Filing summary
Entity identity: The supplied filing is for Trident Acquisitions Corp., a blank-check company, not Sports Entertainment Gaming Global Corp. The financial information below pertains to Trident; verify the intended issuer before relying on this summary.
Business context and reporting period
This unaudited Form 10-Q covers the quarter and six months ended June 30, 2021. Trident had not commenced operating activities and reported no revenue; its activities centered on finding and completing a business combination. It had a proposed merger with AutoLotto, Inc. (Lottery.com).
Financial performance and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Operating costs | 2021: $734,670; 2020: $334,353 | 2021: $1,437,757; 2020: $596,917 |
| Net loss | 2021: $2,714,994; 2020: $255,633 | 2021: $2,514,081; 2020: $255,938 |
| Operating cash used | Not separately presented for the quarter | 2021: $963,650; 2020: $583,733 |
- Second-quarter 2021 loss included a $2,060,500 noncash expense from the change in fair value of derivative liabilities. Six-month loss included a $1,207,500 fair-value expense. Interest income was minimal in 2021.
- Cash outside the Trust Account was $129,387 at June 30, 2021, down from $972,787 at December 31, 2020. Trust Account marketable securities were $63,285,718, restricted principally for a business combination or shareholder redemptions.
- Current liabilities were $5,894,596, including $5,075,000 of non-interest-bearing related-party promissory notes; total liabilities were $18,848,846. The filing reports an adjusted working-capital deficit of $598,529.
- Temporary equity for redeemable shares was $39,997,624, and stockholders’ equity was $5,000,001. No meaningful operating margin is available because the company had no revenue.
Material changes versus the prior comparable period
- Operating costs increased from the prior-year quarter and six-month period, while net losses widened substantially, driven in part by warrant-related fair-value accounting charges.
- Six-month operating cash use increased year over year. Cash outside the Trust Account declined by $843,400 during the first half of 2021.
- Derivative liabilities rose to $7,923,000 from $6,715,500 at year-end 2020, principally reflecting the remeasurement of UPO warrants.
Outlook, risks, contingencies, and unusual items
- The merger agreement contemplated issuing 40 million Trident shares for Lottery.com, with stated transaction consideration of approximately $444 million at $11 per share, subject to a net-indebtedness adjustment. Additional earnout shares may be issued if specified post-closing share-price hurdles are met. Closing remained subject to approvals, an effective Form S-4 registration statement, and other conditions.
- Stockholders approved extending the business-combination deadline from June 1 to September 1, 2021, with a possible further extension to December 1 subject to board approval and specified monthly trust-funding terms. If no combination is completed by the applicable deadline, public shares must be redeemed and the company would wind up.
- Management said additional capital would be needed; insiders and affiliates were not obligated to provide it. The filing states these conditions raise substantial doubt about the company’s ability to continue as a going concern through September 1, 2021 if a combination is not completed. It also warns financing may be unavailable and operations or transaction efforts could be curtailed.
- The $5,031,250 deferred underwriting fee is payable upon a completed business combination. The filing also describes an uncapped-in-practice warrant solicitation fee tied to public warrant exercises, subject to the number of warrants outstanding.
- Disclosure controls and procedures were deemed ineffective as of June 30, 2021 due to a material weakness associated with the accounting and restatement of private and UPO warrants as liabilities. Management described planned remediation but gave no assurance it would be effective.
- Management said COVID-19 could adversely affect the company or its target search, but the impact was not readily determinable. No legal proceedings were reported. No financial guidance was provided.
Important facts for investors to verify
- Confirm that Trident Acquisitions Corp., rather than Sports Entertainment Gaming Global Corp., is the intended issuer and that this is the correct filing.
- Check the subsequent status and final terms of the Lottery.com transaction, its approvals, closing conditions, and any net-debt adjustment.
- Verify deadline extensions, trust-account balances, redemptions, and whether additional insider financing was obtained.
- Review the warrant-liability restatement and remediation of the material weakness, including any later updates on disclosure controls.
- Assess the related-party loans, deferred underwriting fee, and the consequences for public shareholders if the business combination failed.