Business context and reporting period
Important identity discrepancy: The supplied filing is a Form 10-Q for Black Ridge Oil & Gas, Inc. (OTCQB: ANFC), not Sow Good Inc. It reports the quarter and six months ended June 30, 2018, and was signed August 9, 2018. Verify that this is the intended filing before relying on the figures.
Black Ridge reported no current revenue-generating source after its management-services agreement with Black Ridge Holding Company ended effective June 30, 2017. Its stated focus was pursuing oil-and-gas asset opportunities and sponsoring and managing Black Ridge Acquisition Corp. (BRAC), a SPAC seeking a business combination, with an energy-sector emphasis.
Financial results and liquidity
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | 2018: $0; 2017: $500,000 | 2018: $0; 2017: $1,000,000 |
| Operating expenses | 2018: $559,739; 2017: $605,494 | 2018: $1,204,693; 2017: $1,253,497 |
| Operating loss | 2018: $559,739; 2017: $105,494 | 2018: $1,204,693; 2017: $253,497 |
| Net loss attributable to Black Ridge | 2018: $531,575; 2017: $105,494 | 2018: $1,164,604; 2017: $258,211 |
| Operating cash flow | Six-month 2018: $(1,194,598); six-month 2017: $146,511 |
- Six-month 2018 other income was $1,107,562, principally $1,046,102 of trust-account interest and a $60,720 unrealized investment gain. BRAC-related income tax expense was $243,226 for the six months and $148,559 for the quarter.
- At June 30, cash and cash equivalents were $413,112 on the balance sheet, versus $1,477,089 at December 31, 2017. The filing separately reports $139,956,554 of restricted trust assets held for BRAC public shareholders; these are not ordinary operating liquidity.
- Current assets were $513,581 and current liabilities $278,743, yielding reported working capital of $234,838. The company reported no long-term debt. Stockholders’ equity was $502,667, alongside $139,694,307 of redeemable non-controlling interest.
- Quarterly and six-month net losses attributable to Black Ridge include deductions for income attributable to BRAC’s redeemable non-controlling shareholders. The consolidated net loss before that allocation was $76,533 for the quarter and $340,357 for six months.
Material changes versus prior comparable periods
- Revenue fell to zero in both 2018 periods, compared with management fees of $500,000 for the quarter and $1,000,000 for six months in 2017; the prior-year fees were from the terminated BRHC agreement.
- Despite lower total operating expenses, operating losses widened because the prior-year periods included management-fee revenue. Six-month expenses declined by $48,804, while six-month operating loss increased by $951,196.
- Other general and administrative expenses rose 85% for the quarter and 87% for six months, which management attributed mainly to BRAC target-search travel and costs of operating two public companies. Stock compensation declined year over year.
- Six-month operating cash flow shifted from a $146,511 inflow in 2017 to a $1,194,598 outflow in 2018. Cash declined by $1,063,977 during the first half of 2018.
- Weighted-average common shares were 479,799,900 in 2018 versus 47,979,990 in 2017, following the 2017 rights offering and backstop issuance. Reported loss per share rounds to $(0.00) for 2018.
Outlook, risks, and unusual items
- Going concern: Management stated that unrestricted cash was insufficient to fund general and administrative expenses for the next year and that the company had no current revenue source. It planned to seek management-fee arrangements, joint ventures, equity or debt financing, and potentially proceeds under a legacy settlement. There is no assurance that funding will be obtained; the financial statements contain no adjustments for a possible inability to continue as a going concern.
- BRAC: BRAC’s IPO proceeds are held largely in trust for public shareholders, subject to redemption and business-combination terms. BRAC had a 21-month combination period from its October 2017 IPO; failure to complete a combination would generally require redemption and liquidation. The filing gives no completed transaction or quantified operating forecast.
- The filing identifies risks including inability to raise capital or maintain liquidity, failure to find new business or an available oil-and-gas opportunity, stock-price volatility and illiquidity, and legal or regulatory risks. Management said disclosure controls were effective as of June 30, 2018 and reported no material change in internal control over financial reporting during the quarter.
- No material litigation, defaults on senior securities, or material subsequent events were reported. The company reported no off-balance-sheet arrangements.
- Figures to reconcile: MD&A gives cash as $413,212 in one passage, whereas the balance sheet and cash-flow statement report $413,112. MD&A also states working capital of $236,404 in one passage, versus $234,838 in its table and the balance-sheet calculation.
Important facts for investors to verify
- Confirm the issuer identity: the provided text names Black Ridge Oil & Gas, Inc., not Sow Good Inc.
- Reconcile the cash and working-capital discrepancies with the filed statements and any amendments.
- Assess available unrestricted cash, cash burn, and the timing and likelihood of additional financing or revenue.
- Check BRAC’s business-combination progress, deadline, redemption exposure, and the status and accessibility of trust-account funds.
- Review the impact of the 2017 share issuance, outstanding share count, potential dilution, and the allocation of BRAC earnings and losses to redeemable non-controlling interests.