SOW GOOD INC. Cautionary Statements
We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect our company and to take advantage of the "safe harbor" protection for forward-looking statements that applicable federal securities law affords.
From time to time, our management or persons acting on our behalf may make forward-looking statements to inform existing and potential security holders about our company. All statements other than statements of historical facts included in this report regarding our financial position, business strategy, plans and objectives of management for future operations and industry conditions are forward-looking statements. When used in this report, forward-looking statements are generally accompanied by terms or phrases such as "estimate," "project," "predict," "believe," "expect," "anticipate," "target," "plan," "intend," "seek," "goal," "will," "should," "may" or other words and similar expressions that convey the uncertainty of future events or outcomes. Items making assumptions regarding actual or potential future sales, market size, collaborations, trends or operating results also constitute such forward-looking statements.
Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements include the following:
· volatility or decline of our stock price;
· low trading volume and illiquidity of our common stock, and possible
application of the SEC's penny stock rules;
· potential fluctuation in quarterly results;
· our failure to collect payments owed to us;
· material defaults on monetary obligations owed us, resulting in
unexpected losses;
· inability to maintain adequate liquidity to meet our financial obligations;
· failure to acquire or grow new business;
· litigation, disputes and legal claims involving outside parties;
· risks related to seeking a listing on a national securities exchange
and meeting listing requirements; and
· risks related to our holdings of AESE common stock.
We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made.
Readers are urged not to place undue reliance on these forward-looking
statements. We assume no obligation to update any forward-looking statements in
order to reflect any event or circumstance that may arise after the date of this
report, other than as may be required by applicable law or regulation. Readers
are urged to carefully review and consider the various disclosures made by us in
our reports filed with the
23 Overview and Outlook
Effective
The Company is focused on acquiring, investing in, and managing the oil and gas
assets for ourselves or our partners. Additionally, as the sponsor and manager
of
Following the close of the Merger, the Company commenced a strategic review to
identify, review and explore alternatives for the Company, including a merger,
acquisition, or a business combination. The Company currently owns 2,685,500
shares of BRAC (the "Sponsor Shares"). Of those shares, 537,100 of the Sponsor
Shares are subject to distribution rights to officers and directors under the
2018 Management Incentive Plan dated
BRAC Business Combination
On
Pursuant to the Agreement, as amended on
Upon consummation of the Mergers (the "Closing"), BRAC issued to the former
owners of
In addition to the consideration described above, the former owners of Allied
Esports and WPT are entitled to receive their pro rata portion of an aggregate
of an additional 3,846,153 shares of AESE's common stock if the last sales price
of AESE's common stock equals or exceeds
The Mergers resulted in BRAC acquiring two of Ourgame's global esports and entertainment assets, Allied Esports and WPT. Allied Esports is a premier esports entertainment company with a global network of dedicated esports properties and content production facilities. WPT is the creator of the World Poker Tour® (WPT®) - the premier name in internationally televised gaming and entertainment with brand presence in land-based tournaments, television, online and mobile. The transaction strategically combined the globally recognized Allied Esports brand with the three-pronged business model of the iconic World Poker Tour, featuring in-person experiences, multiplatform content and interactive services, to leverage the high-growth opportunities in the global esports industry.
Further information regarding the Business Combination, the combined company
following consummation of the Business Combination and the risks related to the
business of the combined company following consummation of the Business
Combination can be found in BRAC's Current Report on Form 8-K filed with the
24 The Extension Meeting
On
In connection with this vote, the holders of 9,246,727 shares of BRAC's common
stock properly exercised their right to convert their shares into cash at a
conversion price of approximately
Amendment to the Business Combination Agreement
On
In connection with the execution of the Amendment, the parties entered into an
amendment and acknowledgment agreement ("Acknowledgment Agreement") whereby the
terms of the previously issued convertible notes ("Notes") of Allied Esports and
WPT (collectively "AEII/WPT") whereby bridge holders provided
In July and
25
Closing of the Business Combination
The Business Combination was closed on
Commensurate with the Business Combination BROG converted
Upon, the close of the Business Combination, BROG owned 2,685,500 shares of BRAC
stock, representing approximately 11.6% of the outstanding shares of BRAC. As
per the
Going Concern Uncertainty
As of
We continue to pursue sources of additional capital through various financing transactions or arrangements, including joint venturing of projects, equity or debt financing or other means. We may not be successful in identifying suitable funding transactions in a sufficient time period or at all, and we may not obtain the capital we require by other means. If we do not succeed in raising additional capital, our resources may not be sufficient to fund our business.
The report of the Company's independent registered public accounting firm that accompanies its audited consolidated financial statements in the Company's Annual Report on Form 10-K contains an explanatory paragraph regarding the substantial doubt about the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of the going concern uncertainty.
