SOWG

Good morning, everyone, and thank you for participating in today's conference call to discuss Sow Good Inc.'s financial results for the third quarter ended September 30, 2025. Joining us today are Sow Good Inc.'s co-founder and CEO, Claudia Goldfarb, and Chief Financial Officer, Donna Guy. Following their remarks, we will open the call for analyst questions. Before we go further, I would like to turn the call over to Mr. Cody Slach as he presents the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Cody, please go ahead.

Good morning, everyone, and thank you for joining us in today's conference call to discuss Sow Good Inc.'s financial results for the third quarter ended September 30, 2025. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, our competitive landscape, market opportunities, and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions, and we undertake no duty to update this information except as required by law. These statements are also subject to a number of risks and uncertainties, including those highlighted in today's earnings release and our filings with the SEC. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available on the SEC's website or on our investor relations website. Furthermore, we will discuss adjusted EBITDA, a non-GAAP financial measure, on today's call. A reconciliation of adjusted EBITDA to net income or loss, the nearest comparable non-GAAP financial measure discussed on today's call, is available in our earnings press release at our Investor Relations website. With that, I will turn the call over to Claudia.

Good morning, everyone, and thank you for joining us today. Q3 2025 was a quarter of steady progress and operational strengthening as we continue positioning Sow Good Inc. for long-term sustainable growth. Over the past several months, we have made strategic decisions to align our cost structure with current demand, streamline operations, and enhance efficiency across every part of the business. These initiatives have simplified our footprint, reduced fixed costs, and reinforced our foundation for scalability. While our results reflect a transitional period, they also highlight the meaningful strides we have made toward becoming a leaner, stronger, and more agile company. One that is well prepared to capture the opportunities ahead. We completed lease amendments on our Mockingbird and Rock Quarry facilities, resulting in more than $5 million in annualized rent savings while maintaining full production capacity through automation and improved workflow design. We have completely vacated our Mockingbird facility, reducing our footprint by over 50,000 square feet and delivering immediate cost savings. In addition, we will fully vacate our Rock Quarry facility by January, which will further reduce our footprint by more than 320,000 square feet. Together, these consolidations represent a major step forward in optimizing our operations, driving efficiency, eliminating redundant costs, and positioning us for long-term scalability. We also implemented payroll efficiencies that lowered monthly costs by approximately $40,000 while still preserving our consistent quality and innovation. Together, these actions have strengthened our path toward profitability and positioned Sow Good Inc. to scale efficiently as new growth initiatives come online. Importantly, the operational groundwork we have laid in 2025 provides a direct bridge to a return to profitability in 2026, positioning us to leverage increased capacity, broaden retail reach, and expand into new high-margin product categories. Beyond our operational progress, in March 2026, we are launching two new SKUs with a national retailer in our branded displays that will also feature 10 more of our top SKUs. Our international distribution partners remain excited with our performance and are substantially expanding influencer marketing and retailer marketing partnerships for 2026 to continue supporting the Sow Good Inc. brand. We also reached an exciting milestone in our retail strategy, securing our first private label partnership with a 100-store national retailer for our new caramel crunch SKU, with shipments beginning in 2026. Caramel crunch will be our first fully vertically integrated product, made with no artificial dyes, flavors, or preservatives, and produced using our proprietary long-cycle freeze-drying process. It features real caramel made in-house from scratch with naturally derived colors and flavors, aligning perfectly with the industry-wide movement toward cleaner, simpler ingredient decks. This innovation not only strengthens our leadership in the clean snacking space but also opens the door to a wider range of retail opportunities as buyers increasingly prioritize clean label confectionery products. It reflects where the market is headed and where Sow Good Inc. excels. At the same time, we are seeing a slowdown in traditional SKUs that mirror the broader category softening, while growth and retailer demand are shifting toward our new innovative SKUs, particularly those featuring proprietary textures, novel flavors, and clean ingredients. This shift reinforces our commitment to continuous innovation and to leading the next generation of freeze-dried snacking. Furthermore, we are engaged in ongoing discussions with several national retailers regarding additional private label opportunities, including potential expansion into freeze-dried yogurt melts and other innovative product formats. While these conversations are still early, they demonstrate the growing interest in Sow Good Inc.'s manufacturing capabilities, innovation expertise, product quality, and vertically integrated platform. As the freeze-dried category continues to mature, Sow Good Inc. remains an innovation leader, combining unmatched product quality with proprietary technology and vertical integration that sets us apart in taste, texture, and efficiency. Finally, to support our working capital needs, we have received commitments for additional capital, with insiders personally committing $1 million. This continued insider support underscores our leadership's confidence in Sow Good Inc.'s strategy, execution, and long-term potential. With that, I will turn it over to Donna to walk through the financials.

