SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K-A1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
January 6, 1998
Date of Report
(Date of Earliest Event Reported)
TRIDENT MEDIA GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA 2-98074-NY 11-2751536
(State or other (Commission File No.) (IRS Employer I.D. No.)
Jurisdiction)
6349 Palomar Oaks Court
Carlsbad, California 92009
(Address of Principal Executive Offices)
(760) 438-9080
Registrant's Telephone Number
Not Applicable
(Former Name or Former Address if changed Since Last Report)
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
Spector Entertainment Group, Inc.
Audited Financial Statements for years ended
December 31, 1996 and 1995
--------------------------
Report of Independent Accountants
Balance Sheets
Statement of Operations
Statement of Stockholders Equity
Statement of Cash Flows
Notes to Financial Statements
Spector Entertainment Group, Inc.
Unaudited Financial Statements for the nine months
ended September 30, 1997 and 1996
---------------------------------
Balance Sheets
Statement of Operations
Statement of Stockholders' Equity
Statement of Cash Flows
Notes to Financial Statements
(b) Pro Forma Financial Information.
Spector Entertainment Group, Inc. and
Trident Media Group, Inc.
Unaudited Pro Forma Combining Financial Statements
for September 30, 1997
----------------------
Pro Forma Combining Balance Sheet
Pro Forma Combining Statement of Operations
(c) Exhibits.
None.
Documents Incorporated by Reference
None.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
TRIDENT MEDIA GROUP, INC.
Date: 3/31/98 By /s/ Edward M. Spector
President and Director
<PAGE>
SPECTOR ENTERTAINMENT GROUP, INC.
__________
REPORT ON AUDITED FINANCIAL STATEMENTS
For the Years Ended December 31, 1996 and 1995
__________
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Spector Entertainment Group, Inc.
We have audited the accompanying balance sheets of Spector
Entertainment Group, Inc. (the "Company") as of December 31,
1996 and 1995 and the related statements of operations,
stockholders' equity and cash flows for the years then ended.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Spector Entertainment Group, Inc. at December 31, 1996 and
1995 and the results of its operations and its cash flows for
the years then ended, in conformity with generally accepted
accounting principles.
The Company has restated its previously issued financial
statements, as discussed in Note 6 to the financial statements.
/S/Coopers & Lybrand
COOPERS & LYBRAND L.L.P.
San Diego, California
April 23, 1997
<PAGE>
<TABLE>
SPECTOR ENTERTAINMENT GROUP, INC.
BALANCE SHEETS
December 31, 1996 and 1995
__________
<CAPTION>
1996 1995
(as restated)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 536,700 $ 531,500
Accounts receivable, net of
allowance for doubtful accounts
of $73,600 and $15,000, respectively 410,600 313,100
Prepaid expenses and other
current assets 68,600 68,600
Deferred taxes 75,400 179,100
Total current assets 1,091,300 1,092,300
Property and equipment, net 3,976,600 4,214,400
Other assets 100,100 129,100
$5,168,000 $5,435,800
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 392,100 $ 577,400
Due to related party 127,000 265,400
Current portion of bank debt 895,700 895,700
Current portion - capital lease 9,900 -
Taxes payable 9,700 -
Total current liabilities 1,434,400 1,738,500
Bank debt, less current portion 920,000 1,815,700
Deferred taxes 803,200 728,600
Long-term capital lease payable 13,200 -
Total liabilities 3,170,800 4,282,800
Commitments and contingencies
Stockholder's equity:
Common stock, no par value,
stated value, 100,000
shares authorized, 100 shares
issued and outstanding in
1996 and 1995 12,300 12,300
Additional paid-in capital 50,000 50,000
Amounts due from related parties (69,200) (641,300)
Retained earnings 2,004,100 1,732,000
Total stockholder's equity 1,997,200 1,153,000
$5,168,000 $5,435,800
</TABLE>
<TABLE>
SPECTOR ENTERTAINMENT GROUP, INC.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996 and 1995
__________
<CAPTION>
1996 1995
(as restated)
<S> <C> <C>
Revenues $7,885,900 $7,718,100
Cost of operations 5,504,100 5,576,700
Gross profit 2,381,800 2,141,400
Selling, general and administrative
expenses 1,131,400 1,692,800
Interest expense 257,200 320,600
Other income (30,000) (47,600)
Write-off of related party receivables 563,100 -
Income before provision for income taxes 460,100 175,600
