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 June 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.
(Exact name of small business issuer as specified in its charter)
Nevada 11-2751536
(State or other jurisdiction of (I.R.S. Employer
incorporation or 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 July 31, 2000:
20,000,608
PART 1
<TABLE>
ITEM 1: FINANCIAL STATEMENTS
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<CAPTION>
June 30,
2000
-----------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 226,000
Accounts receivable, net of allowance
for doubtful accounts of $51,200 739,900
Deferred taxes 384,500
Prepaid expenses and other current assets 217,500
----------
Total current assets 1,567,900
Property and equipment, net 2,530,200
Other assets 304,800
---------
$ 4,402,900
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 743,700
Current portion of bank debt 655,000
Deferred income 70,000
Other current liabilities 175,400
-----------
Total current liabilities 1,644,100
Bank debt, less current portion 540,000
Payable to majority stockholder 300,000
Deferred taxes 690,500
Other liabilities 14,600
----------
Total liabilities 3,189,200
----------
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 1,158,700
----------
Total stockholders' equity 1,213,700
----------
$ 4,402,900
===========
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<TABLE>
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $2,294,200 $2,901,100 $3,631,000 $4,255,400
---------- ---------- ---------- ----------
Operating costs and expenses:
Cost of operations 1,416,100 1,513,900 2,316,200 2,656,500
Selling, general and administrative 579,700 586,100 1,230,500 1,198,900
Depreciation and amortization 286,200 307,800 576,800 615,300
---------- ---------- ---------- ----------
Total operating costs and expenses 2,282,000 2,407,800 4,123,500 4,470,700
---------- ---------- ---------- ----------
Income (loss) from operations 12,200 493,300 (492,500) (215,300)
Gain on sale of assets 712,400 - 712,400 -
Interest expense 65,200 85,100 148,500 156,700
---------- ---------- ---------- ----------
Income (loss) before taxes 659,400 408,200 71,400 (372,000)
Income tax expense (benefit) 231,100 146,600 25,000 (133,400)
---------- ---------- ---------- ----------
Net income (loss) $ 428,300 $ 261,600 $ 46,400 $ (238,600)
========== ========== ========== ==========
Net income (loss) per share - Basic $ 0.02 $ 0.01 $ 0.00 $ (0.01)
========== ========== ========== ==========
- Diluted $ 0.02 $ 0.01 $ 0.00 $ (0.01)
========== ========== ========== ==========
Weighted average number of shares
outstanding
- Basic 20,000,608 20,000,608 20,000,608 20,000,608
========== ========== ========== ==========
- Diluted 22,101,479 22,123,816 22,134,559 20,000,608
========== ========== ========== ==========
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<TABLE>
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
CONSOLIDATED CASH FLOW
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 428,300 $ 261,600 $ 46,400 $ (238,600)
Adjustments to reconcile net income
to net cash
provided by operating activities:
Depreciation and amortization 286,200 307,800 576,800 615,300
(Gain) loss on sale of assets (712,400) - (718,700) -
Increase (decrease) in cash
resulting changes in:
Accounts receivable (389,900) (545,100) (240,200) (255,100)
Prepaid expenses and
other assets 147,900 151,200 (91,700) (59,000)
Accounts payable and
accrued liabilities 173,500 195,900 396,700 (68,100)
Taxes payable 25,300 - 18,700 (20,500)
---------- ---------- ---------- ----------
Net cash provided (used)
by operating activities (41,100) 371,400 (12,000) (26,000)
---------- ---------- ---------- ----------
Cash flows from investing activities:
Change in amounts due
from related parties 3,200 (1,300) (2,300) (15,900)
Purchase of Steinley's Photochart,
Systems, Inc. (91,200) - (91,200) -
Proceeds from sale of assets 1,600,000 - 1,600,000 -
Purchase of property and equipment (256,600) (298,400) (398,100) (455,300)
---------- ---------- ---------- ----------
Net cash provided (used)
by investing activities 1,255,400 (299,700) 1,108,400 (471,200)
---------- ---------- ---------- ----------
Cash flows from financing activities:
Advances from majority shareholder - 240,000 - 560,000
Debenture payment to former shareholder - - - (75,000)
Borrowings from revolving
credit agreement, net 95,800 - 147,400 -
Principal payments on bank debt (1,275,000) (137,000) (1,345,000) (143,300)
Other (9,700) (3,800) (19,200) 4,000
---------- ---------- ---------- ----------
Net cash provided (used)
by financing activities (1,188,900) 99,200 (1,216,800) 345,700
---------- ---------- ---------- ----------
Net increase (decrease) in
cash and cash equivalents 25,400 170,900 (120,400) (151,500)
Cash and cash equivalents at
beginning of period 200,600 212,400 346,400 534,800
---------- ---------- ---------- ----------
Cash and cash equivalents at
end of period $ 226,000 $ 383,300 $ 226,000 $ 383,300
========== ========== ========== ==========
</TABLE>
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(Unaudited)
===============================================================================
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 June 30, 2000, and the consolidated
results of operations and cash flows for the six and three months ended June
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 June
30, 2000, and June 30, 1999. Options and warrants to purchase common stock of
792,542 and 100,000, respectively, are outstanding at June 30, 2000.