Thank you, Claudia. It is a pleasure to be here with all of you today. Diving into our financial performance for the third quarter, revenue in 2025 was $1.6 million compared to $36 million for the same period in 2024. The decrease is primarily due to lower average selling prices associated with the closeout of discontinued SKUs. Gross loss for 2025 was $8.9 million compared to a gross profit of $600,000 for the same period in 2024. Gross margin was negative 576% in 2025, compared to 16% in the year-ago period. The decline is primarily attributable to approximately $8.5 million in non-cash charges to inventory associated with discontinued SKUs as the company executes its strategy to streamline its product portfolio and focus on its more innovative upcoming offerings. Operating expenses in 2025 were $3.7 million compared to $3.8 million for the same period in 2024. A year-over-year improvement in operating expenses was driven by lower payroll costs and professional fees as we continue to optimize operations. Net loss in 2025 was $10.9 million or negative 90¢ per diluted share compared to a net loss of $3.4 million or negative 33¢ per diluted share for the prior year period. The decrease was largely attributable to lower revenues coupled with non-cash inventory reserve charges, partially offset by a non-cash gain of $1.7 million upon the exit of two leases. Adjusted EBITDA in 2025 was negative $10.9 million compared to negative $1.9 million for the same period in 2024. The decreased adjusted EBITDA is predominantly due to inventory charges previously mentioned, partially offset by increased non-cash compensation. Moving to the balance sheet, we ended the quarter with cash and cash equivalents of $387,300, compared to $3.7 million as of December 31, 2024. We ended the quarter with a stronger and more efficient cost structure. The actions we have taken to streamline operations, lower fixed costs, and optimize payroll are setting the stage for better leverage as demand grows. Our systems are stable, retail momentum is building, and we are seeing encouraging progress in new product categories. As we close out the year, we are focused on driving growth with discipline and maintaining the financial rigor that is now embedded in how we operate. This concludes my prepared remarks. I will now turn the call back to Claudia.

Thank you, Donna. Sow Good Inc. is entering the next phase of its growth journey with strong operational discipline and a focused path toward returning to profitability. The foundational work we have completed has made us more efficient, more resilient, and better positioned for sustained profitability. Our focus remains clear and consistent: optimizing our cost structure and conserving cash, expanding retail distribution and private label partnerships, and executing with discipline to deliver long-term growth and a return to profitability. With our facility consolidations and payroll optimization now complete, we are moving into 2026 leaner, focused, and ready to scale profitably. Our private label expansion, beginning with the caramel crunch and the potential addition of yogurt melts, represents a powerful opportunity to diversify revenue while deepening relationships with key national retailers. We also expect the actions we have taken, combined with automation, SKU rationalization, and vertical integration, to drive gradual margin improvement beginning in mid-2026, further supporting our path to profitability. In parallel, we are advancing a number of forward-looking strategic initiatives, including digital asset and partnership strategies designed to strengthen our balance sheet, diversify our funding base, and enhance long-term shareholder value. These initiatives reflect our ongoing commitment to innovation not just in product development, but also in how we think about capital formation, value creation, and financial resilience. We are actively meeting with a range of partners and advisers to explore opportunities that can help unlock new sources of liquidity, improve capital efficiency, and position Sow Good Inc. at the forefront of responsible financial innovation. We are approaching these discussions with discipline, prudence, and a clear focus on shareholder alignment, ensuring that any steps we take are accretive, transparent, and supportive of our long-term strategy. The level of engagement and interest we are seeing reinforces our belief that Sow Good Inc.'s next chapter has the potential to be both transformative and value-driven. As we head into 2026, we do so with optimism and confidence. Sow Good Inc. is leaner, more agile, and more efficient, and better aligned for sustainable growth, supported by exceptional retail partnerships, category-defining innovation, and a culture built on excellence. The work we have done this year positions us to translate operational progress into financial performance, and we are committed to delivering measurable results that drive shareholder value in 2026 and beyond. We appreciate the continued trust and support of our shareholders, partners, and team members, and we look forward to sharing our progress in the months ahead. Operator, we will now open the call for Q&A.

Thank you, ma'am. As a reminder, to ask a question, please press 1 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. One moment for questions. And our first question comes from Peter Thomas Sidoti with Sidoti and Company. You may proceed.

Hi, Claudia. Just some quick questions. Please, can you provide any more details on the financial commitments that you have in hand at this point?

So it is $1 million, and it is me and Ira.

I got that. Alright. Yeah. What do you think your current cash burn is on a monthly basis at this point?

It is going to decrease pretty significantly after January. Once Rock Quarry comes off. So, you know, this $1 million gives us the runway we need to put into effect the private label. Some of the DAP strategies that we are looking at, so we feel comfortable that this will get us through, you know, the short term.

Okay. And is this $1 million coming in as equity debt? Or it is not formal yet at this point?

It is not formal yet at this point. It should be within the next week. Alright. Good luck. And thank you.

So on revenue, when do you think you need to do revenue to break even at this point? Or after January?

That is a really good question. A lot of it is going to depend on the yield and throughput for the caramel crunch SKU. And so, you know, I think that we are going to have much more visibility as to what our breakeven point is going to be, you know, probably starting March or April. Okay. But right now, you know, we are getting our cost down significantly to where we are probably going to be at about a $4.50 to $5.50 range on a monthly expense.

