Filing summary
Entity mismatch: The request identifies Sow Good Inc., but the supplied filing is Black Ridge Oil & Gas, Inc. (OTCQB: ANFC), a Form 10-K for the fiscal year ended December 31, 2018, filed March 22, 2019. This is an annual report, not a standalone fourth-quarter report.
Business context and reporting period
Black Ridge reported oil-and-gas asset investment and management activities, while also sponsoring and managing Black Ridge Acquisition Corp. (BRAC), a special purpose acquisition company. The statements consolidate BRAC as a variable interest entity. After the 2017 sale and wind-up of Black Ridge Holding Company, the company reported no management-fee revenue in 2018 and said its focus was largely on managing BRAC and pursuing a business combination.
Financial performance and position
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | $0 | $1,000,000 |
| Operating expenses | $2,579,594 | $2,452,496 |
| Operating loss | $(2,579,594) | $(1,452,496) |
| Net income (loss), consolidated | $1,524,880 | $(212,469) |
| Net income attributable to redeemable non-controlling interest | $1,868,894 | $180,060 |
| Net loss attributable to Black Ridge | $(344,014) | $(392,529) |
| Net cash used in operating activities | $(187,936) | $(792,276) |
- 2018 other income totaled $4,680,347, including $2,474,344 of trust-account interest, a $66,507 unrealized gain on trust investments, and $2,137,500 of net settlement income. The settlement comprised a $2.25 million payment and a $112,500 fee; the company gave up rights to further payments under the prior settlement.
- Cash and cash equivalents were $1,503,500 at year-end; current assets were $1,557,448, current liabilities $659,351, and working capital $898,097. Restricted trust cash and investments were $141,307,307, primarily for BRAC public shareholders and not generally available for the parent’s operating needs.
- Total assets were $142,865,980 and total liabilities $659,351. No consolidated debt was listed on the balance sheet. BRAC had borrowed $350,000 from Black Ridge under an unsecured, non-interest-bearing convertible note; the intercompany balance is eliminated in consolidation.
- Cash increased by $26,411 during 2018. Investing cash inflow of $213,897 reflected withdrawals from BRAC’s trust account for taxes and franchise fees; financing cash inflow was $450 from warrant exercises.
- No operating margin is meaningful given zero revenue and an operating loss. The consolidated positive net income chiefly reflects trust-account earnings and settlement income, while the parent-attributable result remained a loss.
Material changes versus 2017
- Management-fee revenue fell from $1 million to zero after the BRHC management agreement ended in 2017.
- Operating expenses rose $127,098 to $2,579,594. Professional services increased $296,919, mainly from BRAC’s full-year public-company costs and proposed-transaction legal and consulting work; salaries and stock compensation declined.
- Interest income rose from $355,338 to $2,474,344 because BRAC’s IPO trust funds were invested for all of 2018 and yields increased. The 2017 comparison included a $1,030,145 gain on the sale of the BRHC investment, which did not recur.
- Cash from operations improved by $604,340, but the company continued to have no current revenue source and incurred an operating loss.
Outlook, risks and unusual items
- Going concern: Management said year-end cash was insufficient to fund projected general and administrative expenses for the next year. The auditor’s report included an explanatory paragraph raising substantial doubt about the company’s ability to continue as a going concern. Management planned to seek capital, new management-fee arrangements, or joint ventures; success was not assured. The financial statements include no adjustments for the uncertainty.
- Proposed BRAC combination: On December 19, 2018, BRAC agreed to acquire Allied Esports and WPT Enterprises assets from Ourgame. Consideration included 11,602,754 BRAC shares and 3,800,003 warrants, with up to 3,846,153 additional shares contingent on the stock-price target described in the agreement. Closing required shareholder approvals and at least $80 million of available cash after redemptions. The transaction was not completed as of the reporting period.
- The filing cited a July 10, 2019 deadline for BRAC to complete a business combination, or face liquidation and redemption of public shares. This deadline and transaction status are historical filing disclosures; verify subsequent outcomes.
- Additional risks include insufficient parent-company liquidity, inability to raise capital or secure partners, possible dilution, OTCQB trading illiquidity and volatility, dependence on key personnel, oil-and-gas partner and commodity risks, and potential Investment Company Act exposure related in part to BRAC holdings.
- Black Ridge reported approximately $25.8 million of federal tax net operating loss carryforwards, potentially subject to ownership-change limits under Section 382. It recorded a full valuation allowance against the parent’s deferred tax assets.
- The filing reported no material litigation, significant contractual payment commitments, or material off-balance-sheet arrangements. Management concluded disclosure controls and internal control over financial reporting were effective; the auditor was not engaged to attest to internal-control effectiveness.
Important facts for investors to verify
- Confirm the issuer: this filing is for Black Ridge Oil & Gas, Inc., not Sow Good Inc.
- Review the company’s latest filings for current liquidity, financing, operating revenue, and going-concern status.
- Verify the final outcome and terms of BRAC’s proposed combination, redemptions, trust funds, and any subsequent liquidation or successor-company transaction.
- Assess the availability of restricted BRAC trust assets to Black Ridge and the effect of the company’s funding needs, related-party loans, incentive awards, options, and warrants on dilution.
- Reconcile consolidated net income with the loss attributable to Black Ridge, and distinguish recurring operating results from trust interest and one-time settlement income.