Filing summary
Entity discrepancy: The supplied filing is Trident Acquisitions Corp.’s Form 10-Q, not a filing under the name Sports Entertainment Gaming Global Corp. Trident describes itself as a blank-check company seeking a business combination; its reported figures are not operating results for a sports entertainment business.
Business context and reporting period
The unaudited report covers the quarter and six months ended June 30, 2020, with comparisons to the same 2019 periods. Trident had not commenced operations and reported no revenue; its activities concerned formation, public-company costs, and identifying a business-combination target. The company’s deadline to complete a combination had been extended to September 1, 2020.
Financial performance and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| 2020 net loss | $255,633 | $255,938 |
| 2019 net income | $827,477 | $1,622,292 |
| Operating costs, 2020 | $334,353 | $596,917 |
| Interest income, 2020 | $78,500 | $340,979 |
| Operating cash flow, 2020 | $(583,733) for the six months |
At June 30, 2020, cash outside the trust account was $965,102, and trust-account securities were $69,102,447. Total assets were $70,122,395; total liabilities were $8,558,971, including $2,725,000 of related-party notes and a $5,031,250 deferred underwriting fee. Redeemable common stock of $56,563,414 was classified as temporary equity. Stockholders’ equity was $5,000,010. The filing reports adjusted working capital of $912,110, excluding specified tax payables and notes payable upon a business combination. Revenue and operating margins are not applicable to this pre-combination entity.
For the first six months of 2020, cash increased by $909,641 to $965,102: operating activities used $583,733, investing activities provided $5,615,149, and financing activities used $4,121,775.
Material changes and unusual items
- Compared with 2019, results shifted from net income to net loss in both the quarter and six-month period. Lower trust-account interest and the absence of 2019 unrealized securities gains were key differences; operating costs also increased year over year.
- Following the May 2020 extension vote, holders redeemed 627,059 shares for $6,666,775, and the company contributed $962,476 to the trust account for the extension. The filing also describes substantial redemptions in connection with the November 2019 extension.
- Related parties and an affiliate provided $2.725 million in non-interest-bearing loans during 2020; the outstanding balance was payable December 2, 2020. A prior $180,000 related-party loan was repaid in June 2020.
- The company owes a $5.031 million deferred underwriting fee if a business combination closes. It reports no long-term debt or off-balance-sheet arrangements.
Outlook, risks, and controls
Management said it did not expect to need additional funds for ordinary expenditures, but warned that extra financing might be needed and that insiders were not obligated to provide it. If Trident could not complete a business combination by September 1, 2020, it would cease operations and redeem public shares from the trust account, subject to creditor claims and applicable law. The filing states there is no assurance a transaction or additional financing would be available in time. Warrants could expire worthless if no transaction is completed. Management reported disclosure controls effective at a reasonable-assurance level and no material change in internal control; no legal proceedings were reported.
Facts investors should verify
- Confirm the intended issuer: the filing names Trident Acquisitions Corp., not Sports Entertainment Gaming Global Corp.
- Verify the September 1, 2020 business-combination deadline and any subsequent extension, transaction, or liquidation filing.
- Reconcile share-count disclosures: the cover and financial-statement notes report 12,597,757 shares outstanding, while MD&A reports 12,567,757 after the May redemptions.
- Review the terms, repayment source, and status of the $2.725 million related-party notes and the deferred underwriting fee.