Provision for income taxes 188,000 468,500
Net income (loss) $ 272,100 $ (292,900)
</TABLE>
<TABLE>
SPECTOR ENTERTAINMENT GROUP, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
For the Years Ended December 31, 1996 and 1995
__________
<CAPTION>
Amount
Additional Due From
Common Stock Paid-In Related Retained
Shares Amount Capital Parties Earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1994 50,000 $12,300 $50,000 $ - $2,505,500 $2,567,800
Cancellation
of shares to
effect merger
with Graff
Pay-Per-View
Inc. (49,900) - - - - -
Stockholder
distributions - - - - (480,600) (480,600)
Related party
receivable - - - (641,300) - (641,300)
Net loss, as
restated - - - - (292,900) (292,900)
Balance at
December 31,
1995, as
restated 100 12,300 50,000 (641,300) 1,732,000 1,153,000
Related party
receivable - - - 572,100 - 572,100
Net income - - - - 272,100 272,100
Balance at
December 31,
1996 100 $12,300 $50,000 $(69,200)$2,004,100 $1,997,200
</TABLE>
<TABLE>
SPECTOR ENTERTAINMENT GROUP, INC.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996 and 1995
__________
<CAPTION>
1996 1995
(as restated)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 272,100 $ (292,900)
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 769,000 744,800
Amortization 32,000 -
Deferred income taxes 178,300 534,500
Gain on sale of property
and equipment (200) (12,300)
Write-off of affiliate receivable 563,100 -
Bad debt expense 58,500 -
Increase (decrease) in cash
resulting from changes in:
Accounts receivable (156,000) 119,500
Prepaid expenses and
other assets (3,000) 113,500
Accounts payable and
accrued liabilities (185,300) (60,100)
Taxes payable 9,700 -
Net cash provided by
operating activities 1,538,200 1,147,000
Cash flows from investing activities:
(Increase) decrease in amounts due from
related parties 38,400 (100,000)
Increase (decrease) in amounts due to related
parties (138,400) 265,400
Purchase of property and equipment (532,100) (801,200)
Proceeds from sale of property and equipment 1,100 9,100
Net cash used by
investing activities (631,000) (626,700)
Cash flows from financing activities:
Principal payments of bank debt (895,700) (776,100)
Proceeds from issuance of bank debt - 600,000
Stockholder distribution - (480,600)
Principal payments on capital leases (6,300) -
Net cash used by
financing activities (902,000) (656,700)
Net increase (decrease)
in cash and cash
equivalents 5,200 (136,400)
Cash and cash equivalents at beginning of year 531,500 667,900
Cash and cash equivalents at end of year $ 536,700 $ 531,500
</TABLE>
SPECTOR ENTERTAINMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
__________
1. The Company:
Spector Entertainment Group, Inc. (the "Company" or "SEG"), a
wholly-owned subsidiary of Graff Pay-Per-View, Inc. ("Graff")
provides telecommunications services for the broadcast industry
and private satellite networks, video production and management
operations services for the sports and entertainment industry,
and syndicates sports and entertainment programming throughout
North America. These services are marketed either as individual
service offerings or on a combined basis. The Company was
incorporated in 1984 under the laws of the State of California.
2. Merger and Recission with Graff Pay-Per-View, Inc.:
On August 31, 1995, the stockholders of the Company consummated
a merger agreement and plan of reorganization with Graff
Pay-Per-View, Inc. Under this agreement, Graff acquired all of
the issued and outstanding shares of the Company for shares of
common stock in Graff. In addition, certain officers and
stockholders of the Company entered into noncompetition
agreements and employment agreements with Graff. In January
1997, the Company finalized an agreement to split off from
Graff, terminating all affiliation with Graff. All stock will
transfer back to the original owners and all contracts between
the parties will become void at the closing.
3. Significant Accounting Policies:
Revenue Recognition
Revenue is recognized at the time services are performed by the
Company. Most of the Company's revenue is generated under
long-term contracts with remaining terms from 1 to 5 years. The
Company provides services for customer's scheduled events under
these noncancelable contracts for the term of the contract. As
of January 1, 1997, contractual revenue for future periods under
these agreements amounted to approximately $17,500,000.
