SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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)
Securities registered pursuant to Section 12(b) of the Exchange Act:None
Securities registered pursuant to Section 12(g) of the Exchange Act:None
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
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
----- ----
Issuer's revenue for the most recent fiscal year: $9,480,800
Number of shares outstanding of Issuer's Common Stock as of March 31, 2000:
5,000,152
PART I
Item 1. Description of Business
INTRODUCTION
Trident Media Group, Inc. ("Trident" or the "Company"), a Nevada
corporation, is a provider of a broad range of services in the
telecommunications, and network television services industries. Trident
produces, displays, edits and distributes video and audio programming and
other data into various broadcast formats, creates graphics animation and
other materials all to support its customer programs. Trident also
provides uplinking satellite and terrestrial distribution services for its
own and client programming, including video, audio, data and telephony.
Trident additionally provides U.S. originated prepaid long distance
telephone calling card services distributed through electronic dispensing
units and retail sales.
FORMATION
Trident Media Group, Inc. was incorporated in 1984 as International
Fire Prevention Inc. ("IFPI"), a Nevada corporation. IFPI was an inactive
public Company with no operations and had been dormant since 1988. IFPI
was renamed Trident Media Group, Inc. and a plan of merger with Spector
Entertainment Group, Inc. ("SEG"), was effected on January 15, 1998, as a
reverse acquisition with Trident as the surviving entity. Trident is a NASD
OTC Electronic Bulletin Board traded company and has its principal
executive offices at 6349 Palomar Oaks Court, Carlsbad, CA 92009.
DESCRIPTION OF BUSINESS
Trident has concentrated on providing satellite transmission services
to the pari-mutuel racing industry. The Company transmits via a fleet of
owned and leased uplink units video, audio and data of televised wagering
events, such as horse racing, for distribution to venues including
racetracks, off track wagering facilities, casinos, and Indian
reservations. The Company additionally provides encryption and compression
services, which enable Trident to scramble and protect the program from
unauthorized third party reception. Trident also controls, under long
term, exclusive lease, satellite transponder capacity used for both
Trident's clients and excess capacity resold for third party use, including
purchase by Globecast, Fox Networks, Vyvx, and major television networks.
The Company's operations also include television production of pari-mutuel
racing events and closed circuit systems. These services include: live
event production; photo finish; post production; closed circuit audio;
public address; television and security systems; and a variety of other
related systems and services. Trident currently provides over 1,000 live -
action television events and transmits over 8,000 hours of programming
annually. The company provides its services to a diversified client base
including over 250 of the premiere wagering and entertainment facilities
and a variety of broadcast cable and private networks throughout North
America. The company also provides telephony services including prepaid
phone card services through electronic dispensing equipment and retail
sales.
The Company has organized its activities into two (2) operating groups
as follows:
Network Services Group
----------------------
The Network Services Group's focus and the core business of the
Company is to provide simulcasting, television production and related
services to racetracks, casinos, off-track betting locations and to the
general sports and entertainment industries. Simulcasting is the process
of uplinking the audio and video television signal of a live event from a
racetrack to a satellite for reception by wagering locations throughout the
country. The Company's simulcast services enable racetracks to
simultaneously send their television signals to multiple wagering
facilities, including other racetracks and off-track betting facilities.
The Company operates a fleet of transportable Earth Stations licensed
by the Federal Communications Commission ("FCC") which are deployed for the
transmission of audio, video and/or data programming via satellite
throughout North America. The Earth Stations are typically configured on a
mobile trailer and transported to the site where the broadcast event
occurs. The Company obtains its satellite transponder capacity by securing
multiple short term and long term leases with a variety of satellite
communications providers. The Company employs state-of-the-art digital
compression technology (which also effectively scrambles the signal),
utilizing General Instruments' DigiCipher TM encoders and decoders
primarily configured for a single-channel-per-carrier ("SCPC") compression
system. The SCPC system enables the Company to uplink digitally compressed
signals from diverse locations to a single satellite transponder. The
Company also uses Scientific Atlanta B-MacT scrambling equipment for its
non-compressed signals. Where the Company's transmitted signal is
compressed or scrambled, the Company has contracts that provide that the
Company will be the exclusive provider of decoder equipment to locations
authorized by the content owner to receive the signal. The Company is an
"OEM" (original equipment manufacturer) for a variety of broadcast
television equipment providers, including General Instruments, Scientific
Atlanta, Mitsubishi, Ikegami and others.
Satellite communications can be used to transmit and distribute audio,
video, data information and programming. In providing satellite
communication services, the Company creates a satellite communications
"Circuit", which consists of three basic elements; (1) an uplink "Earth
Station" that transmits a signal to a satellite; (2) an assigned space
segment (band width) on a leased satellite transponder that receives the
uplink signal and retransmits it to earth; and (3) a "downlink" Earth
Station that receives the signal from the satellite. An Earth Station
generally consists of a parabolic antenna that sends or receives the
signal, and includes electronic equipment that converts, amplifies, and
transmits the signal to the satellite, or receives and converts the signal
for the display of such broadcast or processing of information.
The downlink, or receive end of the communications circuit may be
either a single Earth Station when providing point to point transmission of
live programming, or a number of Earth Stations, geographically dispersed,
when programming is being distributed for a point to multi point
transmission. The satellite transponder space segment needed to complete
the communications circuit is generally leased by the Company directly from
the satellite owner such as PanAmSat, Loral or GE Americom. During the past
twelve month period, the Company has transmitted over 8,000 hours of live
action television programs. The Company also brokers unused satellite
transponder capacity and provides satellite transmission services to third
parties. These services, which are marketed primarily to the sports and
television entertainment networks enable the Company to capitalize on the
Company's excess transponder capacity and fill scheduling gaps for its
uplink fleet. The Company also provides design, equipment, installation
and operational services to several off-track betting facilities.
GE Americom currently provides transponder services to the Company
under a lease for non-preemptible service. The lease expires in June of
2001. The Company typically utilizes a transponder in the C-band
frequency. The Company utilizes its satellite transponder capacity to
service its own broadcasts and resells both analog and compressed capacity
to third parties for video, audio, data and voice transmissions. The
Company continually evaluates new technologies to expand the productive
utilization of its transponder capacity.
The Company also provides television production services primarily for
the pari-mutuel racing industry, and is capable of providing virtually all
of the television programming production, television equipment, and related
service requirements as an integrated package for a wagering facility. At
each site, the Company typically provides track site cameras, production
studios, television monitors, cabling and related equipment and services.
The Company also operates a fleet of mobile production studios, which can
be deployed for on site service. The Company provides cameramen,
producers, editors, and other trained personnel required to operate its
equipment and create its programming. The Company provides the closed-
circuit video systems to enable patrons to see and hear the live races
throughout the racetrack and enable management to oversee its operations.
The Company also produces pre and post-race shows, replays and gaming
information and provides commercial, edit and post-production services.
The Company's simulcasting and television production services, systems and
equipment are typically provided pursuant to multi-year non-cancelable
contracts.
Telecommunications Services
---------------------------
The Company is a non-facilities based reseller of long distance and
international telecommunications services to non-commercial consumers. The
Company offers services primarily through the use of enhanced prepaid phone
cards provided through company owned electronic dispensing units and retail
sales. Trident does not own or operate any of the primary transmission
facilities currently used for its telephone operations. The Company's
products and services are provided under agreements which entitle Trident
to obtain discounted bulk rates which are then resold to Trident's clients.
The Company's operations have historically been located in the Southwestern
portion of the United States.
Within the diversified telephone services industry, prepaid and other
type discount telephone services are relatively new. Phone cards have been
widely used throughout Europe and Asia for more than ten (10) years.
Although prepaid phone cards were not used on a widespread basis in the
United States prior to 1994, the market in the United States has been rapidly
expanding, with annual sales of prepaid phone cards growing from an estimated
$100 million in 1993, to an estimated $1.1 billion in 1996. Industry
analysts project annual sales of prepaid and discount phone cards in the
United States to reach $2.5 billion by the year 2000. Analysts also indicate
that continued industry growth will be fueled by: (i) continued consumer
acceptance of prepaid phone cards; (ii) a broader base of consumer segments
using prepaid phone services, such as business employees, students and
travelers; and (iii) an increased appeal to, and greater use by, residential
users.
