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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 September 30, 2000
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.
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(Exact name of small business issuer as specified in its charter)
Nevada 11-2751536
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6349 Palomar Oaks Court, Carlsbad, CA 92009
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(Address of principal executive offices)
(760) 438-9080
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(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 October 31,
2000: 20,000,608
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PART 1
ITEM 1: FINANCIAL STATEMENTS
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
September 30,
2000
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<S> <C>
ASSETS
Current assets:
Cash and cash equivalents ...................................... $327,100
Accounts receivable, net of allowance for doubtful accounts
of $32,300 .................................................. 426,000
Deferred taxes ................................................. 384,500
Prepaid expenses and other current assets ...................... 302,900
--------
Total current assets ................................. 1,440,500
Property and equipment, net ...................................... 2,428,000
Other assets ..................................................... 297,800
----------
$4,166,300
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities .................... $794,700
Current portion of bank debt ................................ 510,500
Deferred income ............................................. 30,000
Other current liabilities ................................... 124,500
----------
Total current liabilities ............................ 1,459,700
Bank debt, less current portion .................................. 470,000
Payable to majority stockholder .................................. 300,000
Deferred taxes ................................................... 690,500
Other liabilities ................................................ 26,700
----------
Total liabilities .................................... 2,946,900
----------
Stockholders' equity:
Common stock, $.001 par value, 100,000,000 shares authorized,
20,000,608 shares issued and outstanding ................. 20,000
Paid in capital ............................................. 35,000
Retained earnings ........................................... 1,164,400
----------
Total stockholders' equity ........................... 1,219,400
----------
$4,166,300
==========
</TABLE>
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------------- -----------------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues ........................................... $ 2,291,900 $ 3,093,000 $ 5,922,900 $ 7,348,400
------------ ------------ ------------ ------------
Operating costs and expenses:
Cost of operations ............................ 1,495,500 1,625,400 3,811,700 4,281,900
Selling, general and administrative ........... 509,700 641,400 1,740,200 1,840,300
Depreciation and amortization ................. 237,500 287,500 814,300 902,800
------------ ------------ ------------ ------------
Total operating costs and expenses ... 2,242,700 2,554,300 6,366,200 7,025,000
------------ ------------ ------------ ------------
Income (loss) from operations ........ 49,200 538,700 (443,300) 323,400
Gain on sale of assets ............................. -- -- 712,400 --
Interest expense ................................... 41,900 83,200 190,400 239,900
------------ ------------ ------------ ------------
Income before taxes .................. 7,300 455,500 78,700 83,500
Income tax expense ................................. 1,600 141,100 26,600 7,700
------------ ------------ ------------ ------------
Net income ......................................... $ 5,700 $ 314,400 $ 52,100 $ 75,800
============ ============ ============ ============
Net income per share - Basic ....................... $ 0.00 $ 0.02 $ 0.00 $ 0.00
============ ============ ============ ============
- Diluted ..................... $ 0.00 $ 0.01 $ 0.00 $ 0.00
============ ============ ============ ============
Weighted average number of shares outstanding
- Basic....................... 20,000,608 20,000,608 20,000,608 20,000,608
============ ============ ============ ============
- Diluted ...................... 21,672,962 21,680,608 21,995,213 22,123,816
============ ============ ============ ============
</TABLE>
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
CONSOLIDATED CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
Sept. 30, Sept.30, Sept.30, Sep.30,
2000 1999 2000 1999
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Cash Flows from operating activities:
Net income (loss) ................................... $ 5,700 $ 314,400 $ 52,100 $ 75,800
--------- --------- ----------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ...................... 237,500 287,400 814,300 902,700
(Gain) loss on sale of assets ...................... 10,800 24,600 (707,900) 24,600
Increase (decrease) in cash resulting from
changes in:
Accounts receivable .............................. 313,900 219,000 73,700 (36,100)
Prepaid expenses and other assets ................ (87,600) 36,700 (179,300) (22,300)
Accounts payable and accrued liabilities.......... (42,900) (313,500) 353,800 (365,100)
Taxes payable .................................... -- -- 18,700 (20,500)
--------- --------- ----------- ---------
Net cash provided by operating