Cash and Cash Equivalents
The Company considers all highly liquid debt investments with
original maturities of three months or less to be cash
equivalents.
3. Significant Accounting Policies, Continued:
Property and Equipment
Property, plant and equipment, including renewals and
betterments, are recorded at cost. Depreciation is provided
utilizing the straight-line method over the estimated useful
asset lives of 5 to 10 years. Leasehold improvements are
amortized over the shorter of their estimated useful life or the
remaining lease term. Repairs and maintenance are charged to
expense as incurred. Gains or losses from retirements and
dispositions of property and equipment are recognized in the
period incurred. The Company evaluates the carrying value of
its long-lived assets to determine if impairment existed due to
specific conditions known to affect the carrying value of its
assets. The Company determined that no adjustment to asset
values was necessary.
Other Assets
The Company capitalizes certain contract start-up costs,
primarily equipment installation costs, on its long-term
television production and management services contracts and
amortizes such costs over the life of the related contract.
Costs related to obtaining long-term debt are capitalized and
amortized utilizing the interest method over the term of the
related loans. Such amortization is charged to interest.
Income Taxes
The Company records deferred tax assets and liabilities for
differences between the financial statement and tax bases of
assets and liabilities ("temporary differences") at enacted tax
rates in effect for the year in which the differences are
expected to reverse. The effect on deferred taxes of a change
in tax rates is recognized in income in the period that includes
the enactment date. In addition, valuation allowances are
established, when necessary, to reduce deferred tax assets to
the amounts expected to be realized.
The Company and Graff file consolidated federal and state income
tax returns. Income taxes are provided for financial statement
purposes as if the Company was filing separately.
Prior to the merger with Graff, the stockholders of the Company
elected to have the Company taxes pursuant to Subchapter S of
the Internal Revenue Code which provides that, in lieu of
federal corporate income taxes, the stockholders recognize their
proportionate share of the Company's taxable revenue and
deductible expenses on their individual tax returns. For
California state purposes a corporate tax is imposed on S
corporations at the rate of 1.5% of taxable income. Certain
other states impose a corporate tax based upon the Company's
assets and income; these taxes based on taxable income through
the date of the merger with Graff are included in the provision
for income taxes.
Business and Credit Concentrations
The Company invests its cash in federally insured financial
institutions. Such amounts may, from time to time, be in excess
of insured limits.
The Company's customers are not concentrated in any specific
geographic region. During fiscal year 1996, two customers
accounted for 19% of total revenues. During fiscal year 1995,
three separate customers each accounted for 10% of total
revenues. The Company reviews a customer's credit history
before extending credit and establishes an allowance for
doubtful accounts based upon factors surrounding the credit risk
of specific customers, historical trends and other information.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from these estimates.
Reclassification and Restatement
Certain reclassifications have been made to the prior year
financial statements to conform to the current year
presentation. The 1995 financial statements have been restated.
See Note 6.
4. Property and Equipment:
Property and equipment consists of the following:
<TABLE>
1996 1995
<S> <C> <C>
Operating equipment $7,411,500 $6,881,800
Leasehold improvements 220,400 220,400
Office furniture and equipment 326,600 325,300
Automobiles 145,500 145,400
8,104,000 7,572,900
Less accumulated depreciation
and amortization 4,127,400 3,358,500
$3,976,600 $4,214,400
</TABLE>
5. Bank Debt:
Bank debt at December 31, 1996 and 1995 consists of the
following:
<TABLE>
1996 1995
<S> <C> <C>
Bank note payable, net of $50,000 discount, bearing
interest at bank's prime rate plus 2% (8.5% at
December 31, 1996). Principal payments of $62,500
plus interest are due monthly through October
1998. $1,412,500 $2,150,000
Bank note payable bearing interest at bank's prime
rate plus 2% (8.5% at December 31, 1996). Principal
payments of $7,709 plus interest rate due monthly
through July 1999. 238,900 331,400
Bank note payable bearing interest at bank's prime
rate plus 2% (8.5% at December 31, 1996). Principal
payments of $5,476 plus interest rate due monthly
through June 1999. 164,300 230,000
1,815,700 2,711,400
Less current portion 895,700 895,700
$ 920,000 $1,815,700
</TABLE>
Bank debt is collateralized by all of the Company's assets in
1996. Bank debt was guaranteed by Graff in 1996. In
conjunction with the bank notes payable, the Company is
restricted from paying dividends, and is required to meet
certain financial ratios and maintain certain tangible net worth
levels.