That is great. And the caramel coat crunch business, are the economics very similar to your other products, or is it higher volume growth?

Very similar. So the advantage to the caramel crunch, and I think that in the later half of the year, we will start seeing improved margins on the caramel crunch as we just start fine-tuning the manufacturing process. Because it is super exciting. We are making it from scratch. And so, you know, we just expect to see some raw material savings in that and just really good margins once we get fully operational.

Okay. And one last question, though. Get off the phone. I know you have expanded your sales effort quite a bit. Can you talk about how effective that has been and how happy you are with the results so far?

Sorry. I missed the first part of that piece. You have expanded your sales effort.

The sales team there.

Yes. You know, I think that they have done a great job in a very trying time. Right. You know? And I think that we are seeing that in, you know, the private label space. Landing this customer was definitely a big deal, and it is going to be a significant achievement, you know, for next year. ACE, Orgill, you know, expanding to non-retail environments. I think it just really speaks to their dedication and determination to find, you know, great retail partners for us. So Right. We I am very happy with the work they have done. You know, we are looking at private label yogurt melts and other opportunities in adjacent categories. And so they are grinding it out. And so you know.

Okay. It sounds like everybody is grinding it out. So well, I appreciate it. Thank you very much, Claudia.

Thanks, Peter.

Thank you. And as a reminder, to ask a question, please press 11 on your telephone. One moment for questions. And at this time, this concludes our question and session. I would now like to turn the call back over to Claudia for any closing remarks.

Thank you, everyone, for your continued support. We are entering 2026 leaner, more efficient, and well-positioned for sustainable growth that we really believe will set the stage for a return to profitability next year. We remain disciplined and energized and committed and want to thank you again for joining us, and we really look forward to updating you on our progress in the quarters ahead.

Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Good morning, everyone, and thank you for participating in today's conference call to discuss Sow Good financial results for second quarter ended June 30, 2025. Joining us today are Sow Good Co-Founder and CEO, Claudia Goldfarb; and Chief Financial Officer, Donna Guy. Following their remarks, we'll open the call for analyst questions. Before we go further, I would like to turn the call over to Mr. Slach as he reads the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Cody, please go ahead.

Good morning, everyone, and thank you for joining us in today's conference call to discuss Sow Good's financial results for the second quarter ended June 30, 2025. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, our competitive landscape, market opportunities and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions, and we undertake no duty to update this information except as required by law. These statements are also subject to a number of risks and uncertainties, including those highlighted in today's earnings release and our filings with the SEC. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and our filings with the SEC. Copies are available on SEC's website or our Investor Relations website. Furthermore, we will discuss adjusted EBITDA and non-GAAP financial measure on today's call. A reconciliation of adjusted EBITDA to net income or loss, the nearest comparable non-GAAP financial measures discussed on today's call is available in our earnings press release at our Investor Relations website. With that, I will turn the call over to Claudia.

Thank you, Cody, and good morning, everyone, and thank you for joining us today. 2025 marked an important step forward for Sow Good. While we face some near-term operational challenges, we also saw encouraging signs that our innovation strategy, brand resonance and retail partnerships are gaining meaningful traction. What we learned this quarter has only strengthened our conviction in the long-term value of the business we're building and the strategic decisions guiding our path to sustainable growth. Our financial performance was impacted by short-term supply chain and labor constraints that pushed certain shipments until July. I'm pleased to report that these orders have now been fulfilled. It's important to note that these results do not reflect weakness in demand. On the contrary, demand has rebounded nicely, outpacing our current labor capacity. To meet momentum, we have returned to scaling our workforce and supply chain. Our retail partners continue to request new items, validating both the depth of our innovation pipeline and enduring appeal of the Sow Good brand. We've also completed production, packaging and shipping of our entire holiday inventory, giving us the flexibility to stabilize our supply chain and ramp up production more aggressively. While there is still work to do, we have stabilized operations and are moving forward with clarity, focus and competence. With these foundations in place, we're entering the second half of 2025 with greater confidence in our ability to deliver sustained growth. Sow Good remains resilient, well positioned to rebuild momentum and ready to capture growing demand for our brand. So how do we scale from here? By executing with discipline, continuing to drive product innovation and nurturing a strong pipeline of opportunities with both new and existing retail partners. Before I hand it off, I want to very warmly welcome our new CFO, Donna Guy, to the Sow Good leadership team. Donna brings more than 25 years of public company finance experience, including senior leadership roles at ADDvantage Technologies and Basic Energy Services, and she is the founder of Elevation Accounting & Finance. Having worked closely with Sow Good as a consultant over the past year, she already has deep insight into our systems, team and vision. Donna has been such a fantastic addition, and her transition into the role has been seamless. I can't tell you how much easier this transition has been with her leadership. She has a proven track record of driving operational efficiencies, optimizing cost structures and leading through dynamic environments. And we're already seeing that expertise at work. In just a short time, she has strengthened our forecasting, cash management and performance tracking. We are grateful to have her on the team, and I have every confidence in her ability to help lead Sow Good through this next phase as we pursue disciplined and sustainable growth. With that, I'll turn it over to Donna to walk us through our Q2 financials. Donna?

