Business context and reporting period
The supplied filing is Trident Acquisitions Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2020—not a filing under the requested company name, Sports Entertainment Gaming Global Corp. Trident describes itself as a blank-check company seeking a business combination; it had not commenced operating activities or generated revenue.
Financial results and position
| Metric | Q1 2020 / March 31, 2020 | Prior comparable period / December 31, 2019 |
|---|---|---|
| Revenue | None | None |
| Operating costs | $262,564 | $226,217 in Q1 2019 |
| Net income (loss) | $(305) | $794,815 in Q1 2019 |
| Basic and diluted loss per share | $(0.03) | $(0.02) in Q1 2019 |
| Interest income from Trust Account | $262,479 | $1,232,149 in Q1 2019 |
| Cash from operating activities | $(143,239) | $(269,249) in Q1 2019 |
| Cash | $637,207 | $55,461 at December 31, 2019 |
| Trust Account investments | $75,139,111 | $74,376,617 at December 31, 2019 |
| Total liabilities | $7,365,239 | $6,050,058 at December 31, 2019 |
The Trust Account held U.S. Treasury investments and money-market funds; it was reserved principally for a business combination or share redemptions, rather than ordinary operating liquidity. Management reported adjusted working capital of $616,212, excluding specified tax liabilities and related-party notes payable upon a business combination. There was no operating revenue, so operating margins are not applicable.
Material changes versus prior comparable period
Net income of $794,815 in Q1 2019 shifted to a $305 loss in Q1 2020, principally as Trust Account interest income fell by about $970,000; operating costs increased by $36,347. The 2019 period also included a $16,170 unrealized gain on Trust Account securities. Operating cash use declined by $126,010 year over year. Cash increased during Q1 2020, supported by $1,225,000 of related-party loan proceeds, partly offset by operating cash use and a $500,015 Trust Account deposit.
Outlook, risks, contingencies and unusual items
- At March 31, 2020, the company’s business-combination deadline was June 1, 2020. Management intended to seek stockholder approval to extend it to September 1, 2020; approval was not assured. Failure to extend or complete a business combination could require liquidation and redemption of public shares.
- Related-party promissory notes totaled $1,405,000, were non-interest bearing, and were payable December 2, 2020. Lenders were not obligated to provide further financing. If no business combination occurred, outstanding loans could be repaid only from funds outside the Trust Account.
- A $5,031,250 deferred underwriting fee was payable upon closing a business combination. The company also disclosed a $7,500 monthly administrative-services fee and a contingent warrant-solicitation fee.
- Management said it did not expect to need additional funding for ordinary expenditures, but warned of possible funding shortfalls and no assurance of financing or timely completion of a transaction. It reported no off-balance-sheet arrangements or material changes to previously disclosed risk factors.
- The filing discussed the CARES Act and stated it did not expect a significant effect on financial position or results. Management reported disclosure controls effective at a reasonable-assurance level and no material quarterly change in internal control over financial reporting.
Most important facts for investors to verify
- Confirm the registrant identity: this filing is for Trident Acquisitions Corp., despite the company name in the request.
- Check whether stockholders approved an extension beyond June 1, 2020 and whether a business combination was completed; the filing provides no assurance of either.
- Assess the distinction between $637,207 of cash available outside the Trust Account and $75,139,111 held in trust, including restrictions and redemption obligations.
- Review repayment and funding terms for the $1,405,000 related-party notes, the deferred underwriting fee, and potential creditor claims against Trust Account assets.
- Note that the filing reports 13,224,816 common shares issued and outstanding as of May 6, 2020, while the March 31 balance sheet separately presents shares subject to possible redemption as temporary equity.