Sow Good Inc. - Quarter Report: 2010 June (Form 10-Q)

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Delaware (State or other jurisdiction of incorporation or organization)

27-2345075 (I.R.S. Employer Identification No.)

Yes

x

No

¨

Yes

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No

o

Large accelerated filer	¨		Accelerated filer	¨
Non-accelerated filer (Do not check if a smaller reporting company)	¨		Smaller reporting company	x

Yes

¨

No

x

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PART I - FINANCIAL INFORMATION
ITEM 1.		CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)	1
		Condensed Balance Sheet at June 30, 2010 (Unaudited)	1
		Condensed Statement of Operations for the period from April 9, 2010 (Inception) to     June 30, 2010 (Unaudited)	2
		Condensed Statement of Stockholders’ Equity at June 30, 2010 (Unaudited)	3
		Condensed Statement of Cash Flows for the period from April 9, 2010 (Inception) to     June 30, 2010 (Unaudited)	4
		Notes to the Condensed Financial Statements	5
ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	15
ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	21
ITEM 4T.		CONTROLS AND PROCEDURES	21
PART II - OTHER INFORMATION
ITEM 1.		LEGAL PROCEEDINGS	21
ITEM 2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	21
ITEM 3.		DEFAULTS UPON SENIOR SECURITIES	21
ITEM 4.		(REMOVED AND RESERVED)	22
ITEM 5.		OTHER INFORMATION	22
ITEM 6.		EXHIBITS	22
		SIGNATURES	22

 

 

 

 

ITEM 1.

FINANCIAL STATEMENTS

ANTE5, INC.
(DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEET
(Unaudited)
		June 30,
		2010
ASSETS
Current assets:
Cash		$	214,732
Accounts receivable			39,549
Investment in debt securities and related put rights			2,400,000
Current portion of contingent consideration receivable			500,364
Total current assets			3,154,645
Contingent consideration receivable, net of current portion			6,932,411
Property and equipment, net			3,467
Total assets		$	10,090,523
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	588,924
Royalties payable			406,746
Accrued expenses			13,304
Line of credit			1,133,403
Note payable			500,000
Current portion of deferred tax liability			211,700
Total current liabilities			2,854,077
Deferred tax liability, net of current portion			2,932,700
Total liabilities			5,786,777
Stockholders' equity:
Preferred stock, $0.001 par value, 20,000,000 shares
authorized, no shares issued and outstanding			-
Common stock, $0.001 par value, 100,000,000 shares
authorized, 21,292,333 shares issued and outstanding			21,292
Additional paid-in capital			4,629,087
(Deficit) accumulated during development stage			(346,633	)
Total stockholders' equity			4,303,746
Total liabilities and stockholders' equity		$	10,090,523

 

ANTE5, INC.
(DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
		April 9, 2010
		(Inception) to
		June 30, 2010
Revenue		$	-
Operating expenses:
General and administrative			70,780
Officer salary			10,417
Professional fees			258,333
Depreciation			619
Total operating expenses			340,149
Net operating loss			(340,149	)
Other income (expense):
Interest expense			(8,540	)
Interest income			2,056
Total other income (expense)			(6,484	)
Loss before provision for income taxes			(346,633	)
Provision for income taxes			-
Net (loss)		$	(346,633	)
Weighted average number of common shares
outstanding - basic and fully diluted			21,292,333
Net (loss) per share - basic and fully diluted		$	(0.02	)

 

 

ANTE5, INC.
(DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
																						Deficit
																						accumulated
																		Additional				during				Total
		Preferred shares								Common shares								paid-in				development				stockholders'
		Shares				Amount				Shares				Amount				capital				stage				equity
Issuance from spin-off of Ante4, Inc.			-			$	-				21,292,333			$	21,292			$	4,629,087			$	-			$	4,650,379
Net loss from April 9, 2010
(Inception) to June 30, 2010			-				-				-				-				-				(346,633	)			(346,633	)
Balance, June 30, 2010			-			$	-				21,292,333			$	21,292			$	4,629,087			$	(346,633	)		$	4,303,746

 

 

 

 