Thank you, Claudia. It's a pleasure to be here with all of you, and I look forward to making a meaningful contribution to this great company. Now turning to our financial performance. Revenue in the second quarter of 2025 was $1.9 million compared to $15.6 million for the same period in 2024. The decline reflects softer demand, driven primarily by increased competitive pressure with the arrival of large market entrants. Gross loss for the second quarter of 2025 was $0.1 million compared to gross profit of $9 million for the same period in 2024. Gross margin was negative 7% in the second quarter of 2025 compared to 58% in the year ago period. The year-over-year decrease in gross profit and gross margin was largely due to lower sales in conjunction with higher occupancy costs. The increased occupancy costs are related to the larger facility we previously secured, which is partially being used for storing finished goods. As has been mentioned on past calls, we are actively working to rightsize our occupancy needs. Operating expenses in the second quarter of 2025 were $3.9 million compared to $4.1 million for the same period in 2024. The lower operating expenses were due to lower accrued bonus compensation. Net loss in the second quarter of 2025 was $4.2 million or negative $0.36 per diluted share compared to net income of $3.3 million or $0.29 per diluted share for the prior year period. The decrease was primarily attributable to the lower sales in connection with the increased competitive environment. Adjusted EBITDA in the second quarter of 2025 was negative $2.7 million compared to $6.2 million for the same period in 2024. Moving to the balance sheet. We ended the quarter with cash and cash equivalents of $1 million compared to $3.7 million as of December 31, 2024, and $1.6 million as of March 31, 2025. We're approaching the second half of the year with a clear focus, drive the top line growth, improve operational leverage and rebuild from a more resilient foundation of broader customer base and product lines. With our system stabilizing, our retail momentum accelerating and new category opportunities emerging, I'm confident we have the right strategy, the right products and the right team in place to execute. This concludes my prepared remarks. I will now turn the call back to Claudia. Claudia?

Thank you, Donna. Looking ahead, our execution is centered on 3 near-term priorities. First, optimizing our cost structure and conserving cash. We've made meaningful progress here. Following Q1, we took decisive steps to rightsize our cost base and the store margin, including reducing excess inventory storage costs and better aligning production with forecasted demand. As a result, G&A and interest expenses are trending lower, and we remain focused on capital efficiency, prioritizing spend that directly supports revenue growth and margin expansion. Put simply, last year, we built ahead of demand and have been scaling back strategically, streamlining storage, optimizing our supply chain and adopting a more efficient demand-driven growth model. As noted earlier, Q2 results were not sequentially higher due to delayed shipments, an issue that was resolved in July. With those orders now fulfilled, we expect the impact to normalize as operations realign in Q3. Second, expanding distribution of our candy products. Demand momentum is returning. The initial heightened surge of interest in competitors' launches are fading and consumers are coming back to Sow Good for the same reasons they always have. Our expertise in freeze-drying provides a superior crunch with bold, creative flavors. In July, we shipped our new Halloween products for Albertsons grocery nationwide. Our partnership with Five Below continues to grow across multiple SKUs, including new innovation items such as cotton candy taffy and seasonal favorites such as terrifying taffy and candy corn taffy in exclusive packaging. We are also seeing steady performance from Winn Dixie with our 10 SKU brand block, Ace Hardware and Orgill showing continued success in the hardware retail category and promising progress with a major national grocer, where we've advanced to stage 3 of their review process. Feedback has been positive, signaling growing retailer enthusiasm and confidence in our expanding footprint. Internationally, we're building on strong early success in the Middle East, where sell-through rates are driving repeat business and SKU expansion into Q4. Given the summer months are the slowest retail months for the Middle East, we are very optimistic about increasing demand beginning in October. The primary challenge remains the speed in which we can secure export health certificates, which we are working closely with our distributor to resolve. Meanwhile, we continue to invest in innovation. Development is advancing on several high potential products, including our in-house Caramel line and a new soft chew version. We're also exploring private label, co- manufacturing and adjacent categories like yogurt melts. Our innovation pipeline is strong and new retail opportunities are actively developing. Finally, disciplined execution to build on regained momentum. The challenges of the past year, they sharpened our discipline. Our teams are moving with urgency, tightening cost controls, driving margin recovery and reinvigorating our go-to-market strategy. With Halloween and holiday shipments complete, we are positioned to fully shift our focus to stabilizing the supply chain and executing on growth. Demand signals remain encouraging, and our retail partnerships, both domestic and international, are strengthening. While the operating environment remains dynamic, we believe the worst of the near-term disruptions are behind us. With operations stabilizing demand continuing to build and new opportunities emerging, we remain committed to our long-term objectives, scaling with discipline, deepening retailer relationships and leading with bold differentiated innovation. Sow Good is built for resilience, and we are very excited about the opportunities ahead. Operator, we will now open the call for Q&A.

[Operator Instructions] And our first question is going to come from Peter Sidoti with Sidoti & Company.

Can you just talk to your inventory levels as well as your need for future financing?

