Sow Good Inc. Income Taxes Disclosure

Note 17 – Income Taxes

We account for income taxes under the provisions of ASC Topic 740, Income taxes, which provides for an asset and liability approach for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributable to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes.

The Company recognized income tax expense of $0 and $0 for the periods ended December 31, 2025 and 2024, respectively.

Deferred income taxes are provided using the asset and liability method to reflect temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities using presently enacted tax rates and laws. The components of deferred income taxes included in the consolidated balance sheets were as follows:

A portion of the Company’s net operating loss carryforwards is subject to provisions of the tax law that limit the use of losses incurred by a corporation prior to the date certain ownership changes occur. These limitations also apply to certain depreciation deductions associated with assets on hand at the time of the ownership change and otherwise allowable during the five-year period following the ownership change. As the five-year limitation period lapsed in 2019, these disallowed deductions are reflected in property and equipment in the schedule above but continue to be subject to the annual limitation that applies to the pre-change net operating losses. Due to the limitation on the use of net operating losses and depreciation deductions, a significant portion of these carryforwards will expire regardless of whether the Company generates future taxable income. After reducing these net operating loss

carryforwards for the amount which will expire due to this limitation, the Company had remaining federal net operating loss carryforwards of approximately $75,119,367 and state net operating loss carryforwards of approximately $0 at December 31, 2025. These net operating loss carryforwards expire as follows:

In assessing whether the deferred tax assets are realizable, a more likely than not standard is applied. If it is determined that it is more likely than not that deferred tax assets will not be realized, a valuation allowance must be established against the deferred tax assets. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the associated temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

A valuation allowance was established in the amount of $21,843,804 and $13,698,081 as of December 31, 2025 and 2024, respectively, based on the Company’s assessment of the future realizability of certain deferred tax assets. The valuation allowance on deferred tax assets is related to future deductible temporary differences and net operating loss carryforwards for which the Company has concluded it is more likely than not that these items will not be realized in the ordinary course of operations.

For the year ended December 31, 2025, the Company recorded an increase in valuation allowance of $8,145,723. This was primarily related to net operating losses generated by the Company in the current tax year. For the year ended December 31, 2024, the Company recorded an increase in valuation allowance of $713,972. This was primarily related to additional net operating losses accumulated for the year.

Unrecognized Tax Benefits

The Company recorded unrecognized tax benefits for uncertain tax positions of approximately $0 and $0 as of December 31, 2025 and 2024, of which $0 impacted the effective tax rate as it was reversed.