Prepaid phone cards have proven to be a reliable, convenient, and cost-
effective alternative to coin-operated calling, operator-assisted calls and
standard credit calling cards. Unlike credit calling cards, which provide
virtually unlimited credit and impose surcharges on long distance services,
prepaid phone cards are paid for in advance and provide finite amounts of
calling time. Most domestic prepaid phone cards, utilize a remote memory
technology, which permits users to place local, long distance and
international calls from any touch-tone phone by dialing a toll-free or local
access number to connect to a prepaid phone card switching platform. After
being prompted to enter a PIN number, the caller is advised of the value
remaining on the card and is prompted to enter the telephone number to be
called. The call is then routed to its destination. The per-minute charges
for the call are automatically decremented from the prepaid account
corresponding to the PIN as the call progresses.
The Company markets its products and services in telecommunications
through direct sales and a network of independent representatives on a
commission basis. The Company has also utilized field service personnel and
has provided service on a wholesale basis.
Trident will continue to: (i) develop strategic marketing relationships,
(ii) regularly evaluate possible acquisition opportunities, and (iii) improve
operating and network efficiencies. The Company's ability to achieve these
objectives will be affected by, and to a certain extent dependent on,
numerous factors beyond the control of the Company. Thus, no assurance can
be given, nor construed that such objective can or will be achieved.
The following table sets forth the percentage of revenues contributed
by each of the Company's operating groups during the last three fiscal
years.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Network Services Group 85.1% 87.5% 100.0%
Telecommunications Services 14.9 12.5 -
------ ------ ------
Total Revenue 100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
Recent Developments
-------------------
On March 27, 2000, the Company entered into a Letter of Intent with a
major customer to sell certain assets and to assign to the customer all
television production contracts between the Company and the customer. The
agreement calls for an all cash purchase price of $1,600,000 with a planned
closing before the end of April 2000. If the transaction is consummated as
contemplated the majority of the proceeds will be used to retire the
Company's bank debt.
Acquisitions
------------
Trident operates in a number of highly fragmented industries and has
historically expanded its operations through a combination of internal
growth and acquisitions. The Company regularly evaluates possible
acquisition candidates and may seek to acquire companies to expand the
distribution of its services and products, enhance internal efficiencies,
complement existing operations, or for other operating or strategic
considerations. Except as otherwise disclosed herein, the Company has no
agreements, commitments, or arrangements with respect to any acquisition.
There can be no assurance that the Company will ultimately effect any
acquisition, that the Company will be able to successfully integrate,
operate, and/or manage any acquisition, or that the Company will be able to
service any debt or other obligations incurred in connection with any
acquisition.
The following acquisitions were completed during the year ended
December 31, 1998. These transactions were all accounted for under the
purchase method of accounting. The allocation of purchase price for these
transactions was based on historic net book values, which in management's
opinion approximated fair value.
Steinley's Photochart Systems, Inc.
-----------------------------------
On April 1, 1998, the Company acquired 100% of the issued and
outstanding common stock of Steinley's Photochart Systems, Inc.
("Steinley's") for $350,000. In addition, the former owners of Steinley's
can earn up to $250,000, based on achieving certain revenue and earnings
targets over the next two years (as of March 31, 1999 $64,200 had been
earned under this provision). Steinley's is a provider of audio-video and
photo finish services to the pari-mutuel racing industry primarily in the
Northwest portion of the United States.
GoldenTel Prepaid, LLC.
-----------------------
On June 2, 1998, the Company acquired 100% of the issued and
outstanding membership units of GoldenTel Prepaid, LLC. ("GoldenTel") for
$200,000 in cash and an earn-out of an additional $30,000 if certain
revenue objectives were achieved for the two months commencing June 2,
1998. These revenue objectives were met and the earn-out payment was paid
on September 2, 1998. GoldenTel subsequently changed its name to Trident
Prepaid, Inc., and markets and sells prepaid telephone calling cards
primarily through electronic dispensing machines in the State of Nevada.
On Track, Inc.
--------------
On June 24, 1998, the Company acquired 100% of the issued and
outstanding common stock of On Track, Inc. ("OTI") for $200,000. The
purchase price was payable $100,000 at closing and $100,000 less any
unrecorded liabilities, as defined in the agreement, six months after the
closing date. On January 15, 1999, $39,600 was paid to the former owners
of OTI, as payment for the remaining purchase obligation. OTI provides
video production and related services to the pari-mutuel racing industry as
well as insert advertising to the cable television industry in the
Southwest portion of the United States.
Trident Telecard, Inc.
---------------------
In September 1998, the Company acquired certain assets from an
unrelated third party and formed a new company, Trident Telecard, Inc.
("Telecard"). Telecard's purpose was to develop and distribute through a
network of wholesalers prepaid telephone calling cards primarily focused
upon the ethnic markets, tourists, students and the general public. In the
fourth quarter of 1998, the Company determined that Trident Telecard, Inc.,
was unable to support and fulfill its business plan, nor were its
operations a strategic fit with the Company's operations. Accordingly,
Telecard's operations were curtailed and ceased by December 1998. Pursuant
to a Settlement Agreement dated May 3, 1999, the Company conveyed back to
the unrelated third party certain assets and inventory of the Telecard
operations in exchange for a comprehensive release.
Governmental Regulations
------------------------
Trident's communications operations and services in the Network
Services Group are generally subject to regulation by the Federal
Communications Commission ("FCC"). All satellite transmission facilities,
including mobile satellite Earth Stations and microwave equipment, must be
individually licensed and renewed by the FCC, historically this occurred on
an annual basis. During 1998, the FCC approved the Company's licenses for
a period of ten years. The FCC prescribes technical standards for
transmission equipment which may change from time to time.
The FCC also requires a coordination process and filing for each Earth
Station transmitter operating in the frequency band used by some of the
satellites on which the Company provides services. This process is to
demonstrate that the Earth Station transmitter will not interfere with
land-based microwave systems or other users. This requirement, in some
cases, restricts the proximity that a mobile Earth Station can have to a
customer facility and thus may require a cable or other terrestrial link to
be installed between the customer and the Earth Station. Transmission
equipment must also be installed in a manner that avoids harmful levels of
radio frequency radiation.
Employees
---------
At March 31, 2000, the Company had 44 full-time and 33 seasonal/part-
time employees. Trident believes that its relationship with its employees
is satisfactory.
Item 2. Description of Property
The Company conducts its activities from offices at the following
locations:
Leased Facilities
- -----------------
Headquarters (A)
6349 Palomar Oaks Court 26,599 square feet
Carlsbad, CA 92009
Branch Office
6280 S. Valley View Blvd., Suite 330 1,800 square feet
Las Vegas, NV 89118
Owned Facilities
- ----------------
1889 Highway 70 East 4,300 square feet
Ruidoso Downs, NM 88346
(A) Facility is leased from Margate Associates, a general partnership
wholly-owned by the Company's majority stockholder. On March 6, 2000
Margate entered into an agreement to sell this property. In the event the
transaction is consummated, it will be necessary for the Company to
relocate its headquarters operations.
The Company believes the above facilities are adequate and suitable for the
conduct of its current business activities.
Item 3. Legal Proceedings
On January 5, 1999, Lance Teren, et al, commenced an action in the
Superior Court of the State of California. As part of the Telecard
Settlement Agreement dated May 3, 1999, the suit was dismissed.
On September 28, 1999, Spector Entertainment Group, Inc. (a wholly-
owned subsidiary of Trident) filed an action in the U.S. District Court of
Southern California against Florida Gaming, Inc. alleging a breach of
contract on a service agreement. The suit seeks unspecified damages and
equitable relief. Management believes that sufficient evidence exists to
prevail in its claim.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during
the fourth quarter of the fiscal year ended December 31, 1999.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Trident's common stock began trading on the OTC Electronic Bulleting
Board on February 23, 1998, under the symbol "TDNT".
The following table sets forth for the calendar periods indicated, the
per share range of the high and low bid price of the Company's common
stock.