activities .................................... 437,400 568,600 425,400 559,100
--------- --------- ----------- ---------
Cash flows from investing activities:
Change in amounts due from related parties (15,300) (12,800) (17,600) (28,700)
Purchase of Steinley's Photochart, Systems, Inc. .... -- (24,300) (91,200) (40,800)
Proceeds from sale of assets ........................ -- -- 1,600,000 --
Purchase of property and equipment .................. (121,500) (15,400) (519,600) (470,700)
--------- --------- ----------- ---------
Net cash provided (used) by investing
activities .................................... (136,800) (52,500) 971,600 (540,200)
--------- --------- ----------- ---------
Cash flows from financing activities:
Advances (payments) from (to) majority
shareholder ................................... -- (105,000) -- 455,000
Debenture payment to former shareholder ............. -- -- -- (75,000)
Borrowings (payments) from revolving
credit agreement, net ......................... (144,800) -- 2,600 --
Principal payments on bank debt ..................... (70,000) (264,600) (1,415,000) (407,900)
Other ............................................... 15,300 38,200 (3,900) 42,200
--------- --------- ----------- ---------
Net cash provided (used) by financing
activities .................................... (199,500) (331,400) (1,416,300) 14,300
--------- --------- ----------- ---------
Net increase (decrease) in cash and
cash equivalents .............................. 101,100 184,700 (19,300) 33,200
Cash and cash equivalents at beginning of period ....... 226,000 383,300 346,400 534,800
--------- --------- ----------- --------
Cash and cash equivalents at end of period $ 327,100 $ 568,000 $ 327,100 $ 568,000
========= ========= ========= =========
</TABLE>
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
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1. THE COMPANY
Trident Media Group, Inc. ("Trident" or the "Company"), a Nevada
Corporation, through its wholly-owned subsidiaries, provides services for
the broadcast industry and private satellite networks, video production and
management operations services for the sports and entertainment industries,
throughout North America and provides telecommunications products and
services through the sale of prepaid phone cards.
2. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
financial statements for Trident contain all adjustments (consisting of
only normal recurring adjustments and accruals) necessary to present fairly
the consolidated financial position as of September 30, 2000, and the
consolidated results of operations and cash flows for the nine and three
months ended September 30, 2000 and 1999. All significant intercompany
transactions have been eliminated.
3. INTERIM FINANCIAL STATEMENTS
Certain information and footnote disclosures normally included in the
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 to be expected for the full year. These consolidated
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1999.
4. EARNINGS PER SHARE
The computation of basic earnings per share of common stock is based on the
weighted average number of shares outstanding for the periods ended
September 30, 2000, and September 30, 1999. Options and warrants to
purchase common stock of 3,163,928 and 400,000, respectively, are
outstanding at September 30, 2000.
The following tables represent the required disclosure of the basic and
diluted earnings per share computation for the nine and three months ended
September 30, 2000 and 1999.
<TABLE>
<CAPTION>
Nine months ended September 30,
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2000 1999
------------------------------------------------ ----------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------- ---------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
----------
Net Income (loss) ........ $ 52,100 20,000,608 $ 0.00 $ 75,800 20,000,608 $ 0.00
========
Effect of Dilutive
Securities
Securities Assumed
Converted
Options ........ 2,742,964 2,360,000
Warrants ....... 400,000
Less Securities Assumed
Repurchased ........... (748,359) (636,792)
----------- ----------- -------- ----------- ---------- --------
Diluted EPS .............. $ 52,100 21,995,213 $ 0.00 $ 75,800 22,123,816 $ 0.00
=========== ========== ======== =========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
Three months ended September 30,
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2000 1999
--------------------------------------- ---------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ----------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS
---------
Net Income ................. $ 5,700 20,000,608 $ 0.00 $ 314,400 20,000,608 $ 0.02
======== ========
Effect of Dilutive
Securities
Securities Assumed
Converted
Options ...... 2,360,000 2,360,000
Warrants ..... -- 400,000
Less Securities Assumed
Repurchased ............. (687,646) (1,080,000)
----------- ----------- -------- ----------- ----------- --------
Diluted EPS ................ $ 5,700 21,672,962 $ 0.00 $ 314,400 21,680,608 $ 0.01
=========== =========== ======== =========== =========== ========
</TABLE>
5. DISCLOSURE OF SEGMENT INFORMATION
The Company has the following two reportable segments: Network Services
Group and Telecommunications Services. Network Services Group provides
simulcasting, television production, advertising and related services
primarily to racetracks, casinos and off-track betting locations. The
Telecommunications Services Group offers long distance phone services
primarily through the sale to consumers of enhanced prepaid phone cards
distributed through company owned electronic dispensing units and retail
sales.
