SEC Filing Summary
Company-name discrepancy: The request identifies Sow Good Inc., but the supplied Form 10-Q is for Black Ridge Oil & Gas, Inc. (ticker ANFC). This summary reflects the filing provided, not Sow Good Inc.
Business context and reporting period
Unaudited results cover the three months ended March 31, 2018, with balance-sheet comparisons to December 31, 2017. Black Ridge reports oil-and-gas investment and management activities and sponsors Black Ridge Acquisition Corp. (BRAC), a blank-check company seeking a business combination, with an intended focus on energy. Black Ridge owns 22% of BRAC but consolidates it as a variable interest entity because it says it directs BRAC’s activities. BRAC’s public shareholders’ interest is reported as redeemable non-controlling interest.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 / prior balance-sheet date |
|---|---|---|
| Revenue | $0 | $500,000 |
| Operating expenses | $644,954 | $648,003 |
| Operating loss | $644,954 | $148,003 |
| Other income (expense) | $475,797 | ($4,714) |
| Net loss | $263,824 | $152,717 |
| Net loss attributable to Black Ridge | $633,029 | $152,717 |
| Operating cash flow | ($500,950) | $68,600 |
| Cash and cash equivalents | $976,139 | $1,477,089 at Dec. 31, 2017 |
| Working capital | $728,459 | $1,379,518 at Dec. 31, 2017 |
| Total liabilities | $344,766 | $186,677 at Dec. 31, 2017 |
Q1 2018 other income primarily comprised $417,712 interest income and a $57,914 unrealized gain on securities in BRAC’s trust account. Gross margin is not meaningful because the company reported no revenue. The filing reports no long-term debt. Assets included $139.456 million of restricted trust cash and investments, held for BRAC public shareholders and not available as ordinary corporate liquidity; redeemable non-controlling interest was $139.239 million.
Material changes versus the prior period
- Revenue fell to zero from $500,000, following termination of the Black Ridge Holding Company management-services agreement in 2017.
- Operating expenses were nearly flat overall, but professional services rose to $84,942 from $66,623 and other general and administrative expenses rose to $151,881 from $80,218. Management attributed increases to operating two public companies and BRAC target-search and investor-relations activity.
- Operating cash flow deteriorated to a $500,950 use from $68,600 provided, and cash declined by $500,950 during the quarter.
- BRAC-related trust interest and investment gains increased other income, while BRAC-related tax expense was recorded. Net loss attributable to Black Ridge increased to $633,029; the consolidated net loss differs because of income allocated to redeemable non-controlling interest.
Outlook, risks, and unusual items
- Going concern: Management states that unrestricted cash is insufficient to fund general and administrative expenses for the next year. The company is pursuing management-fee arrangements, joint ventures, equity, debt, or other financing, but says it may not secure capital in time or at all. The statements include no going-concern adjustments.
- BRAC transaction risk: BRAC had not completed a business combination. It must complete one within 21 months of its October 2017 IPO or redeem public shares and liquidate. Trust assets are subject to redemption rights and may face third-party claims; Black Ridge’s trust indemnity may not be funded if called upon.
- Other risks: The filing cites low trading volume and possible penny-stock rules, financing and liquidity needs, failure to obtain new business, and legal, market, and listing risks. Management reported no material litigation, no off-balance-sheet arrangements, and no material subsequent events.
- Management incentives: A 2018 incentive plan grants certain officers and directors awards based on a percentage of Black Ridge’s BRAC shares if a business combination closes; the company said it would recognize no expense until a combination is probable.
- No specific earnings or revenue guidance is provided. The filing states disclosure controls were effective as of March 31, 2018.
Important facts for investors to verify
- Confirm issuer identity: the supplied filing is for Black Ridge Oil & Gas, Inc., not Sow Good Inc.
- Reconcile a cash-flow presentation inconsistency: the cash-flow statement reports a $500,950 decrease in cash, while the MD&A table appears to show a positive $500,950 net change; the balance sheet and statement support a decrease.
- Reconcile the tax-expense figures: the statement of operations and MD&A report $94,667, while a note states $94,677.
- Assess the availability and burn rate of the $976,139 unrestricted cash balance separately from the restricted BRAC trust assets, and evaluate the stated going-concern funding need.
- Review BRAC’s business-combination progress, deadline, redemption exposure, and potential dilution or obligations from its rights, warrants, underwriter option, and incentive awards.