Sports Entertainment Gaming Global Corp quarterly report, Q3 FY2019

Business context and reporting period

This is Trident Acquisitions Corp.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2019. The filing describes Trident as a blank-check company seeking a business combination, with no operating business or operating revenue to date. The request metadata names Sports Entertainment Gaming Global Corp.; that name does not match the registrant identified in the filing and should be verified.

Financial results and position

  • Revenue and margins: No operating revenue was generated; operating margins are therefore not meaningful. Operating costs were $244,001 for Q3 2019 and $783,698 for the first nine months of 2019.
  • Net income: Reported net income was $723,357 for Q3 2019, versus $603,603 in Q3 2018; for the first nine months, it was $2,345,649 versus $696,760. Results primarily reflect interest and unrealized gains on trust investments, not operating activity.
  • Per-share result: Basic and diluted net loss per common share was reported as $0.02 for Q3 2019 and $0.07 for the first nine months, compared with $0.02 and $0.05, respectively, in 2018. The filing adjusts net income for the share of trust earnings attributable to redeemable shares.
  • Cash flow: Operating activities used $1,199,673 in the first nine months of 2019, versus $418,396 in 2018. Investing activities provided $577,315, principally from trust withdrawals for taxes; financing activities provided no cash. Cash and escrowed cash totaled $633,459 at period-end.
  • Liquidity and assets: Cash outside the Trust Account was $247,429; cash held in escrow was $386,030. Trust Account marketable securities were $210,945,869. Total assets were $211,619,271.
  • Liabilities and equity: Total liabilities were $6,190,107, including a $425,000 related-party promissory note and $5,031,250 deferred underwriting fee payable. No long-term debt was reported. Redeemable common stock, classified as temporary equity, was $200,429,159; stockholders’ equity was $5,000,005.

Material changes versus the prior comparable period

For the first nine months, net income increased to $2.35 million from $0.70 million, as trust interest income and unrealized gains were higher. Operating costs also rose to $784,000 from $410,000. Trust assets increased from $207.75 million at December 31, 2018 to $210.95 million at September 30, 2019, while cash outside the Trust Account declined from $1.26 million to $247,429. The filing reports no material changes to previously disclosed risk factors.

Outlook, risks, contingencies and unusual items

  • The company’s business-combination deadline was December 1, 2019. It scheduled a November 26, 2019 stockholder meeting to seek an extension to May 29, 2020; approval was uncertain. Without an approved extension or completed transaction, the company would wind up and redeem public shares, subject to applicable terms.
  • Management said it did not expect to need additional funds for operations, but warned that underestimated transaction costs or a need to finance a transaction or redemptions could require additional funding. Related parties may, but are not obligated to, provide working-capital loans.
  • The $5.03 million deferred underwriting fee is payable from the Trust Account upon a completed business combination. If no combination is completed, the underwriter waives the fee.
  • Trust funds are invested in short-term U.S. Treasury securities or qualifying money-market funds. Management stated it believed interest-rate exposure was not material due to the short maturities.
  • Management reported effective disclosure controls at a reasonable-assurance level and no material quarterly change in internal control over financial reporting.

Important facts for investors to verify

  1. Confirm the correct issuer: the filing is for Trident Acquisitions Corp., not the company named in the request metadata.
  2. Verify whether stockholders approved the proposed extension and whether a business combination was completed before the applicable deadline.
  3. Review the Trust Account balance, redemption terms, and funds available outside the trust to assess transaction and liquidation outcomes.
  4. Assess the distinction between reported net income and the loss per common share after allocating trust earnings to redeemable shares.
  5. Check the related-party note, deferred underwriting fee, and any subsequent financing or transaction obligations.