U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
Quarterly report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended
September 30, 1997.
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________ to _______________
Commission file number 000-21585
Worldwide Entertainment & Sports Corp.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware
22-3393152 (State or Other Jurisdiction of (I.R.S.
Employer Incorporation or Organization) Identification No.)
29 Northfield Avenue, West Orange, New Jersey 07052
(Address of Principal Executive Offices)
(973) 325-3244
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Fiscal Year, if Changed Since Last Report)
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 such filing requirements for the past 90 days.
Yes ___x___ No _______
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, $.01par value - 5,317,755 shares
Transitional Small Business Disclosure Format (check one):
Yes ______ No ___x____
<PAGE>
PART I.
Item 1. Financial Statements
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and certificates of deposit $ 339,740
Marketable securities (at fair market value) 1,046,020
Accounts receivable, net of allowance for
doubtful accounts of $600 142,149
Due from athletes and other related parties
, net of reserves of $177,604 401,020
Other current assets 10,710
==========
1,939,639
PROPERTY AND EQUIPMENT - AT COST
Less accumulated depreciation of $41,836 21,855
OTHER ASSETS 11,811
==========
$ 1,973,305
See Notes to Unaudited Condensed Consolidated Financial Statements.
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(Unaudited)
LIABILITIES
CURRENT LIABILITIES:
Accounts payable $ 149,007
Accrued expenses 15,126
Compensation and related items 55,450
Escrow funds payable 149,156
Due to officer 68,826
Income taxes payable 450
=======
438,015
STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY):
Preferred stock, $.01 par value; authorized 5,000 shares; no shares
Issued -
Common stock, $.01 par value; authorized 20,000,000 shares;
5,317,755 shares issued 53,178
Additional paid-in capital 6,979,166
Accumulated deficit (5,486,113)
Demand note receivable on private issuance of Common Stock (12,350)
Unrealized gain on marketable securities 1,409
=========
1,535,290
=========
$ 1,973,305
See Notes to Unaudited Condensed Consolidated Financial Statements.
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
<S> <C> <C> <C> <C>
1997 1996 1997 1996
Purse income $ 12,094 $ 5,500 $ 39,295 $ 127,687
Commission income 22,791
Ticket revenues 248 12,636 31,353 12,636
Merchandise revenues 1,008
Agency and endorsement fee revenue 97,326 7,396 163,259 18,446
Television income 87,500
====== ====== ====== ======
109,668 25,532 321,407 182,568
Training and related expenses 41,518 18,491 372,251 71,064
Promotion and other operating expenses 724,514 460,544 2,381,991 1,195,690
Other expenses 50,000 50,000
766,032 529,035 2,754,242 1,316,754
Loss from operations (656,364) (503,503) (2,432,835) (1,134,186)
Other income and expenses:
Interest and dividend income 14,844 13 83,591 459
Interest expense (50,456) (123,263)
Other (9,520) (10,862)
5,324 (50,443) 72,729 (122,804)
Loss before income taxes (651,040) (553,946) (2,360,106) (1,256,990)
Income taxes (310) 6,488 440
NET LOSS $ (651,040) (553,636) $ (2,366,594) $ (1,257,430)
LOSS PER SHARE $ (0.12) $ (0.14) $ (0.45) $ (0.33)
WEIGHTED AVERAGE OF
COMMON SHARES OUTSTANDING 5,317,755 3,841,205 5,206,970 3,826,484
</TABLE>
See Notes to Unaudited Condensed Consolidated Financial Statements.
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended September 30,
1997 1996
Cash Flows from Operating Activities $ (2,372,994) $ (1,235,482)
Cash Flows from Investing Activities 1,404,479 63,890
Cash Flows from Financing Activities 216,750 612,957
Net Increase (Decrease) in Cash (751,765) (558,635)
Cash at Beginning of Year 1,091,505 547,136
Cash (Overdraft) at End of Period $ 339,740 $ (11,499)
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Income Taxes $ 6,489 $ 1,000
Interest $ $ 1,711
See Notes to Unaudited Condensed Consolidated Financial Statements
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - NATURE OF ORGANIZATION AND BASIS OF PRESENTATION:
1. Nature of Organization:
Worldwide Entertainment & Sports Corp. (the "Company") was incorporated in
Delaware on August 15, 1995, for the purpose of providing management, agency,
and marketing services to professional athletes, artists and entertainers.
