Business context and reporting period
Filing identity: The supplied 10-Q is for Trident Acquisitions Corp., a blank-check company, for the quarter ended September 30, 2018—not Sports Entertainment Gaming Global Corp. The filing says Trident had not begun operating or generating revenue and was seeking a business-combination target.
Trident completed its IPO in June 2018, raising $201.25 million through public units and $11.5 million through private units. It held $205.275 million of proceeds in trust after the offerings. The company had until December 1, 2019 to complete a business combination.
Financial results and position
- Revenue: None reported; management said operating revenue was not expected before a business combination.
- Third-quarter 2018: Operating costs were $249,487; interest income was $1,018,752; unrealized investment loss was $5,210; income-tax provision was $160,452; net income was $603,603. The filing reports basic and diluted loss per share of $0.02 after allocating trust income attributable to redeemable shares.
- Nine months ended September 30, 2018: Operating costs were $409,622; interest income was $1,305,219; unrealized investment loss was $13,622; income-tax provision was $185,215; net income was $696,760. Reported basic and diluted loss per share was $0.05 after the redeemable-share allocation.
- Cash flow: Operating activities used $418,396 in the first nine months. Investing activities used $205.275 million, primarily for the trust account; financing activities provided $206.991 million.
- September 30, 2018 balance sheet: Total assets were $208.129 million, including $206.567 million of trust-account marketable securities and $1.341 million of cash outside the trust, plus $100,000 in escrow. Total liabilities were $5.753 million, including a $5.031 million deferred underwriting fee and $425,000 in related-party notes. Shares subject to possible redemption were recorded as $197.376 million of temporary equity.
- Debt and liquidity: The filing reports no long-term debt or off-balance-sheet arrangements. Management believed available outside-trust cash would cover planned expenditures, but cautioned that cost overruns or transaction needs could require additional financing.
Changes versus the prior comparable period
Compared with the three and nine months ended September 30, 2017, when results were near break-even with small operating losses, 2018 reported net income driven by interest on trust assets, alongside higher operating costs and income taxes. The 2018 balance sheet reflects the June IPO, trust funding, and redeemable shares; the December 31, 2017 balance sheet preceded those transactions.
Outlook, risks, and unusual items
Management expected expenses to rise due to public-company compliance and target due diligence. It intended to use substantially all trust funds for a business combination. A qualifying transaction generally had to involve target businesses with aggregate fair market value of at least 80% of the trust balance, subject to the filing’s stated adjustments, and the company had to acquire control of the target.
There was no assurance a transaction would be completed. If no business combination closed by December 1, 2019, Trident was required to cease operations and redeem public shares, subject to applicable law and creditor claims; warrants could expire worthless. Public shareholders could face redemption, and additional financing might be needed to complete a transaction. The filing reported no material changes to the risk factors in its IPO prospectus, no legal proceedings, and no subsequent events requiring disclosure. Management reported disclosure controls were effective at a reasonable-assurance level.
The company had a $5.031 million deferred underwriting fee payable upon a completed business combination and a $7,500 monthly administrative-services fee payable until a transaction or liquidation.
Investor verification points
- Confirm the filing belongs to Trident Acquisitions Corp.; it does not identify Sports Entertainment Gaming Global Corp. as the registrant.
- Verify the trust balance, outside-trust cash, and redemption-share amounts against the financial statements and subsequent filings.
- Review the target-search status, transaction deadline, and any later business-combination or liquidation disclosures.
- Check the treatment of trust interest, redeemable-share income allocation, taxes, and reported loss per share.
- Assess potential financing needs, deferred underwriting fees, creditor claims against trust funds, and warrant dilution or expiration risk.