SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 2-98074-NY
Trident Media Group, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 11-2751536
(State or other jurisdiction of incorporation or (I.R.S. Employer
organization) Identification No.)
6349 Palomar Oaks Court, Carlsbad, CA 92009
(Address of principal executive offices)
(760) 438-9080
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to filing requirements for the past 90 days.
Yes X No
Number of shares outstanding of Issuer's Common Stock as of April 30,
1998: 5,000,152
PART I
ITEM 1: FINANCIAL STATEMENTS
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TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<CAPTION>
March 31, 1998
<S> <C>
Assets
Current assets:
Cash and cash equivalents $316,700
Accounts receivable, net of allowance
for doubtful accounts of $184,500 449,300
Other current assets 581,100
Total current assets 1,347,100
Property and equipment, net 3,779,900
Other assets 159,900
$5,286,900
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 341,400
Current portion of bank debt 948,900
Other current liabilities 113,400
Total current liabilities 1,403,700
Bank debt, less current portion 1,412,000
Deferred taxes 838,900
Total liabilities 3,654,600
Stockholder's equity:
Common stock, $.01 par value, 100,000,000
shares authorized, 5,000,152 shares issued
and outstanding 5,000
Retained earnings 1,627,300
Total stockholder's equity 1,632,300
$5,286,900
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<TABLE>
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended
March 31, March 31,
1998 1997
<S> <C> <C>
Revenues $1,022,000 $ -
Operating costs and expenses:
Cost of operations 839,500 -
Selling, general and
administrative 483,600 600
Depreciation and amortization 244,100 -
Total operating costs
and expenses 1,567,200 600
Loss from operations (545,200) (600)
Interest expense 60,600 -
Loss before taxes (605,800) (600)
Income tax benefit 242,300 -
Net loss $(363,500) $ (600)
Net (loss) per share Basic $ (0.08) $ -
- Diluted $ (0.08) $ -
Weighted average number of shares
outstanding 4,416,819 1,500,152
</TABLE>
<TABLE>
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
CONSOLIDATED CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 31, March 31,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(363,500) $ (600)
Adjustment to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 244,100 -
Increase (decrease) in cash
resulting from changes in:
Current assets 21,500 -
Current liabilities 313,500 600
Net cash provided by
operating activities 215,600 -
Cash flows from investing activities:
Increase in amounts due from
related parties 8,800 -
Purchase of property and equipment (13,300) -
Net cash used by
investing activities (4,500) -
Cash flows from financing activities:
Principal payments on bank debt (141,900) -
Proceeds from bank borrowings 250,000 -
Principal payments on capital leases (2,500) -
Net cash provided (used)
by financing activities 105,600 -
Net increase (decrease in
cash and cash equivalents 316,700 -
Cash and cash equivalents at beginning of
period - -
Cash and cash equivalents at end of
period $316,700 $ -
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TRIDENT MEDIA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Business Acquisition:
On January 15, 1998, Spector Entertainment Group, Inc. ("SEG"), Millenium
Entertainment Group, Inc. ("Millenium"),a California corporation and the sole
stockholder of SEG, and Trident Media Group, Inc. ("the Company" or
"Trident"), an inactive public company that had been dormant since 1988,
completed an Agreement and Plan of Merger (the "Agreement").
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 was recorded as if SEG acquired
Trident, a reverse acquisition. Subsequent to the business combination, the
Board of Directors and shareholders of Millenium controlled 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 determined the value of the shares exchanged.
Supplemental Proforma Results of Operations
The following unaudited proforma information presents the consolidated
results of operations as if the purchase had occurred at the beginning of the
periods presented and does not purport to be indicative of what would have
occurred had the acquisition actually been made as of such date or of results
which may occur in the future.
Three Months Ended
March 31, March 31,
1998 1997
[S] [C] [C]
Revenue $ 1,022,000 $ 862,000
Loss from operations (545,200) (448,200)
Net loss (363,500) (265,300)
Loss per share (0.08) (0.06)
2. The Company:
Trident, a Nevada corporation formed in 1984, through its wholly-owned
subsidiary SEG, 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. <PAGE>
3. Significant Accounting Policies:
Interim Financial Statements
Certain information and footnotes 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.
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 one to five years. The Company provides services for
customers' scheduled events under these non-cancelable contracts for the term
of the contract.
Cash and Cash Equivalents
The Company considers all highly liquid debt investments with original
maturities of three months or less to be cash equivalents.
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. 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.
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.
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. 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.
4. Loss per Share
The computation of basic loss per share of common stock is based on the
weighted average number of shares outstanding during the period presented.
Options and warrants to purchase common stock of 590,000 and 100,000,
respectively are outstanding at March 31, 1998, but were not included in the
computation of diluted loss per share because their effect was antidilutive.
5. Property and Equipment:
Property and equipment at March 31, 1998, consists of the following:
Operating equipment $8,326,800
Leasehold improvements 220,400
Office furniture and equipment 332,400
Automobiles 145,500
9,025,100
Less accumulated depreciation and
amortization (5,245,200)
$ 3,779,900
6. Bank Debt:
Bank debt at March 31, 1998, consists of the following:
Bank note payable bearing interest at bank's prime rate
plus 2% (8.5% at March 31, 1998). Principal payments
of $43,596 plus interest due monthly through July 2001. $1,743,900
Bank revolving note of $500,000 bearing interest at
bank's prime rate plus 2%. Interest payments due
monthly through July 1998. Outstanding balance shall
be $-0- for a minimum of 30 consecutive days during
the stated term of the note. 300,000
Bank note payable bearing interest at bank's prime rate
plus 2%. Principal payments of $7,353 plus interest
due monthly through February 2001. 250,000
Bank note payable bearing interest at bank's prime rate
plus 2%. Principal payments of $3,125 plus interest due
monthly through January 2000. 67,000
2,360,900
Less current portion (948,900)
$1,412,000
Bank debt is collateralized by all of the Company's assets and is
personally guaranteed by the Company's principal stockholders. 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.