So from an inventory perspective, we still have quite a bit of finished goods from last year. The good thing about our inventory is that it has a very long shelf life, and we continue to sell through that inventory. There are 2 SKUs that we are working through at a discount, which are the sweetener geeks and sweet worms. So those 2 were moving through discount channels, but the rest is remaining at regular retail and continues to perform well. In regards to what we're going to need from a financing perspective, right now, with our current run rate, we're fine. Once we expand if we want to do further R&D or move into some adjacent categories, then that's something we'll evaluate at that time. But for right now, business is stabilized. Sales are in a good spot for where we are. We still need to rightsize our occupancy costs, but we're actively working through that. And that's where we are with those things.

How long until your cash flow breakeven at this point, do you think?

That's a good question. I would say before the end of the year, but we're making really good progress right now. So from a cash perspective. And Donna, you can speak a little bit to this if you'd like. We're holding steady where we are right now.

Yes, I would agree.

[Operator Instructions] Okay. And I am showing there are no further questions in the queue at this time. So I will turn the call back over to Claudia for closing remarks.

Thank you, everybody, for joining us today. We feel very positive about the steps that we've taken thus far and where we're going to keep going from here. So I appreciate the time, and have a great day, everyone.

This does conclude today's conference call. Thank you for participating, and you may now disconnect.

Good morning, everyone, and thank you for participating in today's conference call to discuss Sow Good financial results for first quarter ended March 31, 2025. Joining us today are Sow Good Co-Founder and CEO, Claudia Goldfarb; and Interim Chief Financial Officer, Brendon Fischer. Following their remarks, we'll open the call for analyst questions. Before we go further, I would like to turn the call over to Mr. Slach as he reads the company's safe harbor statement within the meaning of Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Cody, please go ahead.

Good morning, everyone, and thank you for joining us in today's conference call to discuss Sow Good's financial results for the first quarter ended March 31, 2025. Certain statements made during this call are forward-looking statements, including those concerning our financial outlook, our competitive landscape, market opportunities and the impact of the global economic environment on our business. These statements are based on currently available information and assumptions, and we undertake no duty to update this information except as required by law. These statements are also subject to a number of risks and uncertainties, including those highlighted in today's earnings release and our filings with the SEC. Additional information concerning these statements and the risks and uncertainties associated with them is highlighted in today's earnings release and in our filings with the SEC. Copies are available on the SEC's website or on our Investor Relations website. Furthermore, we will discuss adjusted EBITDA and non-GAAP financial measures on today's call. A reconciliation of adjusted EBITDA to net income or loss, the nearest comparable non-GAAP financial measures discussed on today's call is available in our earnings press release at our Investor Relations website. With that, I will turn the call over to Claudia.

Thank you, Cody, and good morning, everyone, and thank you for joining us today. We're encouraged by the continued momentum in the first quarter of 2025 with a 79% increase in revenue from the fourth quarter of 2024. This tracks closely with the expectations we laid out during our last call. While there is still work to be done, Q1 delivered meaningful progress across key areas, particularly in operational execution and retail expansion. The strategic actions we took last year to make the business more agile and efficient are paying off, and we're seeing renewed consumer enthusiasm for our freeze-dried candy line. That said, we continue to feel the effects of global CPG giants entering the category we pioneered. These companies have used their scale and spending power to secure shelf space often at the expense of smaller, more innovative brands like ours. But we believe the initial novelty and market impact of these launches is wearing off. As we gain momentum, it's clear that consumers are returning to our brand for our superior assortment, unmatched crunch and ongoing innovation. I'll share more on the progress we're making shortly. But first, I'll turn it over to Brendon to walk us through our Q1 financials. Brendon?

Thank you, Claudia. Jumping right into our financial performance. Revenue in the first quarter of 2025 was $2.5 million, compared to $11.4 million for the same period in 2024. The decline was primarily driven by softening demand due in large parts to increased competitive pressure. Gross profit for the first quarter of 2025 was $1.1 million compared to $4.6 million for the same period in 2024. Gross margin was 45% in the first quarter of 2025 compared to 41% in the year ago period. The decrease in gross profit was largely due to lower revenue, partially offset by lower cost of goods sold. The improvement in gross margin for the first quarter primarily reflects the lower cost of goods sold in the period. Operating expenses in the first quarter of 2025 were $3.5 million compared to $3.7 million for the same period in 2024. The year-over-year reduction was largely the result of a decrease in bonus compensation and lower legal services expenses. Net loss in the first quarter of 2025 was $2.6 million or a loss of $0.23 per diluted share compared to net income of $511,000 or $0.06 per diluted share for the same period in 2024. The decline reflects lower gross profit, partially offset by reduced operating expenses in Q1. Adjusted EBITDA in the first quarter of 2025 was negative $0.8 million compared to $2.5 million for the same period in 2024. Moving to the balance sheet. We ended the quarter with cash and cash equivalents of $1.6 million compared to $3.7 million as of December 31, 2024. Total debt, excluding operating losses was $2.7 million. However, subsequent to quarter end, we entered into exchange agreements with all of our outstanding noteholders with notes payable this year. Under the exchange agreements, existing notes were exchanged on a dollar-for-dollar basis for new notes maturing 5 years from the date of issuance. The new notes are convertible at the option of the holder in whole or in part into shares of common stock based on our price per share equal to the average closing price of our common stock during the 5 trading days immediately prior to the execution of an entry into the new notes with such conversion prices ranging from $0.62 to $0.63. This concludes my prepared remarks. I'll now turn the call back to Claudia. Claudia?

