Filing summary
Issuer identification: The request identifies Sow Good Inc., but the supplied filing is for Black Ridge Oil & Gas, Inc. (trading symbol ANFC). This summary reflects the filing text, which reports the quarter ended March 31, 2019.
Business context and reporting period
This unaudited Form 10-Q covers the three months ended March 31, 2019, with comparative results for the same 2018 period. Black Ridge describes its business as acquiring and managing oil and gas assets for partners and sponsoring and managing Black Ridge Acquisition Corp. (BRAC), a special purpose acquisition company. BRAC is consolidated as a variable interest entity; its public shareholders’ interest is presented as redeemable non-controlling interest.
Financial results and liquidity
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $697,828 | $644,954 |
| Other income | $816,119 | $475,797 |
| Net loss, consolidated | $68,288 | $263,824 |
| Net loss attributable to Black Ridge | $670,337 | $633,029 |
| Net cash used in operating activities | $771,799 | $500,950 |
Other income primarily comprised trust-account interest income of $811,335 and unrealized gains of $4,733. The company reported no management-fee revenue. The difference between consolidated net loss and the larger loss attributable to Black Ridge reflects $602,049 of net income attributable to redeemable non-controlling interest.
At March 31, 2019, cash and cash equivalents were $826,525, current assets were $927,003, current liabilities were $790,064, and working capital was $136,939. Restricted cash and investments held in trust were $142.0 million and were designated principally for BRAC public shareholders, not general corporate use. Total liabilities were $790,064; the filing says the company had no long-term debt. No financing cash flows were reported. Cash fell by $676,975 during the quarter; investing cash inflow of $94,824 primarily reflected a trust withdrawal for taxes and franchise fees. No meaningful operating margin can be calculated because revenue was zero.
Material changes and unusual items
- Operating expenses increased $52,874 year over year. General and administrative expense rose $54,989, including higher professional services and other administrative costs related to BRAC’s proposed business combination; lower stock compensation partly offset the increases.
- Other income increased $340,322, primarily because trust-account interest income rose from $417,712 to $811,335. Despite the consolidated net loss narrowing, the loss attributable to Black Ridge increased $37,308.
- BRAC had borrowed an aggregate $650,000 from Black Ridge under unsecured, non-interest-bearing convertible promissory notes to fund proposed-transaction expenses. The notes are payable upon a business combination and may be converted into units; if no combination closes, repayment is limited to funds outside the trust account. These related-party amounts are eliminated in consolidation.
Outlook, risks, and contingencies
Management states that unrestricted cash is insufficient to fund general and administrative expenses for the next 12 months and that the company has no current revenue source. It is seeking additional capital through management-fee arrangements, joint ventures, equity, debt, or other financing, but says there is no assurance it will obtain funding. The filing identifies substantial doubt about the company’s ability to continue as a going concern; the interim financial statements include no adjustments for a possible inability to continue.
BRAC’s proposed business combination would acquire Allied Esports and WPT Enterprises. Closing was subject to shareholder approvals and BRAC having at least $80 million of available cash after redemptions. The agreement could be terminated if the transaction was not completed by July 10, 2019. The filing also describes transaction consideration, including $35 million payable to Ourgame to satisfy certain assumed obligations. The company reported no material litigation, no off-balance-sheet arrangements, and effective disclosure controls as of March 31, 2019. Management’s forward-looking risk discussion includes liquidity, financing, transaction completion, stock liquidity, and business-growth risks.
Important facts for investors to verify
- Confirm issuer identity: the supplied filing is Black Ridge Oil & Gas, Inc., not Sow Good Inc.
- Check subsequent filings for the outcome and timing of BRAC’s proposed combination, including whether the $80 million cash condition was met and whether the July 10, 2019 deadline changed.
- Assess unrestricted liquidity and financing needs separately from the $142.0 million restricted trust balance; verify whether additional capital was raised after quarter-end.
- Review the related-party $650,000 notes and their repayment, conversion, or forgiveness outcome.
- Reconcile the MD&A cash-flow table, which is labeled “Nine Months Ended September 30, 2018” despite presenting figures that the surrounding text identifies as three-month periods ended March 31.