6 million for the twelve months ended December 31, 2024, compared to $688.0 thousand for the twelve months ended December 31, 2023, an increase of $901.3 thousand, or 131%. The increase was primarily due to higher professional service expenses incurred in connection with the growth of the company and our underwritten public offering.

In the twelve months ended December 31, 2024, other expense was $2.0 million, consisting of $1.5 million of interest expense on our notes payable and $696.5 thousand of loss on early extinguishment of debt. During the comparative twelve months ended December 31, 2023, other expense was $1.8 million, consisting of interest expense on our notes payable. Interest expense decreased by $380.0 thousand or 20%, due to repayments of notes payable during the twelve months ended December 31, 2024, which resulted in a loss on early extinguishment of debt, and decreased the principal upon which stated interest is calculated.

Net loss

On May 2, 2024 we priced a registered underwritten public offering of 1,200,000 shares of our common stock at a price of $10.00 per share. On May 9, the underwriters exercised an overallotment option for the purchase of an additional 180,000 shares of our common stock. Together with the sale of the additional shares sold pursuant to the overallotment option, the offering netted approximately $12.0 million in proceeds, after underwriting discounts and offering costs.

On November 14, 2024 the Company filed a shelf registration to offer and sell from time to time in one or more offerings, up to $50.0 million in aggregate of common stock, preferred stock, debt securities, warrants, and units, including an at-the-market program for up to $20 million of our common stock. As of December 31, 2024, 1,042,862 shares of our common stock have been issued under the at-the-market program netting aggregate proceeds of $2.2 million.

On May 11, 2023, the Company received proceeds of $100,000 from Bradley Berman, one of the Company’s former directors, on behalf of the Bradley Berman Irrevocable Trust, from the sale of notes and warrants pursuant to an offering to sell up to $1,500,000 of promissory notes and warrants to purchase an aggregate 375,000 shares of the Company’s common stock, exercisable over a ten-year period at a price of $2.50 per share, representing 25,000 warrant shares per $100,000 of notes purchased. On April 15, 2024, in connection with the Warrant Exercise Transaction, the promissory note’s aggregate principal amount was reduced to $37,500. The related proportional amount of unamortized debt discount of $9,991 as of April 15, 2024 is included as amortized interest for the twelve months ended December 31, 2024. This note matured on May 11, 2024.

On April 25, 2023, we closed on a private placement for up to $1,500,000 of promissory notes and warrants to purchase an aggregate 375,000 shares of the Company’s common stock, exercisable over a ten-year period at a price of $2.50 per share, representing 25,000 warrant shares per $100,000 of notes purchased. The notes mature on April 25, 2024. Interest on the notes accrue at a rate of 8% per annum, payable in cash semi-annually on June 30 and December 31. On April 25, 2023, the Company received proceeds of $750,000 and $50,000 from the Company’s Chairman, Mr. Goldfarb, and the Cesar J. Gutierrez Living Trust, as beneficially controlled by the brother of the Company’s CEO, respectively, on the sale of these notes and warrants. The fair value of the warrants was allocated as a debt discount and amortized over the life of the loan. On April 15, 2024, in connection with the Warrant Exercise Transaction, the promissory notes’ aggregate principal amount was reduced to $918,750. The related proportional amount of unamortized debt discount of $40,416 as of April 15, 2024 is included as amortized interest for the twelve months ended December 31, 2024. These notes matured on April 25, 2024.

On April 11, 2023, warrants to purchase an aggregate 62,500 shares of common stock were issued to a director pursuant to a private placement debt offering in which aggregate proceeds of $250,000 were received in exchange for promissory notes and warrants to purchase an aggregate 62,500 shares of common stock, representing 25,000 warrant shares per $100,000 of promissory notes. The warrants are fully vested and exercisable over a period of 10 years at a price of $2.60 per share. The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share, provided that the volume weighted average sale price per share of Common Stock equals or exceeds $9.00 per share for thirty (30) consecutive trading days ending on the third business day prior to the mailing of notice of such redemption. The fair value of the warrants was allocated as a debt discount and amortized over the life of the loan. These notes mature on August 23, 2025.

On December 31, 2022, the Company closed a private placement and concurrently entered into a note and warrant purchase agreement with related parties to sell an aggregate $2.075 million of promissory notes and warrants to purchase an aggregate 311,250 shares of common stock, representing 15,000 warrant shares per $100,000 of promissory notes. The warrants are exercisable at a price of $2.21 per share over a ten-year term. On April 15, 2024, in connection with the Warrant Exercise Transaction, the promissory note’s aggregate principal amount was reduced to $679,138. The related proportional amount of unamortized debt discount of $92,729, as of April 15, 2024, and $51,372 of unamortized debt discount related to a fully repaid note are included in interest expense and loss on early extinguishment of debt, respectively, for the twelve months ended December 31, 2024. These notes mature on August 23, 2025.