The annual principal payments for years ending December 31 are
as follows:
1997 $ 895,700
1998 833,200
1999 86,800
$1,815,700
In conjunction with the bank notes, the Company granted warrants
to the bank to purchase a 1% interest in the Company for
$75,000. These warrants were canceled in 1995. The fair value
of the warrants has been recorded as a debt discount and is
being charged to expense over the debt repayment term.
The Company violated a covenant in September 1996. On March 5,
1997, the Company received a waiver relating to this violation.
6. Income Taxes:
The significant components of the provision for income taxes are:
<TABLE>
1996 1995
<S> <C> <C>
Current:
Federal $ 5,500 $ -
State 4,200 2,400
9,700 2,400
Deferred:
Federal 143,300 345,000
State 35,000 121,100
178,300 466,100
$188,000 $468,500
</TABLE>
Deferred taxes arise primarily from accrual to cash adjustments
and differences in depreciation between the Company's tax return
and the financial statements.
The components of the net deferred tax assets and (liabilities)
at December 31, 1996 and 1995 are as follows:
<TABLE>
1996 1995
Current Noncurrent Current Noncurrent
<S> <C> <C> <C> <C>
Depreciation/amortization $ - $(859,000) $ - $(728,600)
Net operating losses 65,000 - 167,000 -
Other 10,400 55,800 12,100 -
$75,400 $(803,200) $179,100 $(728,600)
</TABLE>
The Company has net operating losses of approximately $175,000
for federal tax purposes and $66,000 for state tax purposes.
Federal net operating losses begin to expire on December 31,
2010, and the state net operating losses begin to expire on
December 31, 2000.
As a result of the Company's election of C-corporation status in
1995, deferred income tax assets and liabilities of $549,500
have been recorded in the 1995 restated balance sheet.
7. Supplemental Disclosures to Statement of Cash Flows:
Cash paid for interest was $260,000 and $309,000 during fiscal
years 1996 and 1995, respectively. Cash paid for income taxes
was $9,000 and $2,400 during fiscal years 1996 and 1995,
respectively.
8. Transactions with Related Parties and Commitments:
Salaries
The Company charged $589,000 of principally salaries and benefits to Graff in
1996 for certain officers who provided services to Graff.
Leases
The Company leases office space from Margate Associates, a
general partnership wholly-owned by the former stockholders of
the Company. The lease which expires May 31, 2003, currently
provides for monthly payments of $18,700.
The total office rent expense for the years ended December 31,
1996 and 1995 was approximately $222,000 and $213,600,
respectively, and was paid to Margate Associates.
The Company leased satelite access from Graff during 1996 for
$1,865,000.
The Company leases certain operating equipment from Sportsat II,
Ltd. ("Sportsat"), a limited partnership wholly-owned by the
president of the Company. The lease expires on December 31,
1999 and the monthly lease payment is $12,500. Total equipment
rent expense was $150,000 for each of the years ended December
31, 1996 and 1995.
Future minimum payments under the office and equipment lease are
as follows:
Year ending December 31,
1997 $ 379,500
1998 387,400
1999 395,200
2000 253,100
2001 261,000
Thereafter 384,700
$2,060,900
Other
During 1996 and 1995, the Company paid expenses of $27,000 and
$39,800, respectively, on behalf of United Transactive Systems,
Inc. ("UTI") (formerly known as Spector Information Systems,
Inc.), a start-up company wholly-owned by certain officers and
former shareholders of the Company. UTI's current operations
are primarily comprised of its joint venture interest in
Faxcast, a joint venture between UTI and Media Technologies
Corporation, Ltd. ("Media Tech"). The entire amount to be paid
by UTI of $165,300 was forgiven in 1996.
During 1994, the Company transferred equipment with a net book
value of $48,000 to Sportsat. On August 30, 1995, the
receivable for the equipment and other advances (totaling
$19,100) were converted to a five year note with interest at 7%
per annum. Payments of $16,400 (including interest) are due
annually beginning on September 1, 1996.
