Business Context and Reporting Period
This Form 8-K is filed by Trident Acquisitions Corp. (not Sports Entertainment Gaming Global Corp) on June 16, 2021. The registrant is a Special Purpose Acquisition Company (SPAC) incorporated in Delaware, trading on the NASDAQ Capital Market under symbols TDACU, TDAC, and TDACW. The filing addresses a material accounting error in the Annual Report on Form 10-K for the year ended December 31, 2020.
Key Financial Metrics and Accounting Adjustments
The filing does not provide specific revenue, profit, or cash flow figures for the current period. Instead, it details a required restatement of the 2020 financial statements regarding the classification of warrants:
- Private Warrants: 1,150,000 warrants issued to the sponsor in a private placement.
- UPO Warrants: 1,750,000 warrants issuable upon exercise of a unit purchase option issued to the underwriter.
- Accounting Change: These instruments were previously classified as equity but must now be classified as liabilities measured at fair value under ASC 815-40 and ASC 820.
- Cash Impact: The restatement is non-cash and non-operating. It will have no impact on the Company's cash position, operating expenses, or total operating, investing, or financing cash flows.
Material Changes Versus Prior Period
The primary material change is the reclassification of the aforementioned warrants from equity to derivative liabilities. This change stems from the SEC Staff Statement issued on April 12, 2021, regarding accounting for SPAC warrants. Consequently, the Company's previously issued financial statements for the year ended December 31, 2020, are no longer reliable. The Company has determined that its disclosure controls and procedures were ineffective for the affected periods solely due to this classification error.
Guidance, Outlook, and Risks
Management Commentary and Outlook:
- The Company plans to file Amendment No. 1 to its 2020 Form 10-K as soon as practicable to include restated financial statements.
- The restatement is not expected to affect the Company's announced business combination with Autolotto, Inc. (Lottery.com).
Risks and Contingencies:
- Restatement Timing: Risk that the Company may not complete restatements in a timely manner.
- Accounting Conclusions: Risk that the Audit Committee or independent auditors may reach different conclusions regarding the financial statements.
- Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ materially from expectations due to various uncertainties.
Investor Verification Checklist
- Verify the filing of Amendment No. 1 to the 2020 Form 10-K to review the restated balance sheet and statement of operations.
- Confirm the fair value measurement of the 2,900,000 warrants (1.15M Private + 1.75M UPO) once the restatement is filed.
- Monitor the status of the business combination with Lottery.com to ensure the accounting restatement does not trigger any covenant breaches or deal delays.
- Review the updated assessment of internal controls over financial reporting in the amended filing.