7. Warrants and Options:
Warrants
In connection with the acquisition of SEG, the Company issued warrants
to purchase 80,000 shares of common stock to a former officer of the Company
and warrants to purchase 20,000 shares of common stock to the Company's legal
counsel. The exercise price of the warrants will be determined in the future
and will be equal to 125% of the opening bid price on the NASDAQ Small Cap
Exchange if the stock is listed on the exchange within twelve months or else
will be 125% of the average bid price of the stock as listed on the OTC
Bulletin Board for the period of thirty days immediately prior to the one
year anniversary date. The warrants are exercisable for a period of two years
from the date the exercise price is determined.
Options
The Company has formed an Employee Stock Option Plan for eligible
officers, employees and consultants of the Company or any of its subsidiaries.
Under the term of the Plan options may not be issued for less than 100% of the
fair market value of the Company's common stock on the date of grant. As of
March 31, 1998, no options have been granted under this Plan.
On February 27, 1998, outside the aforementioned Plan, the Company
granted 590,000 options to acquire the Company's common stock at $0.125 per
share to certain officers of the Company.
8. Transactions with Related Parties:
Leases
The Company leases office space from Margate Associates, a general
partnership wholly-owned by certain stockholders of the Company. The lease,
which expires May 31, 2003, currently provides for monthly payments of
$23,400.
The total office rent expense for the period ended March 31, 1998, was
approximately $70,200 and was paid to Margate Associates.
9. Subsequent Event:
On April 1, 1998, the Company completed the acquisition of Steinley's
Photochart Systems, Inc. ("Steinley's) for $250,000 in cash. In addition, the
former owners of Steinley's can earn an additional $250,000 based on achieving
certain revenue and earnings targets over the next two years. Steinley's which
has annual sales of approximately $400,000, is a provider of audio-video and
photo finish services to the pari-mutuel racing industry.
ITEM 2: MANAGEMENT DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS OF OPERATIONS
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
This report contains forward-looking statements that involve a number of risks
and uncertainties. In addition to the factors discussed elsewhere in this
report, among the other factors that could cause actual results to differ
materially are the following: business conditions and the general economy;
governmental regulation of the Company's telecommunications services and of
the pari-mutuel and gaming industries in general; competitive factors such as
rival service providers and alternative methods of broadcasting; consolidation
in the ownership of the Company's principal customers and the risks associated
with providing services to the gaming industry.
Plan of Operation
Since the merger with SEG (see Note 1), the Company has been primarily
operating as a provider of integrated telecommunications, television
production and related services to the entertainment, sports, and wagering
industries. The Company's services include use and or provision of mobile
satellite and television production facilities, post production
services, closed circuit television and security systems, satellite leasing
and program syndication. The Company's plan of operation over the next twelve
(12) months is to continue to seek expansion opportunities in its core
business with existing clientele, as well as develop new clients to maximize
utilization of the Company's existing facilities and services.
The Company has not and does not project for the future any research and
development efforts, any material purchase or sale of equipment or any
significant increase or decrease in the number of employees used to provide
its services.
Results of Operations
For the three months ended March 31, 1998, the Company reported a net loss of
$363,500. The first calendar quarter of the year historically shows a net
loss due to the cyclical nature of SEG's business activities. The majority of
the Company's current services are provided to customers in the pari-mutuel
wagering industry with racing schedules heavily weighted to the spring and
summers months.
Liquidity
At March 31, 1998, the Company had current assets of $1,347,000 and current
liabilities of $1,403,000. At March 31, 1998, $200,000 was available under a
revolving line of credit from the Company's senior lender.
During the next twelve (12) months the Company's foreseeable cash requirements
include capital expenditures to support its core business, repairs and
maintenance of its equipment and facilities, and new equipment and facilities
to support corporate growth. The Company believes that is current cash flow
and its relationship with its lending institutions will be sufficient to
support these cash requirements.
<PAGE>
PART II OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
NONE
ITEM 6: EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits -
Exhibit 27.00 Financial Data Schedule
(a) Reports on Form 8K
The Company filed a Form 8-K on January 20, 1998, reporting the
merger between the Company and Spector Entertainment Group, Inc.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TRIDENT MEDIA GROUP, INC.
Dated: May 15, 1998 By:/s/ Edward M. Spector
President and Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 316700
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<RECEIVABLES> 633800
<ALLOWANCES> 184500
<INVENTORY> 0
<CURRENT-ASSETS> 1347100
<PP&E> 9025100
<DEPRECIATION> 5245200
<TOTAL-ASSETS> 5286900
<CURRENT-LIABILITIES> 1403700
<BONDS> 1412000
0
0
<COMMON> 5000
<OTHER-SE> 1627300
<TOTAL-LIABILITY-AND-EQUITY> 5268900
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<TOTAL-REVENUES> 102200
<CGS> 0
<TOTAL-COSTS> 839500
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<INTEREST-EXPENSE> 60600
<INCOME-PRETAX> (605800)
<INCOME-TAX> (242300)
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<CHANGES> 0
<NET-INCOME> (363500)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