ANTE5, INC.
(DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
		April 9, 2010
		(Inception) to
		June 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)		$	(346,633	)
Adjustments to reconcile net (loss)
to net cash used in operating activities:
Depreciation			619
Loss on sale of debt securities			8,363
Common stock options granted			58,425
Decrease (increase) in assets:
Accounts receivable			(5,841	)
Contingent consideration receivable			100,210
Increase (decrease) in liabilities:
Accounts payable			139,760
Royalties payable			(8,254	)
Accrued expenses			13,304
Net cash used in operating activities			(40,047	)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash acquired in spin-off from Ante4, Inc.			258,712
Proceeds from sale of short term investments			1,300,000
Net cash provided by investing activities			1,558,712
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on line of credit			(1,303,933	)
Net cash used in financing activities			(1,303,933	)
NET CHANGE IN CASH			214,732
CASH AT BEGINNING OF YEAR			-
CASH AT END OF YEAR		$	214,732
SUPPLEMENTAL INFORMATION:
Interest paid		$	-
Income taxes paid		$	-

 

 

Assets acquired
Cash		$	258,712
Accounts receivable			33,708
Investment in debt securities and related put rights			3,708,363
Contingent consideration receivable			7,532,985
Property and Equipment			15,706
Less: accumulated depreciation and depletion			(11,620	)
Total assets acquired			11,537,854
Liabilities assumed
Accounts payable			449,164
Royalties payable			415,000
Line of credit			2,437,336
Notes payable			500,000
Deferred tax liability			3,144,400
Total fair value of assets and liabilities acquired		$	4,591,954

		Number		Strike
Holder		of options		price		Expiration date		Vesting terms
Director		12,000		$0.51		August 9, 2014		Fully vested
Director		12,000		$0.33		May 31, 2016		Fully vested
Director		4,000		$0.29		May 30, 2017		Fully vested
Director		4,000		$0.29		May 30, 2017		Fully vested
Director		4,000		$0.08		May 22, 2018		Fully vested
Director		4,000		$0.08		May 22, 2018		Fully vested
Director		4,000		$0.05		May 20, 2019		Fully vested
Director		4,000		$0.05		May 20, 2019		Fully vested
CEO		125,000		$0.03		February 20, 2019		Fully vested

 

 

 

 

Description			ARS				Put Rights				Total
Balance, April 9, 2010 (inception)			$	3,364,734			$	335,266			$	3,700,000
Change in value of put rights, included in the earnings of Ante4, Inc. prior to the spin-off				-				(106,983	)			(106,983	)
Change in value of ARS portfolio, included in earnings of Ante4, Inc. prior to the spin-off				106,983				-				106,983
Settlements, net of purchases				(1,300,000	)			-				(1,300,000	)
Balance, June 30, 2010			$	2,171,717			$	228,283			$	2,400,000

		June 30, 2010
Accrued Payroll, Officer		$	10,416
Accrued Payroll Taxes			833
Accrued Interest			2,055
		$	13,304

		June 30, 2010
Unsecured debenture from Ante4, Inc. bearing interest at 2%, due on April 16, 2011		$	500,000

Shares Underlying Options Outstanding								Shares Underlying Options Exercisable
				Weighted
		Shares		Average		Weighted		Shares		Weighted
		Underlying		Remaining		Average		Underlying		Average
Range of		Options		Contractual		Exercise		Options		Exercise
Exercise Prices		Outstanding		Life		Price		Exercisable		Price
$0.03 - $0.92		569,000		8.65 years		$     0.25		569,000		$     0.25

		June 30, 2010
Average risk-free interest rates			1.68	%
Average expected life (in years)			5
Volatility			204	%

 

		Number of Shares				Weighted Average Exercise Price
Balance, April 9, 2010 (Inception)			-0-			$	-0-
Options expired			-0-				-0-
Options cancelled			-0-				-0-
Options granted			569,000				0.25
Options exercised			-0-				-0-
Balance, June 30, 2010			569,000				0.25
Exercisable, June 30, 2010			569,000			$	0.25

 

 

 

 

 

 

 

ITEM 2:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

(a)

volatility or decline of the Company’s stock price;

 

(b)

low trading volume and illiquidity of our common stock, and possible application of the SEC’s penny stock rules;

 