2. Basis of Presentation
The Condensed Financial Statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations.
The Condensed Financial Statements included herein
reflect, in the opinion of management, all adjustments (consisting primarily
only of normal recurring adjustments) necessary to present fairly the results
for the interim periods. The results of operations for the three and nine month
periods ended September 30, 1997 are not necessarily indicative of results to be
expected for the entire year ending December 31, 1997.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1. The condensed consolidated financial statements include the accounts of
the Company and all of its subsidiaries, all of which are wholly-owned except
for Worldwide Basketball Management, Inc., which company is 80% owned.
2. Purse revenue is recognized upon completion of a fight, as a percentage
of the boxer's purse. Commission and endorsement income is recognized upon the
completion of the contracted event. Ticket revenues are recognized upon the
commencement of a scheduled fight. Agency fee revenue is recognized ratably over
the various athletic seasons.
3. Loss per share is computed by dividing net loss by the weighted average
number of shares of Common Stock outstanding during the period. Common Stock
equivalents have not been included in this computation since the effect would be
anti-dilutive.
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
NOTE C - SALE OF COMMON STOCK
On October 22, 1996, the Company sold 1,400,000 Units, each comprising one
share of its Common Stock, $.01 par value, and one Redeemable Common Stock
Purchase Warrant in an initial public offering. Each Redeemable Warrant entitles
the holder to purchase one share of Common Stock at $7.20 commencing October 22,
1997 until October 21, 2001. The proceeds from this transaction (approximately
$7.5 million) were used, in part, to repay outstanding indebtedness of
approximately $2,150,000 and costs and expenses of the offering. The remainder
has been and will be used for operating purposes and has been invested in
short-term securities.
NOTE D - OTHER ITEMS
1. On August 29, 1996 a settlement agreement was reached with a trainer for
one of the boxers which provided for termination of a contract which was
previously made with such trainer. A payment of $50,000 was made on September 6,
1996. Another payment of $50,000 was paid in October 1996.
2. On May 5, 1997, the Company and Joel Segal entered into an agreement,
whereby Segal became an employee of Worldwide Football Management , Inc. a
wholly-owned subsidiary. Segal is a well known football agent and will lead the
Company's efforts in that sport.
3. During the quarter ended June 30, 1997, the Company charged to
operations the remaining balance of the cost of a consulting agreement with
Summit Management Group. Summit was to identify and assist in the recruiting of
players for the Company; however, no players were identified or recruited as a
result of Summit's efforts.
4. On July 7, 1997, the Company sold 100,000 shares of its Common Stock in
a private transaction. The price was the market price on that date, $1.25 per
share.
NOTE E - SUBSEQUENT EVENTS
On October 7, 1997, the Company commenced a Confidential Private Offering
for the sale of a minimum of 444,444 shares and a maximum of 1,555,556 shares of
Common Stock at a price of $2.25 per share. The net proceeds of this offering
are to be used principally for working capital, debt repayment and acquisition.
On November 19, 1997, the Company held the initial closing of such private
offering, selling an aggregate of 492,222 shares, generating gross proceeds of
$1,107,500. The Company is continuing to seek to sell the remaining shares
offered pursuant to such private offering.