Thank you, Brendon. I'll focus on our 3 key strategies: executing cost savings and cash conservation initiatives, expanding candy distribution and pursuing new category opportunities where our team has deep expertise. First, we continue to carefully manage operating expenses to drive meaningful savings while maintaining our commitment to production, innovation and quality. In the first quarter, we reduced overhead by approximately $400,000 through targeted cuts related to our Mexico operations and labor reductions. We are targeting an additional $100,000 in savings during the second quarter. We're also enhancing operational efficiency through smart automation. To support scalable growth without compromising quality, we implemented 2 custom-designed automated packaging machines. These systems partially replace our previously manual hand packaging process, reducing labor costs and increasing speed and consistency, while being specifically engineered to handle the fragility of our freeze-dried candy and preserve our product integrity. Furthermore, we are evaluating opportunities to optimize our manufacturing footprint to better align with our current operational needs. As part of this strategy, we have decided to delay the deployment of freeze dryer 7 through 12 until production demand warrant their activation. This approach allows us to maintain maximum flexibility as we explore new category and geographic expansion opportunities. Similarly, given our current priorities and the need for greater visibility into long-term demand, we have postponed the activation of our 2 candy making machines. Second, to conserve cash and strengthen our balance sheet, on March 31, 2025, we revised the annual compensation for me and our Executive Chairman. Approximately 28% and 32% of our respective annual cash salaries will now be paid in company stock pursuant to the Sow Good 2024 stock incentive plan rather than cash. Additionally, we've taken steps to bolster our short-term cash position by entering into exchange agreements with existing noteholders to push out upcoming maturities by 5 years incorporating certain conversion and redemption features. These agreements reflect the strong confidence our management team and noteholders have in our recovery plan, long-term strategy and future opportunities. Turning to sales expansion. Q1 marked a period of meaningful reengagement and growing momentum through targeted retail promotions and key account wins. Albertsons grocery launched approximately 1,500 displays as part of their summer set with Halloween shipments also scheduled for late May. Kroger received seasonal Easter items, continuing our presence in key seasonal sets. ACE hardware stores saw 50 locations order full displays in Q1 with steady category expansion and encouraging early performance. Orgill mirrored our progress at ACE with positive initial demand and continued orders supporting our entry into the hardware retail channels. KeHe, one of the largest U.S. distributors will officially launch Sow Good in May through its new brand program. Winn-Dixie received initial shipments in Q1 and has already placed reorders indicating a positive consumer response. Five Below launched our Chamoy and Cotton candy taffy in Q1 and thanks to both new product introductions and renewed velocity due to targeted retail promotions across our existing SKUs, we saw a 124% increase in orders compared to Q4. Due to the strong performance, they've now added our Caramel Crunch SKU, which will launch in June. Although we paused the launch of our in-house the chew candy production, we have successfully advanced with in-house production of our Caramel products in both traditional and freeze-dried format. These are handcrafted using a limited selection of high-quality ingredients, completely free from dyes, artificial colors and artificial flavors. This initiative reflects our commitment to meeting the evolving expectations of today's consumers, who are increasingly seeking clean label, better-for-you alternatives without sacrificing taste. The demand for transparency, simplicity and ingredient integrity continues to shape purchasing decisions across the confectionery category. By prioritizing cleaner formulations, we are not only differentiating our brand but also positioning ourselves to lead within this growing segment. We see this shift as a long-term opportunity to build trust, strengthen brand loyalty and future-proof our product portfolio in a competitive and evolving marketplace. Looking ahead, we are excited to continue innovating with cleaner ingredients while expanding our assortment, ensuring Sow Good remains synonymous with quality, transparency and innovation. Internationally, we're excited to share that we launched our products in the Middle East during the first week of May through our partnership with Explore Investments, a leading distributor in the Middle East. While it's still early, initial orders exceeded expectations, and we anticipate having clear visibility into performance by early July. This expansion represents a significant growth opportunity. The Middle East freeze-dried market is still in its infancy with limited competition from high-quality brands and ample space for a market leader to emerge. In Europe, while we've not yet launched as we continue to navigate regulatory requirements, we remain optimistic about the long-term potential of the market. Our strong reception at ISM Germany earlier this year reaffirmed growing interest in premium freeze-dried products within this emerging and relatively untapped category. We will continue to pursue opportunities to open this market, and we'll keep you updated as progress is made. Given the volatility of the emerging freeze-dried candy category, our management team has remained focused on identifying opportunities to further leverage our manufacturing expertise and proprietary freeze-drying technology. As a result, we are planning to enter 2 high potential categories where we have deep expertise, beef jerky and freeze-fried yogurt snacks. Both product extensions will emphasize clean label, better-for-you ingredients, aligning with consumer demand for simple, high-quality formulations and supporting our long-term commitment to health conscious innovation. As previously shared, initial samples were met with very positive feedback from customers reinforcing our confidence in these extensions. Building on that early enthusiasm, we've advanced R&D and remain on track to potentially launch both categories in the second half of the year. Currently, we're planning for yogurt melts to debut under the Sow Good brand, while beef jerky will launch under a new brand currently in development. We're energized by the growth potential these new categories represent and encouraged by the strong early response. We look forward to keeping you updated as these initiatives progress. We're executing on multiple fronts, expanding domestically with new retail partnerships, strengthening our distributor network and entering high-growth international markets. With a good pipeline and continued emphasis on innovation, quality and cost discipline, we are confident in our ability to deliver sustainable long-term growth. While visibility into our revenue path is improving, it remains dynamic as is typical in emerging product category. As previously shared, we expect Q2 to show modest improvement over Q1 as new partnerships begin to take hold. These early steps are laying the foundation for more meaningful growth in the second half of the year. We remain focused on building a scalable, sustainable business with disciplined cost management in a fast-moving environment. While challenges still persist, we believe we're positioning ourselves to emerge stronger, more agile and ready to reassert our leadership through continued manufacturing excellence, innovation and thoughtful category expansion. Operator, we'll now open the call for Q&A.