(c)

we are subject to certain contingent liabilities of our former parent company, and we have an indemnification obligation of up to $2.5 million of liabilities, if any, that our former parent company may incur to a third party arising from pre-spin-off operations;

 

(d)

potential fluctuation in quarterly results;

 

(e)

failure of the Company to earn revenues or to monetize certain claims that it has for payments owed to it;

 

(f)

material defaults on monetary obligations owed to the Company, resulting in unexpected losses;

 

(g)

inadequate capital to continue business;

 

(h)

dissipation of existing assets and failure to acquire or grow a new business;

 

(i)

lower royalty income than anticipated or the absence of royalty income due to default, or to the absence of revenue, or lower revenue than expected, earned by the Company’s licensees;

 

(j)

litigation with or legal claims and allegations by outside parties;

 

(k)

we do not own an operating business and may not be able to acquire one in the future;

 

(l)

business acquisitions that may be made by us in the future, if any, may not be profitable and may result in substantial losses; and

 

(m)

the Company may be deemed to be an “investment company” under the Investment Company Act of 1940, as amended, which would impose substantial additional regulatory costs and requirements.

 

 

•

5% of gross gaming revenue and 5% of other revenue of Party generated by the WPT Business and other assets Ante4 sold to Party in the Party Transaction (the “Royalty Stream”). Party has guaranteed a minimum payment to us of $3 million for such Royalty Stream over the three-year period following the closing of the Party Transaction. The Royalty Stream is an obligation only of Peerless Media Ltd. and its immediate parent company, ElektraWorks Ltd., and does not represent a financial obligation of PartyGaming, PLC. Through November 2, 2011, 20% of the proceeds from the Royalty Stream must be deposited in an escrow account to secure Ante4’s indemnification obligations under the purchase agreement for the Party Transaction.

•

Cash and cash equivalents of approximately $259,000 as of April 16, 2010. Accounts payable of approximately $449,000 as of April 16, 2010, and an additional approximately $140,000 in accounts payable was accrued since that date. Furthermore, we must repay $500,000 borrowed from Ante4 pursuant to a promissory note due April 16, 2011, which accrues interest at a rate of two percent (2%) per annum.

•

The right to receive all of the proceeds received by Ante4 with respect to auction rate securities in the amount of approximately $3,700,000 held by Ante4 in its account with UBS Financial Services. Ante5 received those proceeds in full, net of the repayment of a line of credit with UBS Financial Services in the amount of approximately $2,435,999, periodically through July 3, 2010, which resulted in net cash proceeds to us of approximately $1.3 million.

•

Contingent claims and interests relating to (a) payments previously owed to Ante4 by Xyience, Inc., a former sponsor of the WPT television series; (b) WPT China, a business segment of Ante4 for which most activities were shut down in March 2009; (c) Cecure Gaming, for which Ante4 was entitled to 50% of the net revenues and an 8% ownership interest, but whose business is currently in receivership in the British equivalent of a bankruptcy proceeding; and (d) a lawsuit currently pending against Ante4’s former auditors, Deloitte & Touche, LLP.

•

Ante4’s 25% royalty participation, in perpetuity, in the net proceeds of Poker Royalty, LLC, a poker talent management company.

 

		For the Period from April 9, 2010 (Inception) to June 30, 2010
General and administrative		$	70,780
Officer salary			10,417
Professional fees			258,333
Depreciation			619
Net operating loss			340,149
Other (income) expenses			6,484
Net loss		$	346,633

 

 

		June 30, 2010
Current Assets		$	3,154,645
Current Liabilities		$	2,854,077
Working Capital		$	300,568

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit	Description
31.1	Section 302 Certification of Chief Executive Officer
31.2	Section 302 Certification of Chief Financial Officer
32.1	Section 906 Certification of Chief Executive Officer
32.2	Section 906 Certification of Chief Financial Officer

 

	ANTE5, INC.
Dated: August 16, 2010	By:	/s/Steven R. Lipscomb
		Steven R. Lipscomb, Chairman of the Board and Chief Executive Officer (Principal Executive Officer)
Dated: August 16, 2010	By:	/s/Steven R. Lipscomb
		Steven R. Lipscomb, Chief Financial Officer (Principal Financial Officer)

 

 

 

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