26
Results of Operations for the Three Months Ended
The following table summarizes selected items from the statement of operations
for the three months ended
Three Months Ended
September 30, Increase /
2019 2018 (Decrease)
Management fee income $ 153,279 $ - $ 153,279
Total revenues: 153,279 - 153,279
Operating expenses:
General and administrative expenses:
Salaries and benefits 279,621 285,839 (6,218 )
Stock and deferred compensation 2,836,920 77,901 2,759,019
Professional services 40,287 39,348 939
Other general and administrative expenses 69,157 58,289 10,868
Total general and administrative expenses 3,225,985 461,377 2,764,608
Depreciation and amortization 131 2,535 (2,404 )
Total operating expenses 3,226,116 463,912 2,762,204
Net operating loss (3,072,837 ) (463,912 ) (2,608,925 )
Other income (expense)
Gain on deconsolidation of subsidiary 26,322,687 - 26,322,687
Merger incentive expense (5,874,000 ) - (5,874,000 )
Settlement income - 2,250,000 (2,250,000 )
Settlement expense - (112,500 ) 112,500
Other income - 200 (200 )
Gain on investment in Allied Esports
Entertainment, Inc. 2,094,690 - 2,094,690
Total other income (expense) 22,543,377 2,137,700 (20,405,677 )
Net profit from continuing operations before
provision for income taxes 19,470,540 1,673,788 17,796,752
Provision for income taxes - - -
Net profit from continuing operations, net
of tax 19,470,540 1,673,788 17,796,752
Net profit (loss) from discontinued
operations (8,152,165 ) 442,487 (8,594,652 )
Net profit before non-controlling interest 11,318,375 2,116,275 9,202,100 Less: Net income attributable to redeemable non-controlling interest
(142,919 ) (513,240 ) (370,321 )
Net income attributable to Black Ridge Oil &
Gas, Inc. $ 11,175,456 $ 1,603,035 $ 9,572,421
Management fee revenue
The Company earned management fees of
27
General and administrative expenses
Salaries and benefits
Salaries and benefits for the three months ended
Stock-based compensation
Stock-based compensation expense for the three months ended
Professional services
General and administrative expenses related to professional services were
Other general and administrative expenses
Other general and administrative expenses for the three months ended
Depreciation
Depreciation expense for the three months ended
Other income (expense)
In the three months ended
In the three months ended
Provision for income taxes
The Company had no income tax expense in the 2019 or 2018 periods, as the Company continues to reserve against any deferred tax assets due to the uncertainty of realization of any benefit.
Net profit (loss) from discontinued operations
Net profit (loss) from discontinued operations relates to the income and
expenses of BRAC during the periods prior to deconsolidation. Net profit (loss)
from discontinued operations consisted of a loss of
28
Results of Operations for the Nine Months Ended
The following table summarizes selected items from the statement of operations
for the nine months ended
Nine Months Ended
September 30, Increase /
2019 2018 (Decrease)
Management fee income $ 153,279 $ - $ 153,279
Total revenues: 153,279 - 153,279
Operating expenses:
General and administrative expenses:
Salaries and benefits 910,191 914,166 (3,975 )
Stock compensation 2,892,738 244,664 2,648,074
Professional services 79,978 80,001 (23 )
Other general and administrative expenses 185,035 194,530 (9,495 )
Total general and administrative expenses 4,067,942 1,433,361 2,634,581
Depreciation and amortization 754 7,650 (6,896 )
Total operating expenses 4,068,696 1,441,011 2,627,685
Net operating loss (3,915,417 ) (1,441,011 ) (2,474,406 )
Other income (expense)
Gain on deconsolidation of subsidiary 26,322,687 - 26,322,687
Merger incentive expense (5,874,000 ) - (5,874,000 )
Settlement income - 2,250,000 (2,250,000 )
Settlement expense - (112,500 ) 112,500
Other income 51 940 (889 )
Gain on investment in Allied Esports
Entertainment, Inc. 2,094,690 - 2,094,690
Total other income (expense) 22,543,428 2,138,440 20,404,988
Net profit from continuing operations before
provision for income taxes 18,628,011 697,429 17,930,582
Provision for income taxes - - -
Net profit from continuing operations, net
of tax 18,628,011 697,429 17,930,582
Net profit (loss) from discontinued
operations (7,421,050 ) 1,078,489 (8,499,539 )
Net profit before non-controlling interest 11,206,961 1,775,918 9,431,043 Less: Net income attributable to redeemable non-controlling interest
(1,332,529 ) (1,337,487 ) 4,958
Net income attributable to Black Ridge Oil &
Gas, Inc. $ 9,874,432 $ 438,431 $ 9,436,001
Management Fee Revenue
The Company earned management fees during the nine months ended
29
General and Administrative Expenses
Salaries and benefits
Salaries and benefits for the nine months ended
Stock-based compensation
Stock-based compensation expense for the nine months ended
Professional services
General and administrative expenses related to professional services were
Other general and administrative expenses
Other general and administrative expenses for the nine months ended
Depreciation
Depreciation expense for the nine months ended
Other income (expense)
In the nine months ended
In the nine months ended
Provision for Income Taxes
The Company had no income tax expense in the 2019 or 2018 periods, as the Company continues to reserve against any deferred tax assets due to the uncertainty of realization of any benefit.
Net profit (loss) from discontinued operations
Net profit (loss) from discontinued operations relates to the income and
expenses of BRAC during the periods prior to deconsolidation. Net profit (loss)
from discontinued operations consisted of a loss of
30
Liquidity and Capital Resources
The following table summarizes our total current assets, liabilities and working
capital at
September 30, December 31,
2019 2018
Current Assets $ 270,646 $ 1,557,448
Current Liabilities $ 2,891,279 $ 659,351
Working Capital $ (2,620,633 ) $ 898,097 As of
The following table summarizes our cash flows during the nine month periods
ended
Nine Months Ended
September 30,
2019 2018
Net cash used in operating activities
450
Net change in cash and cash equivalents
Net cash used in operating activities was
Net cash provided by investing activities were
Net cash provided by financing activities was
Satisfaction of our cash obligations for the next 12 months
As of
31
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of financial conditions and results of
operations is based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in
Our critical accounting policies are more fully described in Note 2 of the
footnotes to our financial statements appearing elsewhere in this Form 10-Q, and
Note 2 of the footnotes to the financial statements provided in our Annual
Report on Form 10-K for the fiscal year ended
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