<TABLE>
<CAPTION>
1999 1998
-------------------- ---------------------
<S> <C> <C> <C> <C>
High Bid Low Bid High Bid Low Bid
First Quarter $1.50 $1.03 $0.11 $0.02
Second Quarter 1.50 1.50 3.50 0.13
Third Quarter 1.00 0.63 3.00 1.50
Fourth Quarter 1.13 0.75 1.99 0.87
</TABLE>
Trident has never paid cash dividends on its common stock and intends
to retain future earnings to support growth of its business and does not
anticipate paying any cash dividends in the near future.
Item 6. Management' s Discussion and Analysis
The following table is a summary of financial information for the
Company for the periods indicated.
<TABLE>
<CAPTION>
For years ended December 31, 1999 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 9,480,800 $ 8,538,900 $ 6,472,400
Operating costs and expenses:
Cost of operations 5,471,800 5,579,200 3,347,400
Selling, general and
administrative 2,358,500 2,822,500 1,939,500
Depreciation and amortization 1,177,200 1,145,000 948,400
----------- ----------- -----------
Total operating costs and
expense 9,007,500 9,546,700 6,235,300
----------- ----------- -----------
Income (loss) from operations 473,300 (1,007,800) 237,100
Interest expense 332,100 300,000 215,000
----------- ----------- -----------
Income (loss) before income taxes and
cumulative effect of
accounting change 141,200 (1,307,800) 22,100
Income tax provision (benefit) 76,000 (422,800) 17,700
----------- ----------- -----------
Income (loss) before cumulative
effect of accounting change 65,200 (885,000) 4,400
Cumulative effect of accounting change,
net of tax - (43,700) -
----------- ----------- -----------
Net income (loss) $ 65,200 $ (928,700) $ 4,400
=========== =========== ===========
</TABLE>
RESULTS OF OPERATIONS
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.
1999 COMPARED TO 1998
For the year ended December 31, 1999 the Company reported income
before income taxes of $141,200 as compared to a loss before income taxes
and the cumulative effect of a change in accounting of $1,307,800 for the
year ended December 31, 1998. The 1998 loss was primarily attributable to
three main factors: (i) in May of 1998 the Company's satellite provider
pre-empted (due to the failure of one of the providers other satellites)
all clients of the satellite on which the Company had leased two full-time
transponders thereby, forcing the Company to find alternative transponder
capacity in a tighter and more expensive marketplace (the loss in income
from this disruption in satellite service was in excess of $350,000), (ii)
operating losses of approximately $330,000 in connection with the start-up
of the Company's prepaid telephone calling card business and (iii) a write-
off of approximately $200,000 relating to certain equipment and other
deferred costs no longer utilized in the operation of the business. Also,
contributing to the 1998 losses were approximately $80,000 of legal and
related acquisition costs incurred in connection with the Company's
acquisition of certain businesses during 1998.
Revenues
--------
The Company reported revenues of $9.5 million for the year ended
December 31, 1999 as compared to $8.5 million for the year ended December
31, 1998. The increase in revenues was directly related to the Company's
telephone calling card business, which was started in 1998 (approximately
$0.4 million) and acquisitions made in 1998, which reported a full year of
operations in 1999 versus a partial year in 1998 of (approximately $0.9
million). Revenue from the Company's core business activities decreased
from $6.4 million in 1998 to $6.0 million in 1999.
Cost of Operations
------------------
Cost of operations amounted to $5.5 million for the year ended
December 31, 1999 as compared to $5.6 million for the year ended December
31, 1998. Cost of operations remained flat on higher revenues primarily
due to two factors; (i) higher satellite expense in 1998 of $0.5million
primarily caused by the satellite failure discussed above and, (ii) lower
costs of approximately $0.4 million related to the processing and
transmission of the Company's prepaid telephone card activities.
Selling, General and Administrative Expenses
--------------------------------------------
The Company reported selling, general and administrative expenses of
$2.4 million for the year ended December 31, 1999 as compared to $2.8
million for the year ended December 31, 1998. The decrease is primarily
attributable to the start-up of the telephone calling card business and
selling, general and administrative expenses relating to acquisitions made
during 1998 which weren't required in 1999. Also, included in selling,
general and administrative expenses for 1998 is a provision of $75,000
relating to the cessation of the Company's wholesale prepaid calling card
business as of December 31, 1998.
Depreciation and Amortization
-----------------------------
Depreciation and amortization was approximately the same for 1999 and
1998.
Interest Expense
----------------
Interest expense was substantially the same for the years ended
December 31, 1999 and 1998.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's primary 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 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.
1998 COMPARED TO 1997
For the year ended December 31, 1998 the Company reported a loss
before income taxes and the cumulative effect of a change in accounting of
$1,307,800 as compared to income before income taxes of $22,100 for the
year ended December 31, 1997. The 1998 loss was primarily attributable to
three main factors: (i) in May of 1998 the Company's satellite provider
pre-empted (due to the failure of one of the providers other satellites)
all clients of the satellite on which the Company had leased two full-time
transponders, thereby forcing the Company to find alternative transponder
capacity in a tighter and more expensive marketplace (the loss in income
from this disruption in satellite service was in excess of $350,000), (ii)
operating losses of approximately $330,000 in connection with the start-up
of the Company's prepaid telephone calling card business and (iii) a write-
off of approximately $200,000 relating to certain equipment and other
deferred costs no longer utilized in the operation of the business. Also,
contributing to the 1998 losses were approximately $80,000 of non-recurring
general and administrative expenses incurred in connection with the
Company's acquisition of certain businesses during 1998. In addition to
the start-up of the telephone calling card business during 1998, the
Company also acquired Steinley's Photochart, Systems, Inc. ("Steinley's")
and On Track, Inc. ("OTI"), which operated in the same business segment as
the Company's existing core business. These two acquisitions contributed
approximately $120,000 to pre-tax results within the Network Service Group
for the year ended December 31, 1998.
Revenues
--------
The Company reported revenues of $8.5 million for the year ended
December 31, 1998 as compared to $6.5 million for the year ended December
31, 1997. The increase in revenues was directly related to the start-up of
the Company's telephone calling card business (approximately $1.0 million)
and the acquisition of Steinley's and OTI (approximately $1.1 million).
Revenue from the Company's existing core business activities decreased
slightly from $6.5 million in 1997 to $6.4 million in 1998.
Cost of Operations
------------------
Cost of operations amounted to $5.6 million for the year ended
December 31, 1998 as compared to $3.3 million for the year ended December
31, 1997. The increase from 1997 to 1998 relates to three factors: (i)
higher satellite expense in 1998 of $0.7 million caused by the satellite
failure discussed above, and the loss of a favorable sub-lease of
transponder space for the first six months of 1997 from the Company's
former parent Graff Pay-Per-View, Inc. ("Graff") (this sub-lease agreement
was part of the settlement agreement in the split-off from Graff in early
1997), (ii) costs of approximately $0.6 million associated with Steinley's
and OTI which didn't exist in 1997 and (iii) costs of approximately $0.9
million relating to the Company's telephone calling card business which was
started-up during 1998.
Selling, General and Administrative Expenses
--------------------------------------------
The Company reported selling, general and administrative expenses of
$2.8 million for the year ended December 31, 1998 as compared to $1.9
million for the year ended December 31, 1997. The increase is primarily
attributable to the start-up of the telephone calling card business and
selling, general and administrative expenses relating to acquisitions made
during 1998 which didn't exist in 1997. Also, included in selling, general
and administrative expenses for 1998 is a provision of $75,000 relating to
the cessation of the Company's wholesale prepaid calling card business as
of December 31, 1998.
Depreciation and Amortization
-----------------------------
Depreciation and amortization amounted to $1.1 million for the year
ended December 31, 1998 as compared to $0.9 million for the year ended
December 31, 1997. The increase from 1997 to 1998 primarily relates to
acquisitions made during 1998 ($0.1 million) and the write-off of certain
assets no longer utilized in the business ($0.1 million).
Interest Expense
----------------
Interest expense increased by approximately $85,000 from 1997 to 1998
primarily as a result of borrowings incurred in connection with
acquisitions consummated during 1998.