[Operator Instructions] And our first question comes from the line of George Kelly of ROTH Capital Partners.

Maybe one for you, Claudia, just to start. You talked about in your prepared remarks seeing renewed consumer enthusiasm. So I guess the question is, could you share what you're seeing just in weekly or monthly velocities. And how has that trended maybe over the last, I don't know, 6 weeks or longer. And then secondarily, how is your retail inventory position right now? Are you still kind of working through excess retail inventory with certain of your large partners?

George. Yes. No, great questions. So what we're seeing is a slow increase in sell-through data in retailers. We were kind of at about 12, 13 units per door. Over the last few weeks, we've increased to 14. This past week, we increased to 16 units per door. So just like our revenue recovery, which has been slow and steady, we're seeing that same kind of trend in retail environments. What we're hearing is that customers were really excited about the large CPG launches, and they wanted to try them. As they've tried them, the novelty has worn off, and they're returning to our brand because of our superior assortment and the quality of our products. And week-over-week, we're starting to see that improvement in Circana data. I'll give you a great anecdote. Five Below, when we did the cotton candy, it was supposed to be a one-and-done order, was a limited edition run and it performed so well that they just placed a reorder for an additional 46,000 bags. And we're seeing that throughout retailers, ACE, Orgill where it was just going to be limited displays are now placing reorders for additional displays. So that's what we're seeing on the retailer side. In regards to retailer excess inventory, Five Below was working through quite a bit of inventory. That has slowly gone away. We did some very targeted promotions at Five Below, at H-E-B to get rid of the excess inventory. Those were successful, and so we're now returning to a normal reorder cadence with those customers. So we're excited. There are still challenges, we're still working through reopening doors, but in our existing retailers with our existing customers, we're seeing a return to normal reorder cadences and excitement for the brand, especially our relaunches and I'm probably giving you more information than you want, but like the Caramel Crunch going into Five Below and other retailers, our innovation, our new product launches are being accepted incredibly well. And I think that part of that is, a, they trust us as one of the pioneers in the category. So when we're coming out with these new products, they understand that it's coming in with a really quality freeze-drying process. And we're really focused on cleaner ingredients, which is also being received incredibly well. Like our Caramel Crunch, it's got 6 ingredients completely free of artificial dyes and flavors. And I do think that that is going to be a really strong important component of our go-forward strategy.

That's all helpful information. And a few questions left for you. How many doors are you in currently?

So that is changing, especially right now. We just did the Winn-Dixie launch. We did -- we're increasing in Orgill and ACE. So that's a very dynamic number.

Maybe at quarter end would be the better question?

Yes. So somewhere around 1,900 -- somewhere between 1,900 and 2,000 doors.

Okay. And then a separate topic. Your inventory grew again sequentially. And so, a, how do you feel about the quality of that inventory? Is any of it heat affected or just generally thoughts there? And then what are your expectations for the next couple of quarters? How quickly can you work inventory down?

So in regards to heat-affected inventory, that's really contained to 2 SKUs, the sweet worms and some of the peach perfect, I feel like we've identified and gotten rid of most of that inventory, there might be some stragglers here and there. In regards to the quality of the inventory or the salability of the inventory that we have remaining, we've got a 2-year shelf life on most of our products. So we've got time to work through it. One of the things that we're trying to be really strategic about is like the sweet worms, the peach perfect that we want to work through at a quicker cadence looking for opportunities that we can do that overseas and focusing on new inventory that we bring in being those better-for-you ingredients, cleaner ingredients and kind of restocking with those product lines. So that's where we are on inventory. It's going to take us a little bit of time to work through specifically the sweet worms, some of the peach product and those things, but we're actively working on it.

