Sow Good Inc. quarterly report, Q2 FY2020

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Filing identity and reporting period

Important identity mismatch: The supplied filing is for Black Ridge Oil & Gas, Inc. (OTCQB: ANFC), not Sow Good Inc. It is a Form 10-Q for the quarter and six months ended June 30, 2020. The summary below reflects the filing text; confirm the issuer before relying on it.

Financial results and position

  • Revenue: None in Q2 or the first half of 2020, versus management-fee revenue of $30,000 and $60,000, respectively, in 2019. The former BRAC management agreement ended after the August 2019 merger.
  • Profit/loss: Q2 net income attributable to the company was $716,782 ($0.45 per share), compared with a $630,687 loss in Q2 2019. First-half net loss was $1,928,797 ($1.21 per share), versus a $1,301,024 loss in first-half 2019. Q2 2020 income included a $1,529,896 gain on AESE securities; first-half results included a $682,956 net investment loss and $382,761 of interest expense, including $377,440 from warrant-related debt discount amortization.
  • Expenses and margins: Operating expenses were $445,464 in Q2 and $863,082 for the first half. With no 2020 revenue, an operating margin is not meaningful; operating losses were $445,464 and $863,082, respectively.
  • Cash flow: First-half operating cash outflow was $682,885; investing inflow was $962,812, principally from AESE share sales; financing inflow was $262,925 net. Cash rose by $542,852 to $651,608.
  • Liquidity and assets: June 30 total assets were $5,755,610, including $5,073,353 of AESE securities. Current liabilities were $1,274,395, including $1,133,281 of deferred compensation tied to AESE shares. The balance sheet reports working capital of $4,475,466.
  • Debt: Notes payable totaled $262,925 at quarter-end: $150,000 under the SBA EIDL and $112,925 under the PPP. The Cadence Bank loan was repaid by June 30. The EIDL is secured by company assets; PPP forgiveness was not assured.
  • Equity: Stockholders’ equity was $4,218,290; accumulated deficit was $33,286,196. Common shares outstanding were 1,600,424 at June 30 and August 10, 2020.

Changes versus prior period

  • The company reported no management-fee revenue in 2020 after the BRAC agreement ended. First-half operating expenses rose modestly to $863,082 from $842,580; professional-services costs increased, primarily for the S-FDF transaction, while salaries and benefits declined.
  • Q2 moved to reported profit largely because of AESE investment gains, while the six-month net loss widened. Comparisons also reflect BRAC’s 2019 results being classified as discontinued operations.
  • Cash increased from $108,756 at December 31, 2019, aided by AESE share sales and new borrowing. AESE securities declined in carrying value from $6,982,300 to $5,073,353.

Outlook, risks, and unusual items

  • Going concern: Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing recurring losses and potentially insufficient cash. It expected to use cash and AESE share sales and might need further debt or equity financing; success was not assured.
  • Proposed S-FDF acquisition: The June 9 agreement covers freeze-dried fruit and vegetable business assets and agreements, described as including $2.5 million in cash. Consideration includes 1,120,000 company shares, subject to adjustment. The company expected closing around October 1, 2020, subject to extension. The agreement describes a $4 million company contribution condition and possible $5 million termination fee.
  • Market and execution risks: The company cited AESE share-price and liquidity volatility, financing availability, COVID-19 impacts, and the risk of failing to close the S-FDF transaction or identify other strategic alternatives.
  • Other items: A 1-for-300 reverse stock split took effect February 21, 2020. Management reported disclosure controls effective as of June 30 and no material change in internal control over financial reporting. No material litigation was reported.

Key facts for investors to verify

  1. Confirm the filing belongs to the intended issuer: the supplied document identifies Black Ridge Oil & Gas, Inc., not Sow Good Inc.
  2. Check the S-FDF agreement’s closing status, contribution conditions, share-adjustment terms, and termination provisions.
  3. Assess the going-concern warning, available financing, and the market value and saleability of AESE holdings.
  4. Reconcile the MD&A liquidity table, which lists December 31, 2019 current assets as $156,412, with the balance sheet, which reports $7,138,712. The filing text does not explain this discrepancy.
  5. Confirm the stated contribution deadline: the filing refers in one passage to January 1, 2020, while other passages refer to January 1, 2021.