Change in Accounting
--------------------
As of December 31, 1998, the Company elected early adoption of
Statement of Position 98-5 issued by the Accounting Standards Executive
Committee on April 3, 1998. This pronouncement is effective for financial
statements beginning after December 15, 1998 and requires all costs of
start-up activities to be expensed as incurred. Accordingly, the Company
wrote-off approximately $43,700 (net of tax) of previously capitalized
contract start-up and organization costs.
LIQUIDITY AND CAPITAL RESOURCES
The Company had current assets of $1.4 million and current liabilities
of $1.5 million as of December 31, 1999. Stockholder's equity at December
31, 1999 was $1.2 million compared to $1.1 million at December 31, 1998.
The increase in stockholder's equity was due to the net income reported for
the year ended December 31, 1999.
At December 31, 1999, the Company had a credit facility with its
principal lender consisting of term loans of $2.2 million and a revolving
line of credit based on accounts receivable balances of $1.0 million (of
which $0.2 million was drawn down at December 31, 1999). The loan agreement
requires the Company to meet certain financial ratios and maintain certain
tangible net worth levels.
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. During the
first part of 1999 the Company's majority shareholder loaned the Company
over $500,000 to cover this cash flow shortfall. The loan (which amounted
to $300,000 at December 31, 1999) is subordinated to the outstanding bank
debt and can not be paid without written consent from the bank.
Net cash provided by operating activities was approximately $0.8
million and $0.3 million for the years ended December 31, 1999 and 1998,
respectively. In 1998 cash provided by operating activities was the result
of non-cash adjustments (primarily depreciation and amortization) which
more than offset net losses for the period.
Net cash used by investing activities was approximately $0.6 million
and $1.1 million for the years ended December 31, 1999 and 1998,
respectively. The decrease in cash used by investing activities in 1999 as
compared to 1998 was primarily attributable to the use of funds for
acquisitions made during 1998.
Net cash used by financing activities in 1999 was approximately $0.4
million as compared to approximately $0.8 million provided by financing
activities in 1998. The decrease in cash provided by financing activities
from 1998 to 1999 was primarily due to increased borrowings utilized to
connection with acquisitions made during 1998.
YEAR 2000 COMPLIANCE
The Company has completed its Year 2000 conversions and readiness
initiatives and did not experience any significant problems as a result of
these changes. The Company does not anticipate any future business impacts
related to Year 2000 issues. The Company incurred approximately $86,500,
including approximately $65,500 of capital spending on Year 2000 changes
and issues, all of which were incurred in 1999.
Item 7. Financial Statements
See the Financial Statements at pages F-1 through F-17.
Item 8. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure
As reported on Form 8-K dated March 3, 1999, the Company on March 1,
1999, terminated its audit relationship with its former auditors,
Pritchett, Siler & Hardy, P.C. ("PSH"), and on March 3, 1999, engaged Grant
Thornton LLP as the Company's new independent accountants. The audit
committee of the Board of Directors approved the decision to change
accountants.
PHS's report on the financial statements for 1997 and 1996 did not
contain an adverse opinion or disclaimer of opinion, and was not qualified
or modified as to audit scope or accounting principles. Their report
contained an explanatory paragraph discussing doubt as to the Company's
ability to continue as a going concern due to the lack of on-going
operations and losses, which resulted in a stockholders' deficit. In
January 1998, the Company completed a merger with Spector Entertainment
Group, Inc. (reported on Form 8-K, dated January 6, 1998), an operating
company.
During the Company's two most recent fiscal years and any subsequent
interim period preceding such termination, there were no disagreements with
the former accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreement(s), if not resolved to the satisfaction of the former
accountant, would have caused it to make reference to the subject matter of
the disagreement(s) in connection with its report.
There were no reportable events of the type described in Item 304(a)
(1) (v) (a) through (d) of Regulations S-K.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance With Section 16(a) of the Exchange Act.
Name Age Position
----------------- ----- -----------------------------------
Edward M. Spector 65 Chief Executive Officer, President
and Director
Ilene H. Spector 58 Executive Vice President of
Administration, Corporate
Secretary, Treasurer and Director
Harlyn C. Enholm 58 Executive Vice President, Chief
Financial Officer and Director
Eric M. Spector 35 Executive Vice President of
Corporate Development, and Director
Evan M. Spector 33 President Network Services Group
and Director
Edward M. Spector
-----------------
Chief Executive Officer, President and Director. Mr. Spector is the
founder of the Company and has over 30 years of broad experience in the
communications, gaming and entertainment industries. Mr. Spector's
knowledge of the telecommunications, pari-mutuel wagering and pay-per-view
industries are invaluable in the continued expansion and growth of the
Company.
Ilene H. Spector
----------------
Executive Vice President of Administration, Corporate Secretary,
Treasurer, and Director. Mrs. Spector has served as a Director and Executive
Vice President of Administration for the Company since the Company was
founded. Mrs. Spector is also a partner in Margate Associates, a real
estate development partnership.
Harlyn C. Enholm
----------------
Executive Vice President, Chief Financial Officer, and Director. Mr.
Enholm joined the Company in 1994 . From 1996 through 1998 he served as the
Executive Vice President and Chief Financial Officer for Graff Pay-Per View,
Inc. He rejoined the Company in 1999 and was elected a Director in August
1999.
Eric M. Spector
---------------
Executive Vice President Corporate Development, and Director. A
graduate of Cornell University and the Boston University School of Law, Mr.
Spector has served as a Director and Executive Vice President of the
Company since 1991, and is also responsible for mergers, acquisitions, and
contract negotiations.
Evan M. Spector
---------------
President Network Services Group and Director. Mr. Spector has served as
a Director and Executive Vice President of the Company since 1992, and is
responsible for all aspects of the Network Services Group's day-to-day
operations.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
No securities of the Company are registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, and the Company files reports under Section
15(d) of the Securities Exchange Act of 1934; accordingly, executive
officers, directors and 10 percent stockholders are not required to make
filings under Section 16 of the Securities Exchange Act of 1934.
Item 10. Executive Compensation
The following table sets forth for the fiscal years ended December 31,
1999, 1998, and 1997, compensation paid by the Company for services to the
Chief Executive Officer and the other executive officers.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------------------------
Long Term
Annual Compensation Compensation
---------------------------- ------------------------
Other Secur-
Name Annual ities All other
and Compen- Underlying Compensa-
Principal Salary sation Options/ tion (2)
Position Year ($) ($) SARs (#) ($)
- --------------------------------- ------ --------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Edward M. Spector, Chairman & CEO 1999 197,900 (1) 18,375 (3) 30,922
1998 381,600 (1) 118,375 (3) 30,742
1997 367,500 (1) 30,742
Eric M. Spector, Executive VP 1999 62,300 (1) 6,563 (4) 11,525
1998 60,000 (1) 136,563 (4) 11,455
1997 60,000 (1)
Evan M. Spector, President Network
Serv. Group 1999 136,300 (1) 6,563 (5) 8,456
1998 131,200 (1) 136,563 (5) 8,456
1997 131,200 (1)
Ilene H. Spector, Executive VP
Administration 1999 5,000 (1) 6,500 (6)
1998 90,000 (1) 106,500 (6)
1997 130,000 (1)
Harlyn C. Enholm, Executive VP & CFO 1999 174,400 (1) 12,500 (7)
1998 48,300 (1) 140,000 (7)
</TABLE>
(1) Other annual compensation is less than 10% of such executive's salary
and bonus compensation for the year.
(2) Consists of premiums for life insurance.
(3) Mr. Edward Spector's securities underlying options for 1999 were 18,375
options granted on December 15, 1999 with an exercise price of $0.75 and for
1998 include: (i) 18,375 options granted on December 30, 1998 with an
exercise price of $1.50 and (ii) 100,000 options granted on February 27, 1998
with an exercise price of $0.125.
(4) Mr. Eric Spector's securities underlying options for 1999 were 6,563
options granted on December 15, 1999 with an exercise price of $0.75 and for
1998 include: (i) 6,563 options granted on December 30, 1998 with an exercise
price of $1.50 and (ii) 130,000 options granted on February 27, 1998 with an
exercise price of $0.125.