During 1995, the Company incurred expenses of $293,100 on behalf
of Buccaneer Gaming, Inc. ("Buccaneer"), a start-up company
wholly-owned by a former shareholder and officer of the Company.
These expenses were incurred by Buccaneer in conjunction with
pending acquisitions. Buccaneer was to repay these advances when
it was capitalized. The note was guaranteed by a former
shareholder and officer of the Company (the sole shareholder of
Buccaneer). On August 30, 1995, these outstanding advances were
converted to a five year note with interest at 7% per annum.
Payments of $95,300 (including interest) were due annually
beginning on September 1, 1996. The Company forgave amounts due
of $356,200 during 1996.
During 1995, the Company paid expenses of $41,600 on behalf of
American Gaming Network, J.V., a joint venture between Graff and
an unrelated third party (Multimedia Games, Inc.) During 1996,
this amount was forgiven.
<TABLE>
1996 1995
<S> <C> <C>
Due (to) from related parties:
Graff Pay-Per-View $(127,000) $(340,400)
Officers 6,400 -
Margate Associates 7,200 (2,800)
United Transactive Systems, Inc. - 123,700
Sportsat II, Ltd. 56,400 68,800
Buccaneer Gaming, Inc. - 400,000
American gaming Network, J.V. - 41,600
Santa Fe Management - 2,200
</TABLE>
9. Commitments and Contingencies:
The Company leases certain equipment under capital leases with
bargain purchase options. Future minimum payments under these
leases are as follows:
1997 $12,600
1998 12,600
1999 4,900
30,100
Less amount representing interest (7,000)
Present value of minimum lease payments 23,100
Less current portion (9,900)
Capital lease obligation, noncurrent $13,200
At December 31, 1996, assets recorded under capital leases are
summarized as follows:
Equipment $29,700
Accumulated depreciation (4,000)
$25,700
<TABLE>
SPECTOR ENTERTAINMENT GROUP, INC.
BALANCE SHEETS
September 30, 1997 and 1996
(Unaudited)
_________
<CAPTION>
1997 1996
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 166,600 $ 308,600
Accounts receivable, net 436,400 429,600
Prepaid expenses and other
current assets 110,900 162,600
Deferred taxes 160,300 179,100
Total current assets 874,200 1,079,900
Property and equipment, net 4,443,000 4,099,700
Other assets 51,200 103,600
$5,368,400 $5,283,200
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued
liabilities $ 485,400 $ 683,200
Due to related party 46,200 324,400
Current portion of
long-term debt 570,600 905,600
Total current
liabilities 1,102,200 1,913,200
Long-term debt, less
current portion 1,544,100 1,159,600
Deferred taxes 803,200 728,600
Total liabilities 3,449,500 3,801,400
Commitments and contingencies
Stockholder's equity:
Common stock 12,300 12,300
Additional paid-in capital 50,000 50,000
Amounts due from related parties (19,100) (198,100)
Retained earnings 1,875,700 1,617,600
Total
stockholder's
equity 1,918,900 1,481,800
$5,368,400 $5,283,200
</TABLE>
<TABLE>
SPECTOR ENTERTAINMENT GROUP, INC.
STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
___________
<CAPTION>
1997 1996
<S> <C> <C>
Revenues $4,601,000 $5,960,200
Cost of operations 3,158,400 4,275,800
Gross profit 1,442,600 1,684,400
Selling, general and
administrative expenses 1,508,000 1,257,100
Interest expense 153,200 201,900
Other income (5,200) (23,600)
Write-off of related party
receivables - 418,200
Income before
provision for
income taxes (213,400) (169,200)
(Benefit) for income taxes (85,000) (54,800)
Net (loss) $ (128,400) $ (114,400)
</TABLE>
<TABLE>
SPECTOR ENTERTAINMENT GROUP, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
__________
<CAPTION>
Amount
Additional Due From
Common Stock Paid-In Related Retained
Shares Amount Capital Parties Earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1996 100 $12,300 $50,000 $(69,200) $2,004,100 $1,997,200
Related party
receivable - - - 50,100 - 50,100
Net loss - - - - (128,400) (128,400)
Balance at
September 30, 1997 100 $12,300 $50,000 $(19,100) $1,875,700 $1,918,900
</TABLE>
<TABLE>
SPECTOR ENTERTAINMENT GROUP, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
__________
<CAPTION>
1997 1996
<S> <C> <C>
Net cash provided by operating activities $ 389,500 $ 881,200
Cash flows from investing activities:
(Increase) decrease in amounts due
from related parties (50,100) (25,000)
Purchase of property and equipment (1,155,800) (490,800)
Proceeds from sale of property and
equipment 268,500 1,100
Net cash used by investing activities (937,400) (514,700)
Cash flows from financing activities:
Increase (decrease) in payable to
related party (80,800) 59,000
Principal payments of long-term debt (2,223,300) (671,800)
Proceeds from issuance of
long-term debt 2,489,500 -
Proceeds of capital lease - 29,700
Principal payments on capital leases (7,400) (6,300)
Net cash provided (used) by financing
activities 178,000 (589,400)
Net decrease in cash and cash equivalents (369,900) (222,900)
Cash and cash equivalents at beginning
of period 536,500 531,500
Cash and cash equivalents at end of period $ 166,600 $ 308,600
</TABLE>
SPECTOR ENTERTAINMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
__________
1. The Company:
Spector Entertainment Group, Inc. (the "Company" or "SEG")
provides integrated telecommunications, television, production,
and related services to the entertainment, sports, and wagering
industries. The Company's services include mobile satellite and
television production facilities, post-production, closed
circuit television and security systems, satellite leasing, and
program syndication. These services are marketed either as
individual service offerings or on a combined basis. The
Company was incorporated in 1984 under the laws of the State of
California.
2. Merger and Recision with Graff Pay-Per-View, Inc.:
On August 31, 1995, the stockholders of the Company consummated
a merger agreement and plan of reorganization with Graff
Pay-Per-View, Inc. ("Graff"). Under this agreement, Graff
acquired all of the issued and outstanding shares of the Company
for shares of common stock in Graff. In January 1997, the
Company finalized an agreement to split off from Graff,
terminating all affiliation with Graff. All stock was
transfered back to the original owners and all contracts between
the parties became void at the closing.
3. Interim Financial Statements:
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles ("GAAP") have been condensed or
omitted. The results of operations included herein are not
necessarily indicative of the operating results that may be
expected for a full year. In the opinion of management, all
adjustments (consisting of only normal recurring adjustments)
considered necessary for a fair presentation have been included.
These financial statements should be read in conjunction with
the financial statements and notes thereto included in the
Company's December 31, 1996 audited financial statements.
4. Revenue Recognition:
Revenue is recognized at the time services are performed by the
Company. Most of the Company's revenue is generated under
long-term contracts with remaining terms from 1 to 5 years. The
Company provides services for customer's scheduled events under
these noncancelable contracts for the term of the contract. As
of October 1, 1997, contractual revenue for future periods under
these agreements amounted to approximately $19,000,000.
5. Income Taxes:
The Company records deferred tax assets and liabilities for
differences between the financial statement and tax bases of
assets and liabilities ("temporary differences") at enacted tax
rates in effect for the year in which the differences are
expected to reverse. The effect on deferred taxes of a change
in tax rates is recognized in income in the period that includes
the enactment date. In addition, valuation allowances are
established, when necessary, to reduce deferred tax assets to
the amounts expected to be realized.
The Company and Graff filed consolidated federal and state
income tax returns for 1996. Income taxes were provided for
financial statement purposes in 1996 as if the Company was
filing separately. For 1997, the Company was included in
Graff's consolidated income tax returns until January 1997.