Okay. Okay. And then one last question for me is just about the competitive dynamics. Has any of the big guys that entered the space, do you feel that they're committed? Have you seen them pull back at any retailers? Or is the industry perhaps just not big enough for them to kind of stay interested? Or anything you've observed there? And then also, the smaller competitors that have been around for longer, have you seen any of those exit the space? And that's all I had.

Yes, a lot of the small guys have exited the space. None of them were real competitors. And we've seen a huge inundation of cheap China product in especially like discount retailers and some of kind of the lower price point retailers, which has affected trial quite a bit. But I think that consumers are smart, they're savvy and they're recognizing that the reason there's so much cheap product in some of those retailers is because it's cheap product. And they're returning to Five Below, and H-E-B and these other places and purchasing good quality product. In regards to some of the larger -- sorry, one of the other smaller retailers that we've been kind of neck and neck, not retailers, brands that we've been neck and neck with. Looking through the Circana data, they've been affected by the large CPG companies entering the space much more so than we have, and they aren't seeing the recovery that we are. So again, I think that that speaks to our assortment, our quality, the fact that we actually freeze dry our products ourselves as you may remember, we were co-manufacturing overseas last year. As of late last year, we no longer do that. Everything is now once again in our Irving facility. And you see that quality really speaking, coming through our product line. In regards to the large CPGs, I haven't heard anything from them or from retailers. Based on what I'm hearing from buyers, consumers and what I'm seeing in the data, I'm surprised that they're not performing better. I would have expected a stronger performance from them. And we're seeing what we would consider some pretty substantial declines in their sell-through rate. And again, I think that, that has to do with the fact that who you choose to freeze dry your product really matters. How you freeze dry, how you package really matters. And so I don't know if they're going to evaluate who their co-manufacturers are, I don't know if they're happy with what their performance is. But I think that there is definitely room for improvement on the quality of the product that's out there by some of those larger CPG companies.

And our next question comes from the line of Igor [indiscernible] Capital.

And I think a couple of questions already been answered. So I'm happy to hear that. One of the questions, I remember, Claudia, you mentioned that on the previous call that the Q1 will not be materially better in terms of sales of Q4. However, we could say that it was materially better. So revenue has recovered somewhat by more than a $1 million. So was there a lot of sales right after the call? Did you ship a lot of product after the -- at the very end of March? So I'm just curious if something has changed in that respect.

Igor, great question. And yes, we saw much quicker recovery right after that call. And so reiterating what I said to George and on this call, a lot of consumers were really excited about trying some of the new launches on the market. And as those trials kind of happened, they said, "You know what, we're going back to Sow Good because we love their assortment, we love their quality." And we saw that in the last half of that quarter. And we're seeing that this quarter. Recovery is still going to be slow. We recovered a little bit more than we anticipated in the first quarter. Second quarter is still going to be marginally better than the first quarter. Third quarter is still going to be marginally better than the second, but it's happening. And we're excited to see it happening. And right now, we're incredibly focused on how do we sustain that momentum through targeted partnerships with our strong retailers and with really thoughtful, methodical product launches that are speaking to consumers and what they're looking for at this time.

Okay. My other question is, I think it's fair to say that you have 6 units and you have a significant spare capacity until your sales recover. What are your plans for the spare capacity? Can it be utilized in doing some private label or subletting it to somebody? Or what are your thoughts on that?

Yes. No, definitely. I hate having our machines idle. We want them to be operating, we want to keep our workforce at full force and so we're analyzing and looking for opportunities in all of the areas you just mentioned, home manufacturing, private labeling. We're excited about bringing yogurt melts into our product assortment, both on the branded side and a private label side because, again, that's something that will help keep the machines fully utilized. And so nothing is off the table in regards to how to bring our utilization rates back up.

My final question, and I know it's sort of a difficult question. So obviously, your cash position has improved somewhat by converting some of the compensation into equity and I'm happy to see that given the circumstances, but it's still a little bit tenuous. Do you have any discussion to improve your cash position? What are your thoughts for the next couple of quarters? What are you planning to do?

Yes, definitely. As a management team, cash is an important conversation that we're having on a very regular basis. And converting some of our salaries from cash to stock, talking to our noteholders to push those notes out. And we're going to keep evaluating every strategy we can on how to improve our cash position. What our primary focus at this time is, a, being really thoughtful and methodical about evaluating what our expenses are and converting our inventory to cash because that is the easiest way for us to improve our cash position. We have plenty of inventory sitting in our warehouse that we need to work through and convert to cash because that's going to be the most meaningful way for us to improve the cash position.

Okay. Thank you so much, and I'm glad to see some green shoots in this quarter. So hopefully, we will see more green shoes in next quarter. So that's all the questions I have. Thank you, Claudia.

Thank you. And I'm looking forward for more green as well. Everyone, thank you very much. I greatly appreciate you being on this call and being on this journey with us. We still have challenges ahead, but we're excited as we see our recovery strategy is taking hold. So have a great day, everyone, and again much appreciated.

Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.