(5) Mr. Evan Spector's securities underlying options for 1999 were 6,563
options granted on December 15, 1999 with an exercise price of $0.75 and for
1998 include: (i) 6,563 options granted on December 30, 1998 with an exercise
price of $1.50 and (ii) 130,000 options granted on February 27, 1998 with an
exercise price of $0.125.
(6) Mrs. Ilene Spector's securities underlying options for 1999 were 6,500
options granted on December 15, 1999 with an exercise price of $0.75 and for
1998 include: (i) 6,500 options granted on December 30, 1998 with an exercise
price of $1.50 and (ii) 100,000 options granted on February 27, 1998 with an
exercise price of $0.125.
(7) Mr. Enholm's securities underling options for 1999 were 12,500 options
granted on December 15, 1999 with an exercise price of $0.75 and for 1998
include: (i) 10,000 options granted on December 30, 1998 with an exercise
price of $1.50 and (ii) 130,000 options granted on February 27, 1998 with an
exercise price of $0.125.
Stock Option Plan
-----------------
In 1998 the Company established a Non-Qualified Stock Option Plan
("Plan") for officers, employees, directors and consultants of the Company.
Options may be granted under the Plan for the purchase of not more than
850,000 shares of stock of the Company. The following is a brief description
of the Plan.
Each option has a term of six years commencing from the date of its
grant and may not be granted for less than 85% of the Fair Market Value of
the shares at the time an option is granted. All options will terminate
three months after employment is terminated, except if employment is
terminated because of dishonestly or wrongful conduct, in which event the
option will terminate immediately.
The Plan provides that the exercise price of the stock issuable upon
exercise of an option shall be paid in full in cash on exercise. In lieu
of cash payment, an optionee may, with the approval of the Board of
Directors, pay for all or part of the shares to be purchased upon exercise
of his or her option (i) by tendering to the Company shares of Stock owned
by such optionee and having a fair market value equal to the exercise price
(or the balance thereof) applicable to such optionee's option or (ii) by
payment to the Company by certified or bank check, or postal or express
money order of a per share price at least equal to the par value of the
Stock, with the remainder of the exercise price satisfied by the issuance
of a promissory note in form satisfactory to counsel to the Company at the
time of exercise, subject to certain conditions. Twenty five percent of
the options will vest one year from the date of grant. The balance will
vest twenty-five percent on the second anniversary date of the grant and
fifty percent on the third anniversary date of the grant.
The Plan is administered by the Board of Directors. A total of
807,484 options were outstanding as of December 31, 1999.
The following table sets forth stock options that the Company granted
to the named executive officers in 1999.
<TABLE>
<CAPTION>
OPTIONS/GRANTS IN LAST FISCAL YEAR
Individual Grants
--------------------------------------------------------------------------------------------
Number of
Share of Total Options
Common Stock Granted to Exercise
Underlying Employees or Base
Options Granted in Fiscal Year Price Expiration
Name (#) (%) ($/Share) Date
- --------------------- ----------------- ---------------- ----------- ----------
<S> <C> <C> <C> <C>
Edward M. Spector 18,375 (1) 17.6 0.75 12/15/05
Ilene H. Spector 6,500 (1) 6.2 0.75 12/15/05
Harlyn C. Enholm 12,500 (1) 12 0.75 12/15/05
Eric M. Spector 6,563 (1) 6.3 0.75 12/15/05
Evan M. Spector 6,563 (1) 6.3 0.75 12/15/05
(1) All options will vest in three years following grant.
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE OPTIONS EXERCISED IN LAST FISCAL YEAR
AND YEAR END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at FY-End Options at FY-End (1)
Shares Acquired Value ------------------------ -------------------------
on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
Name (#) ($) (#) ($)
- ---------------------- ------------ ---------- ------------------------ -------------------------
<S> <C> <C> <C> <C>
Edward M. Spector None None 29,594 25,000
107,156 75,000
Ilene H. Spector None None 26,625 25,000
86,375 75,000
Harlyn C. Enholm None None 35,000 35,000
17,500 97,500
Eric M. Spector None None 34,141 35,000
108,985 97,500
Evan M. Spector None None 34,141 35,000
108,985 97,500
(1) Based on the last bid price of $1.125 on December 31, 1999.
</TABLE
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of the Company's common stock at March 31, 2000.
</TABLE>
<TABLE>
<CAPTION>
Shares
Issuable upon
Exercised of
Options Shares Percentage
Executive Officer, Directors within Beneficially of Shares
and 5% Stockholders 60 Days Owned Outstanding (1)
- -------------------------------- ------------- ------------- ---------------
<S> <C> <C> <C>
Edward M. Spector 54,594 (2) 54.9
Ilene H. Spector 51,625 (2) (3)
Harlyn C. Enholm 67,500 67,500 1.3
Eric M. Spector 66,641 880,291 17.4
Evan M. Spector 66,641 876,641 17.3
</TABLE>
(1) Assumes exercise of options exercisable within 60 days owned by such
person and the exercise of no other options or warrants.
(2) Majority shareholders of Millenium Entertainment LLC which holds
2,700,000 shares of the Company.
(3) Percentage included with Edward M. Spector.
The business address for the individuals named above is c/o Trident
Media Group, Inc., 6349 Palomar Oaks Court, Carlsbad, CA 92009.
Item 12. Certain Relationships and Related Transactions
Lending Relationship
--------------------
The majority shareholder loaned the Company $300,000 (net of $295,000 in
repayments) during 1999. The outstanding balance of $300,000 as of December
31, 1999, is subordinated to the outstanding bank debt and can not be paid
without the written consent of the bank.
Leasehold Relationship
----------------------
Trident leases 26,599 square feet of improved office and warehouse space
for its headquarters in Carlsbad, California, from Margate Associates, a
partnership owned by the majority shareholder. The lease is scheduled to
expire on May 31, 2003, and currently provides for monthly lease payments of
$23,400.
Item 13. Exhibits and Reports on form 8-K
(a) Exhibits -
Exhibit
No. Description
- -------- ----------------------------------------------------------------
2.01 Agreement and Plan of Merger between Registrant and Spector
Entertainment Group, Inc. dated December 30, 1997. Incorporated
by reference to Exhibit 2 of Form 8-K filed January 20, 1998.
3.01 Certificate of Incorporation of the Company. Incorporated by
reference to previous filings.
3.02 By-laws of the Company. Incorporated by reference to previous
filings.
3.03 Certificate of Amendment to the Articles of Incorporation of
International Fire Prevention, Inc., changing the name to
Trident Media Group, Inc. Incorporated by reference to Exhibit
3 of Form 8-K filed January 20, 1998.
10.01 Industrial Lease between Margate Associates and Spector
Entertainment Group, Inc. dated May 31, 1995.
10.02 Transponder Lease Agreement between Spector Entertainment Group,
Inc. and Vista Satellite Communications dated December 28, 1999.
10.03 Stock Subscription Warrant to purchase 80,000 shares of Common
Stock between International Fire Prevention, Inc., and David C.
Merrell dated December 31, 1997. Incorporated by reference to
Exhibit 2 of Form 8-K filed January 20, 1998.
10.04 Stock Subscription Warrant to purchase 20,000 shares of common
stock between International Fire Prevention, Inc. and Leonard W.
Burningham dated December 31, 1997. Incorporated by reference
to Exhibit 2 of Form 8-K filed January 20, 1998.
10.05 1998 Non-Qualified Stock Option Plan.
10.06 Lending Agreement between Trident Media Group, Inc. and Imperial
Bank dated November 17, 1998.
10.07 Revolving Line of Credit between Trident Media Group, Inc. and
Imperial Bank dated August 8, 1997.
10.08 Agreement for Purchase of Stock between Steinley's Photochart
Systems, Inc., Oscar Steinley and Trident Media Group, Inc.
dated April 1, 1998.
10.09 Purchase Agreement between Trident Media Group, Inc. and
GoldenTel Prepaid, LLC dated June 2, 1998.
10.10 Stock Purchase Agreement between Trident Media Group, Inc.,
Cyrus Leland, Denys McCoy and On Track, Inc. effective June 24,
1998.