6. Property and Equipment:
Property and equipment consists of the following:
1997 1996
Operating equipment $8,563,300 $7,371,600
Leasehold improvements 220,300 220,300
Office furniture and equipment 328,700 325,300
Automobiles 145,500 145,500
9,257,800 8,062,700
Less accumulated
depreciation and
amortization 4,814,800 3,963,000
$4,443,000 $4,099,700
7. Bank Debt:
Bank debt at September 30, 1997 and 1996 consists of the
following:
1997 1996
Bank note payable bearing interest at bank's prime
rate plus 2% (8.5% at December 31, 1997). Principal
payments of $43,596 plus interest are due monthly
through July 2001. Note contains an available line of
credit of $500,000 in which $500,000 was drawn on
August 1, 1997 $2,005,500 $ -
Bank note payable, net of $50,000 discount, bearing
interest at bank's prime rate plus 2% (8.5% at
December 31, 1996). Principal payments of $62,500
plus interest are due monthly through October 1998. - 1,596,900
Bank note payable bearing interest at bank's prime
rate plus 2% (8.5% at December 31, 1996). Principal
payments of $7,709 plus interest rate due monthly
through July 1999. - 262,000
Bank note payable bearing interest at bank's prime
rate plus 2% (8.5% at December 31, 1996). Principal
payments of $5,476 plus interest rate due monthly
through June 1999. - 180,700
Bank note payable bearing interest at bank's prime
plus 2% (8.5% at December 31, 1997). Principal
payments of $3,125 plus interest due monthly through
January 2000 93,600 -
Capital lease obligation 15,600 25,600
2,114,700 2,065,200
Less current portion 570,600 905,600
$1,544,100 $1,159,600
On August 8, 1997, the Company refinanced its outstanding bank
notes into a note payable in the amount of approximately
$2,100,000 and a $500,000 revolving credit agreement. At
September 30, 1997, no amounts were outstanding under the
revolving credit agreement.
Bank debt is collateralized by all of the Company's assets in
1997. In conjunction with the bank note payable, the Company is
restricted from paying dividends, and is required to meet
certain financial ratios and maintain certain tangible net worth
levels.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this current report on Form 8K of
our report dated April 23, 1997 on our audits of the financial
statements of Spector Entertainment Group, Inc. as of December
31, 1996 and 1995, and for the two years in the period ended
December 31, 1996.
/s/Coopers & Lybrand
COOPERS & LYBRAND L.L.P.
San Diego, California
March 31, 1998
<PAGE>
SPECTOR ENTERTAINMENT GROUP, INC. AND
TRIDENT MEDIA GROUP, INC.
INTRODUCTION TO UNAUDITED PRO FORMA
COMBINING FINANCIAL STATEMENTS
__________
Effective January 15, 1998, Spector Entertainment Group, Inc.
("SEG"), a California corporation, Millenium Entertainment
Group, Inc. ("Millenium"), a California corporation and the sole
stockholder of SEG, and Trident Media Group, Inc. ("Trident"),
a Nevada corporation, entered into an Agreement and Plan of
Merger (the "Agreement").
Trident was an inactive public company that has been dormant
since 1988. Trident has been exploring business opportunities
in an attempt to enter into a transaction with a company where
the controlling interest in Trident would be acquired by the
successor company.
Pursuant to the Agreement, all of the outstanding shares of SEG
were exchanged for 4,500,000 shares of validly issued, fully
paid and non-assessable common stock of Trident (approximately
90% of the issued and outstanding shares of Trident).
For accounting purposes, this transaction has been recorded as
if SEG acquired Trident, a reverse acquisition. Subsequent to
the business combination, the current Board of Directors of SEG
will control a majority of the common stock of Trident. As a
result of the large number of shares being issued in connection
with the transaction, the fact that the shares represent
unregistered securities, and the market for the securities is
thin, the fair value of Trident's net assets, which approximates
cost, was used to determine the value of the shares exchanged.
The attached unaudited pro forma condensed balance sheet as of
September 30, 1997 and the condensed statements of operations
for the nine months then ended and the year ended December 31,
1996 give effect to the Agreement. The pro forma combining
statements of operations assume that the transaction took place
as of the beginning of the period presented.
The pro forma combining financial information is presented for
illustrative purposes only and is not necessarily indicative of
the operating results that would have occurred had the
transaction been consummated at the beginning of the period
presented, nor is it necessarily indicative of future operating
results.
The pro forma combining financial information should be read in
conjunction with the historical financial statements and the
related notes thereto of SEG, included herein, and the
historical financial statements and related notes thereto of
Trident, included in Trident's annual report filed on Form
10-KSB as of and for the year ended December 31, 1996 and the
interim financial statements filed on Form 10-QSB for the
periods ended March 31, 1997, June 30, 1997 and September 30,
1997.
<PAGE>
<TABLE>
SPECTOR ENTERTAINMENT GROUP, INC. AND
TRIDENT MEDIA GROUP, INC.
