Trident Acquisitions Corp. — Form 10-Q Summary
Filing identity: The supplied filing is for Trident Acquisitions Corp., not Sports Entertainment Gaming Global Corp. Trident identifies itself as a blank-check company and shell company formed to pursue a business combination. Confirm that this is the intended filing.
Business context and reporting period
This unaudited report covers the quarter and six months ended June 30, 2018. Trident had not begun operating a business or generating revenue; its activities concerned formation, its June 2018 IPO and identifying a potential acquisition target. The company completed its IPO and full over-allotment in June.
Financial results and position
| Metric | Three months ended June 30, 2018 | Six months ended June 30, 2018 |
|---|---|---|
| Revenue | None reported | None reported |
| Operating costs | $155,407 | $160,135 |
| Interest income | $286,467 | $286,467 |
| Unrealized loss on trust investments | $8,412 | $8,412 |
| Net income | $97,885 | $93,157 |
| Reported basic and diluted loss per share | $(0.02) | $(0.02) |
Although the statements report net income, the per-share reconciliation subtracts income attributable to redeemable shares, resulting in adjusted net losses of $96,787 for the quarter and $101,515 for the six-month period. Profitability and operating margins are not meaningful for this pre-combination shell with no revenue.
At June 30, 2018, total assets were $207.3 million, including $205.6 million of marketable securities in the Trust Account. Cash outside the trust was $1.46 million, with another $150,000 reported in escrow. Total liabilities were $5.53 million, including a $5.03 million deferred underwriting fee and $425,000 in related-party notes. Common stock subject to possible redemption was presented as $196.8 million of temporary equity. Stockholders’ equity was $5.0 million.
For the six months, the cash flow statement reports $253,362 used in operating activities, $205.3 million used to fund the Trust Account, and $207.0 million provided by financing activities. Ending cash and escrow combined was $1.61 million. No long-term debt or off-balance-sheet arrangements were reported.
Changes versus the prior comparable period
Compared with the three and six months ended June 30, 2017, when operating costs were $265 and $355 and net losses were $265 and $355, respectively, 2018 results reflect the IPO, trust investment income, and higher public-company and transaction-related costs. Trust assets and redeemable shares were established during the 2018 period; the December 31, 2017 balance sheet reported total assets of $547,642 and no trust investments.
Outlook, risks and unusual items
- Trident had until December 1, 2019 to complete a business combination; otherwise, it generally must stop operations and redeem public shares from the Trust Account. There is no assurance a transaction will be completed.
- The company expected no operating revenue before a business combination and anticipated public-company compliance and due-diligence expenses. It said it did not expect to need additional funds for planned expenditures, but warned that higher-than-estimated costs or transaction financing needs could require additional capital or prevent a transaction.
- IPO and private-placement proceeds totaled $212.75 million gross; $205.275 million was deposited in the Trust Account. The company reported $11.10 million in offering costs, including $5.03 million of deferred underwriting fees payable upon a completed business combination.
- Public shareholders could seek conversion of shares in connection with a business combination, subject to stated limitations. Warrants may expire worthless if no business combination is completed. Initial stockholders have agreed to certain protections for trust assets against creditor claims, subject to exceptions.
- Management reported disclosure controls were effective at a reasonable-assurance level and no material change in internal control during the quarter. No legal proceedings or material changes to the prospectus risk factors were reported.
Important facts for investors to verify
- Confirm the issuer and filing match the intended company: the supplied 10-Q names Trident Acquisitions Corp.
- Reconcile the MD&A cash-flow discussion: it reports $253,362 of operating cash use, but also says $68,464 was used; the cash flow statement reports $253,362.
- Verify the unit purchase option terms: Note 7 states an exercise price of $12 per Unit, while Part II describes $10 per Unit.
- Review the treatment and amount of redeemable shares, the $196.8 million temporary-equity balance, and the trust funds available after any redemptions and deferred underwriting fees.
- Assess the December 1, 2019 business-combination deadline, related-party obligations, and whether any subsequent transaction or financing changed the SPAC’s status.