10.11 Stock Exchange and Purchase Agreement between USA
Telecommunications, Inc. and Trident Prepaid, Inc. effective
September 1, 1998.
10.12 Lending Agreement between Trident Media Group, Inc. and Wells
Fargo Business Credit, Inc. dated December 10, 1999.
21.01 Subsidiaries of the Registrant.
27.00 Summary Financial Data Schedule.
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the fourth quarter of 1999.
SIGNATURES
In accordance with Section 13 and 15(d) of Securities Exchange Act of
1934, Trident Media Group, Inc. caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TRIDENT MEDIA GROUP, INC.
Dated: April 14, 2000 By: /s/ Edward M. Spector
-------------------------------
Chief Executive Officer,
President and Director
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of Trident Media Group, Inc., and in the
capacities and on the dated indicated.
Dated: April 14, 2000 By: /s/ Ilene H. Spector
-------------------------------
Executive Vice President of
Administration, Corporate
Secretary, Treasurer, and
Director
Dated: April 14, 2000 By: /s/ Eric M. Spector
-------------------------------
Executive Vice President
Corporate Development, and
Director
Dated: April 14, 2000 By: /s/ Evan M. Spector
-------------------------------
President Network Services Group
and Director
PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER:
Dated: April 14, 2000 By: /s/Harlyn C. Enholm
-------------------------------
Executive Vice President, Chief
Financial Officer and Director
INDEX TO FINANCIAL STATEMENTS
AND SCHEDULE
TRIDENT MEDIA GROUP, INC. AND SUBSIDIARIES
Page
Numbers
-------
Report of Independent Certified Public Accountants F-1
Consolidated Balance Sheet at December 31, 1999 F-2
Consolidated Statements of Operations for the years ended
December 31, 1999 and 1998 F-3
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1999 and 1998 F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1999 and 1998 F-5
Notes to the Consolidated Financial Statements F-6 - F-15
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Trident Media Group, Inc.
We have audited the consolidated balance sheet of Trident Media Group,
Inc. and Subsidiaries (the "Company") as of December 31, 1999, and the
related statements of operations, stockholders' equity and cash flows for
the years ended December 31, 1999 and 1998. 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 audit.
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 consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Trident Media Group, Inc. and Subsidiaries as of December 31,
1999, and the consolidated results of their operations and their
consolidated cash flows for the years ended December 31, 1999 and 1998, in
conformity with generally accepted accounting principles.
/s/ Grant Thornton LLP
- ----------------------
GRANT THORNTON LLP
Irvine, California
March 17, 2000, (except for Note 15,
as to which the date is March 27, 2000)
<TABLE>
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<CAPTION>
December 31,
1999
-----------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 346,400
Accounts receivable, net of allowance for doubtful accounts
of $94,300 499,600
Prepaid expenses 114,000
Deferred taxes 384,500
Other current assets 43,300
-----------
Total current assets 1,387,800
Property and equipment, net 3,536,700
Other assets 231,200
-----------
$ 5,155,700
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 473,600
Current portion of bank debt 945,400
Other current liabilities 98,700
-----------
Total current liabilities 1,517,700
Bank debt, less current portion 1,447,400
Payable to majority stockholder 300,000
Deferred taxes 690,500
Other long-term liabilities 32,800
-----------
Total liabilities 3,988,400
-----------
Stockholders' equity:
Common stock, $.001 par value, 100,000,000 shares authorized,
5,000,152 shares issued and outstanding 5,000
Paid in capital 35,000
Retained earnings 1,127,300
-----------
Total stockholders' equity 1,167,300
-----------
$ 5,155,700
===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Year Ended
----------------------------
December 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Revenues $ 9,480,800 $ 8,538,900
----------- -----------
Operating costs and expenses:
Cost of operations 5,471,800 5,579,200
Selling, general and administrative 2,358,500 2,822,500
Depreciation and amortization 1,177,200 1,145,000
----------- -----------
Total operating costs and expenses 9,007,500 9,546,700
----------- -----------
Income (loss) from operations 473,300 (1,007,800)
Interest expense 332,100 300,000
----------- -----------
Income (loss) before income taxes and
cumulative effect of accounting change 141,200 (1,307,800)
Income tax provision (benefit) 76,000 (422,800)
----------- -----------
Income (loss) before cumulative effect
of accounting change 65,200 (885,000)
Cumulative effect of accounting change, net of tax - (43,700)
----------- -----------
Net income (loss) $ 65,200 $ (928,700)
=========== ===========
Per share amounts
Income (loss) before cumulative effect
of accounting change - Basic $ 0.01 $ (0.18)
=========== ===========
- Diluted $ 0.01 $ (0.18)
=========== ===========
Net income (loss) per share - Basic $ 0.01 $ (0.19)
=========== ===========
- Diluted $ 0.01 $ (0.19)
=========== ============
Weighted average number of shares outstanding
- Basic 5,000,152 4,856,316
=========== ============
- Diluted 5,530,954 4,856,316
=========== ============
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<TABLE>
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1999 and 1998
<CAPTION>
Amounts
Additional Due from
Common Paid-In Related Retained
Stock Capital Parties Earnings Total
--------- ---------- ------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1997 $ 12,300 $ 50,000 $ (2,300) $2,008,500 $2,068,500
Merger with Spector Entertainment (7,300) (50,000) - (17,700) (75,000)
Group, Inc.
Payment of related party receivable - - 2,300 - 2,300
Issuance of warrants in connection - 35,000 - - 35,000
with SEG merger
Net loss (928,700) (928,700)
---------- -------- -------- ---------- ----------
Balance at December 31, 1998 5,000 35,000 - 1,062,100 1,102,100
Net Income 65,200 65,200
---------- -------- -------- ---------- ----------
Balance at December 31, 1999 $ 5,000 $ 35,000 $ - $1,127,300 $1,167,300
========== ======== ======== ========== ==========
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1999 and 1998
<CAPTION >
1999 1998
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 65,200 $ (928,700)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,177,200 1,145,000
Deferred income taxes 50,200 (449,900)
(Gain) loss on disposal of property and equipment 25,400 7,800
Cumulative effect of accounting change - 43,700
Bad debt expense 22,700 80,700
Expense relating to issuance of warrants - 35,000
Increase (decrease) in cash resulting from changes in:
Accounts receivable 116,300 2,000
Prepaid expenses and other assets 75,900 (40,000)
Accounts payable and accrued liabilities (723,100) 357,600
Taxes payable (13,300) 1,600
---------- ----------
Net cash provided by operating activities 796,500 254,800
---------- ----------
Cash flows from investing activities:
Change in amounts due from related parties (1,400) (43,200)
Purchase of property and equipment (543,800) (410,400)
Purchase of Steinley's Photochart Systems, Inc. (22,200) (272,000)
Purchase of GoldenTel Prepaid, LLC. - (230,000)
Purchase of On Track, Inc.(Net of $13,000 cash acquired) - (126,600)
---------- ----------
Net cash used by investing activities (567,400) (1,082,200)
---------- ----------
Cash flows from financing activities:
Advances from majority stockholder 300,000 -
Debenture payment to former stockholder (75,000) -
Borrowings from revolving credit agreement 227,800 -
Principal payments of bank debt (3,067,500) (628,600)
Proceeds from bank borrowings 2,165,000 1,443,300
Principal payments on capital leases 2,800) (9,900)
Other 35,000 (28,700)
---------- ----------
Net cash (used) provided by financing activities (417,500) 776,100
---------- ----------
Net decrease in cash and cash equivalents (188,400) (51,300)
Cash and cash equivalents at beginning of year 534,800 586,100
---------- ----------
Cash and cash equivalents at end of year $ 346,400 $ 534,800
=========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
TRIDENT MEDIA GROUP, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------
1. MERGER WITH SPECTOR ENTERTAINMENT GROUP, INC.:
On January 15, 1998, Spector Entertainment Group, Inc. ("SEG"), which
was formed in 1984, Millenium Entertainment LLC ("Millenium"), a California
Limited Liability Company, 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. As a result, the
shareholders of Millenium control approximately 90% of the issued and
outstanding shares of Trident.