PRO FORMA COMBINING BALANCE SHEET (UNAUDITED)
September 30, 1997
__________
Spector
Entertainment Pro Forma
Group, Inc. Trident Adjustments Combined
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 166,600 $ - $ - $ 166,600
Accounts receivable, net 436,400 - - 436,400
Prepaid expenses and other 110,900 - - 110,900
Deferred taxes 160,300 - - 160,300
Total current assets 874,200 - - 874,200
Net fixed assets 4,443,000 - - 4,443,000
Other assets 51,200 - - 51,200
Total non-current assets 4,494,200 - - 4,494,200
Total assets $5,368,400 $ - $ - $5,368,400
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accrueds and accounts
payable $ 485,400 $ 15,900 $(15,900)(3)$485,400
Due to affiliates and
related parties 46,200 4,400 75,000 (3) 121,200
(4,400)(3)
Current portion of debt 560,700 - - 560,700
Current portion of capital
lease 9,900 - - 9,900
Total current
liabilities 1,102,200 20,300 54,700 1,177,200
Long-term debt 1,538,400 - - 1,538,400
Long-term capital lease 5,700 - - 5,700
Deferred income taxes 803,200 - - 803,200
Total
liabilities 3,449,500 20,300 54,700 3,524,500
Stockholder's equity:
Capital stock 12,300 1,500 (12,300)(2) 5,000
3,500 (1)
Additional paid in capital 50,000 201,400 (223,200)(2) (17,700)
12,300 (2)
(3,500)(1)
(54,700)(3)
Due from Related Parties (19,100) (19,100)
Retained earnings (accumulated
deficit) 1,875,700 (223,200) 223,200(2) 1,875,700
Total
stockholder's
equity 1,918,900 (20,300) (54,700) 1,843,900
Total
liabilities and
stockholder's
equity $5,368,400 $ - $ - $5,368,400
</TABLE>
(1)In connection with the transaction, Trident issued 4,500,000 shares
to Spector. Simultaneously, Trident canceled 1,000,000 shares issued as
compensation.
(2)The accumulated deficit of Trident of $223,200 was eliminated against
additional paid-in capital. All common stock of SEG will be eliminated.
(3)In connection with the transaction, a retiring officer of Trident and
canceled all debt owing himself by Trident in exchange for a $75,000 debenture
due one year from closing and accruing interest at 7% per year.
<TABLE>
SPECTOR ENTERTAINMENT GROUP, INC. AND
TRIDENT MEDIA GROUP, INC.
PRO FORMA COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
For the Nine Months Ended September 30, 1997
__________
Spector
Entertainment Pro Forma
Group, Inc. Trident Adjustments Combined
<S> <C> <C> <C> <C>
Revenue $4,601,000 $ - $ - $4,601,000
Operating expenses 3,158,400 - - 3,158,400
Gross profit 1,442,600 - - 1,442,600
SG&A 1,508,000 6,500 54,700(3) 1,569,200
Interest expense 153,200 - - 153,200
Other expense (5,200) - - (5,200)
Loss before taxes (213,400) (6,500) (54,700) (274,600)
Provision for income
taxes (85,000) - - (85,000)
Net loss $ (128,400) $(6,500) $ (54,700)(3) $(189,600)
</TABLE>
<TABLE>
SPECTOR ENTERTAINMENT GROUP, INC. AND
TRIDENT MEDIA GROUP, INC.
PRO FORMA COMBINING STATEMENT OF OPERATIONS (UNAUDITED)
For the Year Ended December 31, 1996
__________
<CAPTION>
Spector
Entertainment Pro Forma
Group, Inc. Trident Adjustments Combined
<S> <C> <C> <C> <C>
Revenue $7,885,900 $ - $ - $7,885,900
Operating expenses 5,504,100 - - 5,504,100
Gross profit 2,381,800 - - 2,381,800
SG&A 1,131,400 2,700 54,700(3) 1,188,800
Interest expense 257,200 - - 257,200
Write-off of related
party receivables 563,100 - - 563,100
Other expense (30,000) - - (30,000)
Income (loss)
before taxes 460,100 (2,700) (54,700) 402,700
Provision for income
taxes 188,000 - - 188,000
Net income (loss) $272,100 $(2,700) $ (54,700)(3) $ 214,700
</TABLE>