The Company manages segment reporting at a gross profit level. Selling,
general and administrative expenses (including, corporate functions,
recruiting and marketing) are managed at the corporate level separately
from the segments.
The following information about the segments is for nine and three month
periods ended September 30, 2000 and 1999 (000's).
<TABLE>
<CAPTION>
Nine Months Ended September 30,
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2000 1999
------------------------------------------- -----------------------------------------
Network Telecommu- Network Telecommu-
Services nication Services nication
Group Services Total Group Services Total
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues ....................... $ 4,374 $ 1,549 $ 5,923 $ 6,331 $ 1,017 $ 7,348
Cost of Operations ............. 2,760 1,052 3,812 3,651 631 4,282
Depreciation and
Amortization ................. 738 76 814 844 59 903
------- ------- ------- ------- ------- -------
Gross Profit ................... $ 876 $ 421 1,297 $ 1,836 $ 327 2,163
======= ======= ======= =======
Selling, General &
Administrative ............... 1,740 1,840
----- -------
Income (loss) from Operations .. $ (443) $ 323
======= =======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended September 30,
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2000 1999
------------------------------------------- -----------------------------------------
Network Telecommu- Network Telecommu-
Services nication Services nication
Group Services Total Group Services Total
------------- ------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues ........................ $1,516 $ 776 $2,292 $2,681 $ 412 $3,093
Cost of Operations .............. 964 532 1,496 1,388 237 1,625
Depreciation and
Amortization .................. 206 31 237 269 19 288
------ ------ ------ ------ ------ ------
Gross Profit .................... $ 346 $ 213 559 $1,024 $ 156 1,180
====== ====== ====== ======
Selling, General &
Administrative ................ 510 641
------ ------
Income from Operations .......... $ 49 $ 539
====== ======
Identifiable Assets ............. $3,521 $ 645 $4,166 $5,720 $ 470 $6,190
====== ====== ====== ====== ====== ======
</TABLE>
6. SALE OF ASSETS
On May 7, 2000, the Company consummated an agreement with a major customer
to sell certain assets and to assign to the customer all television
production contracts between the Company and the customer for a cash
purchase price of $1.6 million. The majority of the proceeds were used to
pay down the Company's bank debt and a pretax gain of approximately
$712,000 was recorded on the transaction.
7. STOCK SPLIT
On May 30, 2000, the Company effected a four-for-one split of its common
stock.
ITEM 2: MANAGEMENT'S DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS OF OPERATIONS
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
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The following discussion of the financial condition and operating results of
Trident should be read in conjunction with Trident's Financial Statements and
notes thereto, and other financial information included elsewhere in this
report. 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, alternative methods of broadcasting and an increasing variety
of telecommunication products being offered to the general public; consolidation
in the ownership of the Company's principal customers and the risks associated
with providing services to the gaming industry.
RESULTS OF OPERATIONS
The Company reported net income of $52,100 for the nine months ended September
30, 2000, as compared to net income of $75,800 for the same period of 1999. For
the three months ended September 30, 2000, the Company reported net income of
$5,700 as compared to net income of $314,400 for the same period of the prior
year. On May 7, 2000, the Company completed a sale (which resulted in a pretax
gain of approximately $712,000) of certain assets to a major customer. The first
calendar quarter of the year historically shows a net loss, primarily due to the
cyclical nature of the Company's core 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 late spring and summer
months.