For accounting purposes, this transaction was recorded as if SEG
acquired Trident (a recapitalization of SEG). The fair value of Trident's
net assets, which approximated cost, was used to determine the value of the
previously outstanding Trident shares.
2. THE COMPANY:
Trident, 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.
3. ACQUISITIONS:
The following acquisitions were completed during the year ended
December 31, 1998. These transactions were all accounted for under the
purchase method of accounting. Operations for these acquisitions are
included in the consolidated financial statements for the periods after the
acquisition dates for the respective acquisition.
Steinley's Photochart Systems, Inc.
----------------------------------
On April 1, 1998, the Company acquired 100% of the issued and
outstanding common stock of Steinley's Photochart Systems, Inc.
("Steinley's") for $350,000 ($250,000 in cash and the remainder to be paid
in monthly installments in connection with a consulting and non-compete
agreement with one of the former owners). As of December 31, 1999, the
liability for the remaining monthly installments was $45,000. 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 (as
of April 1, 1999, $64,200 had been earned under this provision).
Steinley's is a provider of audio-video and photo finish services to the
pari-mutuel racing industry.
GoldenTel Prepaid, LLC.
-----------------------
On June 2, 1998, the Company acquired 100% of the issued and
outstanding membership units of GoldenTel Prepaid, LLC. ("GoldenTel") for
$200,000 in cash and an earn-out of an additional $30,000 if certain
revenue objectives are achieved for the two months commencing June 2, 1998.
These revenue objectives were met and the earn-out payment was paid on
September 2, 1998. GoldenTel (which changed its name to Trident Prepaid,
Inc.) markets and sells prepaid telephone calling cards primarily through
electronic dispensing machines in the State of Nevada
On Track, Inc.
--------------
On June 24, 1998, the Company acquired 100% of the issued and
outstanding common stock of On Track, Inc. ("OTI") for $200,000. The
purchase price was payable $100,000 at closing and $100,000 less any
unrecorded liabilities, as defined in the agreement, six months after the
closing date. On January 15, 1999, $39,600 was paid to the former owners
of OTI, as payment for the remaining purchase obligation. OTI provides
video production and related services to the pari-mutuel racing industry as
well as insert advertising to the cable television industry in the
southwest portion of the United States.
Trident Telecard, Inc.
----------------------
In September 1998, the Company acquired certain assets from an
unrelated third party and formed a new company, Trident Telecard, Inc.
("Telecard"). Telecard's purpose was to develop and distribute through a
network of wholesalers prepaid telephone calling cards. In December 1998,
the Company determined that certain assumptions in the business plan for
this entity were no longer valid. Accordingly, all operations were
discontinued and a reserve to provide for the shut down of operations of
$75,000 was recorded as of December 31, 1998.
Supplemental Proforma Results of Operations
-------------------------------------------
The following proforma information presents the consolidated results
of operations for the year ended December 31, 1998, as if the above noted
purchases had occurred at the beginning of the period and does not purport
to be indicative of what would have occurred had the acquisitions actually
been made as of such date or of results which may occur in the future.
1998
----------
[S] [C]
Revenue $9,500,000
Income (loss) from operations (1,175,000)
Net Income (loss) (1,200,000)
Income (loss) per share (0.25)
4. SIGNIFICANT ACCOUNTING POLICIES:
Consolidation
-------------
The consolidated financial statements included the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
transactions have been eliminated.
Revenue Recognition
-------------------
Revenue from broadcasting and production activities is recognized at
the time services are performed by the Company. Most of the Company's
revenue is generated under multi-year contracts with remaining terms from
one to five years. The Company provides services for customers' scheduled
events under these noncancelable contracts for the term of the contract.
As of December 31, 1999, contractual revenue for the future periods under
these agreements amounted to approximately $11,600,000.
Revenue from prepaid phone card activities is recognized at the time
of sale.
Fair Value of Financial Instruments
-----------------------------------
The carrying amounts for cash and cash equivalents, accounts
receivable, accounts payable, and accrued expenses reflected in the
financial statements approximated fair value because of the short maturity
of these items. The carrying amount of the Company's long-term debt at
December 31, 1999, approximated fair value because the interest rate is
adjusted frequently based on market conditions.
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. 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.
Goodwill
--------
Goodwill recorded in connection with acquisitions is included in other
assets and is amortized on a straight-line basis over four years.
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. During fiscal year 1999, three customers accounted for
25% of total revenues. During fiscal year 1998, four customers accounted
for 32% 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.
Reclassifications
-----------------
Certain amounts for 1998 have been reclassified to conform with the
1999 presentation.
5. EARNINGS PER SHARE:
The computation of basic earnings per share of common stock is based
on the weighted average number of shares outstanding during the periods
presented. Options and warrants to purchase common stock of 807,484 and
100,000, respectively, are outstanding at December 31, 1999.
The following table represents the required disclosure of the basic
and diluted earnings per share computation for the twelve months ended
December 31, 1999 and 1998.
<TABLE>
<CAPTION>
Twelve months ended December 31,
--------------------------------------------------------------------
1999 1998
---------------------------------- ----------------------------------
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) $ 65,200 5,000,152 $ 0.01 $ (928,700) 4,856,316 $ (0.19)
====== =======
Effect of Dilutive
Securities
Securities Assumed
Converted
Options 590,000
Warrants 100,000 -
Less Securities Assumed
Repurchased (159,198)
--------- --------- ------ ---------- --------- -------
Diluted EPS $ 65,200 5,530,954 $ 0.01 $ (928,700) 4,856,316 $ (0.19)
========= ========= ====== ========== ========= =======
</TABLE>
For 1999 and 1998, options and warrants to purchase a total of 217,000
and 815,000 shares, respectively, were excluded from the calculation of
diluted earnings per share as their effect would be antidilutive.
6. CHANGE IN ACCOUNTING:
The Company historically capitalized certain contract start-up costs,
primarily equipment installation costs, on its long-term television
production and management services contracts and amortized such costs over
the life of the related contract.
Statement of Position 98-5 ("SOP 98-5") issued by the AICPA Accounting
Standards Executive Committee on April 3, 1998, requires all costs of
start-up activities (as defined by SOP 98-5) to be expensed as incurred.
The company elected early adoption of SOP 98-5 (which is effective for
financial statements beginning after December 15, 1998) and accordingly
wrote off as a Change in Accounting start-up costs (as described above) of
$46,100 and organization costs associated with the merger between Trident
Media Group and SEG of $18,300.
<TABLE>
<CAPTION>
7. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1999, consists of the
following:
<S> <C>
Operating equipment $ 9,439,400
Electronic dispensing equipment 292,100
Building and leasehold improvements 280,500
Office furniture and equipment 475,100
Automobiles 192,900
-----------
10,680,000
Less accumulated depreciation and amortization (7,143,300)
-----------
$ 3,536,700
===========
</TABLE>
<TABLE>
<CAPTION>
8. BANK DEBT:
<S> <C>
Bank debt at December 31, 1999, consists of
the following:
Bank note payable bearing interest at bank's
prime rate plus 1.5% (8.5% at December 31,
1999). Principal payments of $23,300 plus
interest due monthly. Balance due
December 31, 2002. $1,400,000
Bank note payable bearing interest at bank's
prime rate plus 2.5% (8.5% at December 31,
1999). Interest only through April 2000.
Principal payments of $54,700 plus interest
due monthly May 2000 through June 2001 765,000
Bank revolving note of up to $1,000,000 bearing
interest at Bank's prime rate plus 1.5%
(8.5% at December 31, 1999). Interest Payments
due monthly. 227,800
----------
2,392,800
Less current portion 945,400
----------
$1,447,400
----------
</TABLE>
Bank debt is collateralized by all of the Company's assets and is
personally guaranteed (up to $1,500,000) 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.