On August 23, 2022, the Company closed on a private placement for up to $2.5 million of promissory notes and warrants to purchase an aggregate 625,000 shares of the Company’s common stock, exercisable over a ten-year period at a price of $2.60 per share, representing 25,000 warrant shares per $100,000 of notes purchased. The notes mature on August 23, 2025. Interest on the notes accrue at a rate of 8% per annum, payable on January 1, 2025. Loans may be advanced to the Company from time to time from August 23, 2023 to the maturity date. On December 21, 2022 and September 29, 2022, the Company received aggregate proceeds of $0.25 million and $0.75 million from two of the Company’s directors on the sale of these notes and warrants. The fair value of the warrants was allocated as a debt discount and amortized over the life of the loan.

On April 8, 2022, the Company closed a private placement and concurrently entered into a note and warrant purchase agreement to sell an aggregate $3.7 million of promissory notes and warrants to purchase an aggregate 925,000 shares of common stock, representing 25,000 warrant shares per $100,000 of promissory notes. Accrued interest on the notes was payable semi-annually beginning September 30, 2022 at the rate of 6% per annum, but on August 23, 2022, the notes were amended to update the terms of the interest payment to be payable at the earlier of the maturity date or January 1, 2025, rather than being paid semi-annually. The principal amount of the notes mature and become due and payable on April 8, 2025. The warrants are exercisable immediately and for a period of 10 years at a price of $2.35 per share. Proceeds to the Company from the sale of the securities were $3.7 million. The Company may redeem outstanding warrants prior to their expiration, at a price of $0.01 per share, provided that the volume weighted average sale price per share of common stock equals or exceeds $9.00 per share for 30 consecutive trading days ending on the third business day prior to the mailing of notice of such redemption. Assuming full exercise thereof, further proceeds to the Company from the exercise of the warrant shares is calculated as approximately $2.2 million. The offering closed simultaneously with execution of the purchase agreement. Of the aggregate $3.7 million of notes, a total of $3,120,000 of notes were sold to officers or directors, along with 780,000 of the warrants. On April 15, 2024, in connection with the Warrant Exercise Transaction, of which a significant portion was with related parties, the promissory notes’ aggregate principal amount was reduced to $239,250. The related proportional amount of unamortized debt discount of $72,638 as of April 15, 2024, was included as interest expense for the twelve months ended December 31, 2024, and $645,130 of unamortized debt discount related to fully repaid notes, was included as loss on extinguishment of debt for the twelve months ended December 31, 2024 twelve months ended December 31, 2024. These notes mature on April 8, 2025.

Net cash used in investing activities was $5.93 million for twelve months ended December 31, 2024, compared to $2.3 million for the twelve months ended December 31, 2023, an increase of $3.7 million. During the twelve months ended December 31, 2024, and 2023, cash used in investing activities was primarily used for additional freezers, with three new freezers put into production during 2024 and two freezers put into production during 2023, respectively.

We are conducting this at-the-market offering shortly following this management and board transition. Purchasers of our common stock in this offering will be relying on the judgment and leadership of an executive team and Board that have limited experience in their current roles with our company and limited familiarity with our business and industry.

We have in the past, and may in the future, be unable to comply with certain of the listing standards that we are required to meet to maintain the listing of our common shares on Nasdaq. For example, on May 14, 2025, we received a letter from the Staff indicating that, based upon the closing bid price of our common stock for the 30 consecutive business days, we did not meet the minimum bid price of $1.00 per share required for continued listing on Nasdaq pursuant to the Minimum Bid Price Rule. The letter also indicated that we will be provided with a compliance period of 180 calendar days, or until November 10, 2025, in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A). On November 11, 2025, Nasdaq subsequently issued a letter providing us with an additional 180 day compliance period, or until May 11, 2026 to regain compliance.

In order to regain compliance with the Minimum Bid Price Rule, our common stock must maintain a minimum closing bid price of $1.00 for at least ten consecutive business days during the Minimum Bid Price Compliance Period (which we believe we cured on May 7, 2026). However, if it appears to Nasdaq that we will be unable to cure the deficiency, Nasdaq will provide notice that our common stock will be subject to delisting. There can be no assurance that the Nasdaq staff would grant our request for continued listing subsequent to any delisting notification. In the event of such a notification, we may appeal the Staff’s determination to delist its securities.

Further, on April 7, 2026, we received written notice from the Listing Qualifications Department of Nasdaq stating that, based upon the stockholders’ equity reported in our Form 10-K for the period ended December 31, 2025, we were no longer in compliance with Nasdaq Listing Rule 5550(b)(1), which requires a company to maintain a minimum of $2,500,000 in stockholders’ equity. In accordance with the Nasdaq Listing Rules, the Company has 45 calendar days, or until May 22, 2026, to submit a plan to regain compliance. If the Company’s plan is accepted, Nasdaq may grant the Company an extension of up to 180 calendar days from the date of the Notice, or until October 4, 2026, to evidence compliance. If the Company’s plan to regain compliance with the minimum stockholders’ equity standard is not accepted or if it is accepted but the Company does not regain compliance by the end of the extension granted by Nasdaq, or if the Company fails to satisfy another Nasdaq requirement for continued listing, Nasdaq staff could provide notice that the Company’s common shares will become subject to delisting. In such event, Nasdaq rules permit the Company to request a hearing to appeal to a Nasdaq hearings panel, which would stay any further delisting actions through the hearings process. Accordingly, there can be no guarantee that the Company will be able to maintain its Nasdaq listing.

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.

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.

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.

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.