Revenues
--------
The Company reported revenues of $5.9 million and $2.3 million for the
nine and three months ended September 30, 2000, respectively, as compared to
$7.3 million and $3.1 million for the same periods in 1999. The decrease in
revenues of $1.4 million from 1999 to 2000 for the nine month period ended
September 30 was caused by: 1) a decrease in revenues from TV Production
activities of approximately $0.7 million (primarily as a result of the sale of
certain contracts to a major customer in May of 2000) and 2) a decrease in
revenues of approximately $1.1 million from the Company's
Communications/Broadcast activities due to the non-renewal of certain contracts.
Higher revenues of approximately $0.5 million directly related to the Company's
prepaid telephone calling card business offset these decreases.
Cost of Operations
------------------
Cost of operations amounted to $3.8 million and $1.5 million
for the nine and three months ended September 30, 2000, respectively, as
compared to $4.3 million and $1.6 million for the same periods of the prior
year. The decrease of $0.5 million from 1999 to 2000 for the nine months ended
September 30 primarily relates to lower costs incurred for satellite time. In
1999, the Company leased a full-time transponder at a cost of $135,000 per month
versus only paying for actual satellite time incurred in 2000.
Selling, General and Administrative Expenses
-----------------------------------------------
The Company reported selling,general and administrative expenses of $1.7 million
and $0.5 million for the nine and three months ended September 30, 2000,
respectively, as compared to $1.8 million and $0.6 million for the same periods
of 1999. The decrease of approximately $0.1 million is primarily due to the
recording of a favorable settlement of a contract dispute with a former
customer.
Depreciation and Amortization
-------------------------------
Primarily as a result of the sale of assets discussed above depreciation and
amortization for the nine and three months ended September 30, 2000 have
decreased by approximately $89,000 and $50,000, respectively, as compared to the
same periods of the prior year.
Interest Expense
----------------
Interest expense decreased approximately $50,000 from 1999 to 2000 primarily as
a result of the payoff of approximately $1.2 million in bank debt with the
proceeds from the sale of certain assets and contracts discussed above.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's primarily business of providing services to the pari-mutuel gaming
industry is subject to concentrations of risk. The Company derives a significant
portion of its revenues (approximately 25% in fiscal year 1999) from three
racetrack operators. The loss of one or more of these customers could have a
material adverse impact on the Company's operating results.
LIQUIDITY AND CAPITAL RESOURCES
The Company had current assets of $1.4 million and current liabilities of $1.4
million as of September 30, 2000. Stockholders' equity was approximately $1.2
million at December 31, 1999 and September 30, 2000.
At September 30, 2000, the Company had a credit facility with its principal
lender consisting of a term loan of $750,000 and a revolving line of credit
based on accounts receivable balances of $1.0 million (of which $230,000 was
drawn down at September 30, 2000). The lending agreement requires the Company to
meet certain financial ratios and maintain certain tangible net worth levels.
Based on its current operating performance and prior experience the Company
believes that its current credit facilities are sufficient to meet its immediate
needs.
During the next twelve 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 to support
corporate growth. In addition, the Company operates primarily under long-term
non-cancelable contracts with major establishments in the sports and wagering
industries, which provides a reliable and predictable revenue stream. During the
first three or four months of the calendar year the Company historically shows
negative cash flow due to the cyclical nature of the Network Services Group's
business activities.
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
In August of 2000, Trident Prepaid, Inc., (a wholly owned subsidiary
of Trident) filed an action in District Court in Clark County, Nevada,
against Phonechip.com, et al alleging, among other charges, that
defendants misappropriated trade secrets. The suit seeks unspecified
damages and equitable relief. Management believes that substantial
evidence exists to prevail in its claims.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits -
Exhibit 27.00 - Financial Data Schedule
(b) Reports on Form 8-K - None
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: November 14, 2000 By: /s/Harlyn C. Enholm
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Executive Vice President and
Chief Financial Officer