The annual principal payments for the term notes described above for
years ending December 31, are as follows:
2000 $716,600
2001 936,000
2002 512,400
----------
$2,165,000
----------
9. INCOME TAXES:
The provision (benefit) for income taxes, excluding $20,700 related to
an accounting change in 1998, consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Current:
Federal $ - $ -
State 13,000 27,100
---------- ----------
Total Current 13,000 27,100
Deferred:
Federal 18,700 (504,000)
State 44,300 54,100
---------- ----------
Total Deferred 63,000 (449,900)
---------- ----------
Provision (benefit) for income taxes $ 76,000 $ (422,800)
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Temporary differences consist of the following:
As of December 31,
1999
------------------
<S> <C>
Deferred tax assets:
Net operating loss $ 223,000
Other 161,500
----------
Total current deferred tax assets 384,500
----------
Deferred tax liabilities:
Depreciation (690,500)
Other -
----------
Total deferred tax liabilities (690,500)
----------
Total net deferred tax liabilities $ (306,000)
==========
</TABLE>
Income tax provision (benefit) varies from statutory federal rate
primarily due to state income taxes and non-deductible expenses.
As of December 31, 1999, the Company has net operating losses of
approximately $613,000, which begin to expire on December 31, 2010.
10. SUPPLEMENTAL DISCLOSURES TO STATEMENT OF CASH FLOWS:
Cash paid for interest was approximately $333,600 and $275,200 during
fiscal years 1999 and 1998, respectively. Cash paid for income taxes was
$36,500 and $32,800 during fiscal years 1999 and 1998, respectively.
11. 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. On December 30, 1998, the exercise price of the
warrants was set at $0.95 per share. The warrants are exercisable for a
period of two years from December 30, 1998.
Options
-------
In 1998, the Company adopted a stock option plan (the "1998 Non-
Qualified Stock Option Plan") accounted for under APB Opinion 25 and
related Interpretations. The Plan allows the Company to grant options to
employees for up to 850,000 shares of common stock. Options currently
outstanding become exercisable in one to three years from the grant date
and expire 6 years after the grant date. The options are exercisable at no
less than 85% of the market value of the Company's stock on the date of the
grant. Options granted to date have exercise prices equal to the market
value of the Company's stock on the date of the grant, therefore no
compensation cost has been recognized for the Plan. Had compensation cost
for the Plan been determined based on the fair value of the options at the
grant dates consistent with the method of Statement of financial Accounting
Standards 123, Accounting for Stock-Based Compensation (SFAS 123), the
Company's net loss and loss per share would have been increased to the
proforma amounts indicated below.
<TABLE>
1999 1998
-------- ---------
<S> <C> <C>
Net Income As reported $ 65,200 $(928,700)
Proforma $ 52,000 $(931,650)
Basic income (loss)
per share As reported $ 0.01 $ ( 0.19)
Proforma $ 0.01 $ (0.19)
</TABLE>
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes options-pricing model with the following weighted-
average assumptions: dividend yield of zero percent; expected volatility of
zero percent; risk-free interest rate of 5.5 percent; and expected lives of
6 years.
A summary of the status of the Company's fixed stock option plan as of
December 31, 1999, and changes during the year ending on that date is
presented below.
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Shares Exercise Price Fair Value
------- -------------- ----------
<S> <C> <C> <C>
Outstanding at beginning of year 715,000 $ 0.37 $ 0.08
Granted 109,321 0.78 0.20
Forfeited (16,837) 1.50 0.31
------- --------- ---------
Outstanding at end of year 807,484 $ 0.40 $ 0.09
======= ========= =========
Options exercisable at
December 31, 1999 174,781 $ 0.34 $ 0.07
======= ========= =========
</TABLE>
The following table summarizes information concerning options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Weighted
Average Remaining Weighted
Exercise Number Contractual Average
Prices Outstanding Life (years) Exercise Price
-------- ----------- ----------------- --------------
<S> <C> <C> <C>
$ 0.125 590,000 4.20 $ 0.125
1.50 113,163 5.00 1.50
0.75 104,321 6.00 0.75
--------
807,484
========
</TABLE>
12. TRANSACTION WITH RELATED PARTIES AND COMMITMENTS:
Leases
------
The Company leases office space from Margate Associates, a general
partnership wholly-owned by the majority stockholder 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 years ended December 31,
1999 and 1998 was $280,800, and was paid to Margate Associates.
Future payments under the office lease are as follows:
Year ending December 31,
------------------------
2000 $280,800
2001 280,800
2002 280,800
Thereafter 117,700
--------
$960,100
========
Payable to majority stockholder
-------------------------------
During the year ended December 31, 1999, the Company's majority
stockholder advanced $300,000 (net of $295,000 in repayments) toward
funding the Company's operations. The outstanding balance of $300,000 is
non-interest bearing and as of December 31, 1999 is subordinated to the
outstanding bank debt and can not be paid without written consent of the
bank.
13. COMMITMENTS AND CONTINGENCIES:
Satellite Transponder Lease
---------------------------
The Company leases certain satellite transponder capacity under an
operating lease through June 30, 2001. Future minimum payments under this
lease are as follows:
Year ending December 31,
------------------------
2000 $1,200,000
2001 300,000
----------
$1,500,000
==========
Total satellite expense, including lease payments and transponder time
purchased on the open market, was $1,714,000 and $2,202,000 for the years
ended December 31, 1999 and 1998, respectively.
14. DISCLOSURE OF SEGMENT INFORMATION:
The Company has the following two reportable segments: Network
Services Group and Telecommunications Services Group (which was commenced
during the year ended December 31, 1998). 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 accounting policies used to develop segment information correspond
to those described in the summary of significant accounting policies. 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 the years ended
December 31, 1999 and 1998 (000's).
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------
1999 1998
---------------------------- ------------------------------
Network Telecommu- Network Telecommu-
Services nication Services nication
Group Services Total Group Services Total
------- --------- ------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 8,071 $ 1,410 $ 9,481 $ 7,470 $ 1,069 $ 8,539
Cost of Operations 4,699 773 5,472 4,644 935 5,579
Depreciation and
Amortization 1,099 78 1,177 1,109 36 1,145
------- --------- ------- -------- --------- -------
Gross Profit $ 2,273 $ 559 2,832 $ 1,717 $ 98 1,815
======= ======= ======== =========
Selling, General &
Administrative 2,359 2,823
------- -------
Income (loss) from
Operations $ 473 $(1,008)
======= =======
Identifiable Assets $ 5,010 $ 416 $ 5,426 $ 5,985 $ 499 $ 6,484
======= ======= ======= ======= ========= =======
</TABLE>
15. SUBSEQUENT EVENT:
On March 27, 2000, the Company entered into a Letter of Intent with a
major customer to sell certain assets and to assign to the customer all
television production contracts between the Company and the customer. The
agreement calls for a cash purchase price of $1.6 million and is expected
to close by the end of April 2000. The majority of the proceeds will be
used to pay down or retire the Company's bank debt.
Exhibit 21.01
TRIDENT MEDIA GROUP, INC.
SUBSIDIARIES OF REGISTRANT
Subsidiary State of Jurisdiction or Incorporation
- --------------------------------- -------------------------------------
Spector Entertainment Group, Inc. California
Steinley's Photochart Systems, Inc. Idaho
On Track, Inc. New Mexico
Trident Prepaid, Inc.
(formerly GoldenTel Prepaid LLC) Nevada
Trident Telecard, Inc. Nevada
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Form
10KSB for the year ended December 31, 1999 of Trident Media Group, Inc. and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 346,400
<SECURITIES> 0
<RECEIVABLES> 593,900
<ALLOWANCES> 94,300
<INVENTORY> 9,600
<CURRENT-ASSETS> 1,387,800
<PP&E> 10,680,000
<DEPRECIATION> 7,143,300
<TOTAL-ASSETS> 5,155,700
<CURRENT-LIABILITIES> 1,517,700
<BONDS> 2,392,800
0
0
<COMMON> 5,000
<OTHER-SE> 1,162,300
<TOTAL-LIABILITY-AND-EQUITY> 5,155,700
<SALES> 0
<TOTAL-REVENUES> 9,480,800
<CGS> 0
<TOTAL-COSTS> 9,007,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 22,700
<INTEREST-EXPENSE> 332,100
<INCOME-PRETAX> 141,200
<INCOME-TAX> 76,000
<INCOME-CONTINUING> 65,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,200
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
