The festival was set to run on March 12-13.
"We couldn't make this announcement until now because it's such a huge project," Damosso said.
"There were lots of things to factor in and lots of people to communicate with, to try and figure out what needed to happen in terms of cancelling the event.
"We've now managed to do all of that."
For Lost Arts, the path forward would be putting on smaller events in Whanganui, Damosso said.
"That could be mini-festivals under the Lost Art brand, and getting great artists from around the country to come on board.
"Realistically that won't be until the next event season though, until we've ridden this current wave and come out the other side.
"There will be exciting stuff coming, once it's safe to do so."
Damosso said the artists booked for this year's festival were still keen to come to Whanganui, and she would try to bring them to town in the future.
"That goes for the On the Rocks event as well, which is up to its fourth postponement.
"At the moment, it's not a great time for people to feel confident about going out and gathering, which is understandable."
All ticket holders for Sound Valley will be able to access refunds.
"They will get an email, essentially running them through the process. The only thing we ask is that people be patient," Damosso said.
"We are also accessing the Event Support Fund from the Government, so we can make sure the artists and production crew get paid.
"People who have put in their time, skill and energy into the event will still get that income."
Lost Arts was really appreciative of the local support it had received throughout the Covid-19 pandemic, Damosso said.
"People have bought tickets in this climate of 'Is it going ahead? Is it not going ahead?', because they want to see events be successful.
"A really great community has formed, especially within events. People support one another, and are really understanding of things being all over the place.
"You have to look for those silver linings."