The following tables represent the required disclosure of the basic and
diluted earnings per share computation for the six and three months ended June
30, 2000 and 1999.
<TABLE>
<CAPTION>
Six months ended June 30,
----------------------------------------------------------------------
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) $ 46,400 20,000,608 $ 0.00 $ (238,600) 20,000,608 $ (0.01)
====== =======
Effect of Dilutive
Securities
Securities Assumed
Converted
Options 2,746,084 -
Warrants 400,000 -
Less Securities Assumed
Repurchased (1,012,133) -
--------- ---------- ------ ---------- ---------- -------
Diluted EPS $ 46,400 22,134,559 $ 0.00 $ (238,600) 20,000,608 $ (0.01)
========= ========== ====== ========== ========== =======
</TABLE>
<TABLE>
<CAPTION>
Three months ended June 30,
----------------------------------------------------------------------
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) $ 428,300 20,000,608 $ 0.02 $ 261,600 20,000,608 $ 0.01
====== =======
Effect of Dilutive
Securities
Securities Assumed
Converted
Options 2,746,084 2,360,000
Warrants - 400,000
Less Securities Assumed
Repurchased (645,213) (636,792)
--------- ---------- ------ ---------- ---------- -------
Diluted EPS $ 428,300 22,101,479 $ 0.02 $ 261,600 22,123,816 $ 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 six and three month
periods ended June 30, 2000 and 1999 (000's).
<TABLE>
<CAPTION>
Six Months Ended June 30,
---------------------------------------------------------------
2000 1999
---------------------------- ------------------------------
Network Telecommu- Network Telecommu-
Services nication Services nication
Group Services Total Group Services Total
------- -------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 2,858 $ 773 $ 3,631 $ 3,650 $ 605 $ 4,255
Cost of Operations 1,796 520 2,316 2,262 394 2,656
Depreciation and
Amortization 532 45 577 576 39 615
------- -------- ------- -------- ------- -------
Gross Profit $ 530 $ 208 738 $ 812 $ 172 984
======= ======== ======== =======
Selling, General &
Administrative 1,230 1,199
------- -------
Income (loss) from Operations $ (492) $ (215)
======== =======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended June 30,
---------------------------------------------------------------
2000 1999
---------------------------- ------------------------------
Network Telecommu- Network Telecommu-
Services nication Services nication
Group Services Total Group Services Total
------- -------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 1,855 $ 439 $ 2,294 $ 2,561 $ 340 $ 2,901
Cost of Operations 1,082 334 1,416 1,294 220 1,514
Depreciation and
Amortization 261 25 286 288 20 308
------- -------- ------- -------- ------- --------
Gross Profit $ 512 $ 80 592 $ 979 $ 100 1,079
======= ======= ======== =======
Selling, General &
Administrative 580 586
------- --------
Income from Operations $ 12 $ 493
======= ========
Identifiable Assets $ 3,885 $ 518 $ 4,403 $ 5,720 $ 470 $ 6,190
======= ======= ======= ======== ======= ========
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 OPERATONS
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
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 $46,400 for the six months ended June
30, 2000, as compared to a net loss of $238,600 for the same period of 1999.
For the three months ended June 30, 2000, the Company reported net income of
$428,300 as compared to net income of $261,600 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 $700,000) 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 $3.6 million and $2.3 million for the six
and three months ended June 30, 2000, respectively, as compared to $4.2 million
and $2.9 million for the same periods in 1999. The decrease in revenues of
$0.6 million for the six and three month periods from 1999 to 2000 was caused
by: 1) a decrease in revenues from TV Production activities of approximately
$0.3 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 $0.5
million from the Company's Communications/Broadcast activities due to the non-
renewal of certain contracts. Higher revenues of approximately $0.2 million
directly related to the Company's prepaid telephone calling card business
offset these decreases.
Cost of Operations
------------------
Cost of operations amounted to $2.3 million and $1.4 million for the six
and three months ended June 30, 2000, respectively, as compared to $2.7 million
and $1.5 million for the same periods of the prior year. The decrease of $0.4
million from 1999 to 2000 for the six months ended June 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 $1.2
million and $0.6 million for the six and three months ended June 30, 2000,
respectively. Approximately the same amounts were reported for the same
periods of 1999 as the Company has been able to effectively control its fixed
overhead costs.
Depreciation and Amortization
-----------------------------
Depreciation and amortization for the six and three months ended June 30,
2000 were approximately the same as the comparable periods of the prior year.
Interest Expense
----------------
Interest expense decreased slightly 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 $1.6 million and current liabilities of
$1.6 million as of June 30, 2000. Stockholders' equity was approximately $1.2
million at December 31, 1999 and June 30, 2000.
At June 30, 2000, the Company had a credit facility with its principal
lender consisting of a term loan of $0.8 million and a revolving line of credit
based on accounts receivable balances of $1.0 million (of which $0.4 million
was drawn down at June 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
None
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: August 14, 2000 By: /s/Harlyn C. Enholm
Executive Vice President and
Chief Financial Officer
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