On October 22, 1997, the Company, through its wholly-owned subsidiary,
Worldwide Bobcats Football, Inc., executed a preliminary agreement in the form
of term sheets to acquire all of the assets and assume certain specified
liabilities of Florida Sports Enterprises, L.P. which owns the Florida Bobcats
Arena Football team. The purchase price is $1,937,500 in cash plus 1,100,000
shares of unregistered Common Stock. The Company is currently attempting to
negotiate a Purchase and Sale Agreement relating to such acquisition and to
negotiate the final terms and conditions thereof. Assuming the execution of such
an agreement, the closing of the transaction will be dependent upon numerous
conditions and there can be no assurance that all of such conditions will be
satisfied or that the closing will occur.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
General
Worldwide Entertainment & Sports Corp. was organized in August 1995, and
since such date has succeeded to the business operations of various entities
engaged in the management of professional boxers, each previously controlled by
the Company's Chief Executive Officer. In addition, in January 1996, the Company
formed Worldwide Team Sports, Inc. ("WWTS") and hired a registered NFL contract
advisor. In August 1996, for the purpose of providing agency, marketing and
management services to professional basketball players, the Company formed
Worldwide Basketball Management, Inc. ("WWBM"), a corporation 80% owned by the
Company and 20% owned by WWBM's President and Executive Vice President,
respectively. In March 1997, the Company established Worldwide Sports
Promotions, Inc. for the purpose of promoting sporting events. Through WWBM and
WWTS, the Company has expanded into the field of player agency and contract
advisory services. The Company had only limited experience in the negotiation of
player contracts, and consequently in May 1997, the Company formed Worldwide
Football Management Inc. and retained the services of another registered NFL
Agent. To date, the Company has generated limited revenues from contract
advisory services to professional football and basketball players.
Establishing and maintaining a presence in each of the Company's areas
of concentration, (i.e., boxing management and team sports player agency)
require significant expenditures. Each sports specific division must develop a
roster of clients, establish relationships within their prospective sports and
develop support services to provide to the athletes. Only a portion of such
expenses incurred by the Company will result in the engagement by a client of
the Company's services, and it is often uncertain the extent to which, even if
retained, a target client will generate significant revenues to the Company. In
addition, the Company incurs significant training expenses for the boxers under
the Company's management, not all of which are directly reimbursed pursuant to
bout agreements for such boxers. In the development of a boxer, particularly a
young amateur boxer, into a professional boxer who can command significant
purses, such expenses can be incurred over a period of years and constitute
hundreds of thousands of dollars or more. The Company must continuously incur
such expenses in contemplation of future revenues, the receipt of which is
uncertain.
The Company's revenues are directly related to the earnings of its clients.
The Company derives revenues based upon a percentage, currently ranging from 15%
to 27-1/2%, of the boxers' purses from professional bouts. The Company also
derives revenues based upon a percentage of salaries and other income received
from contracts, endorsement arrangements and other income producing activities
of athletes for whom the Company or its management acts as agent or
representative. These percentages currently range up to 4% for professional
basketball and football player contracts to a range of 10% or 20% for
endorsement and marketing revenues.
The timing of receipt of revenues by the Company is subject to seasonal
variations with respect to revenues generated from the negotiation of player
contracts and subject to irregular patterns in the case of boxing purse revenues
as a result of the irregular occurrence of the bouts. In addition, the magnitude
of the Company's revenues can be expected to experience wide fluctuations based
upon the success or failure of the Company's boxers or the negotiation of player
contracts with significant bonus provisions. The Company's WWTS subsidiary can
be expected to incur significant expenditures during the first eight months of
each calendar year (particularly March through July) for recruitment and related
expenses, and to receive its revenues during the last four and first three
months of the year during the NFL and NBA seasons. If the Company were to expand
into the representation of baseball players (or other professional athletes with
a spring/summer season), of which there can be no assurance, the effects of such
seasonality would be diminished.
<PAGE>
Nine months Ended September 30, 1997 Compared with Nine months Ended September
30, 1996
Net revenues for the nine months ended September 30, 1997 were $321,407, as
compared to $182,568 for the nine months ended September 30, 1996. Although
during the nine months ended September 30, 1997, the Company was actively
engaged in the management of its four boxers (the same as the comparable 1996
period), one of the Company's boxers, Ray Mercer, was forced to cancel a
scheduled bout during the current period due to a neck injury. Mr. Mercer has
undergone surgery to correct the injury, and the Company has been advised by Mr.
Mercer's physician that Mr. Mercer may engage in bouts as early as January 1998.
Historically, Mr. Mercer's bouts have generated the largest purses of the
Company's boxers. Accordingly, purse income decreased to $32,295 for the nine
months ended September 30, 1997 as compared to $127,687 for the nine months
ended September 30, 1996 as a result of a decrease in the number of bouts for
the Company's boxers. During the nine months ended September 30, 1997, the
Company recognized agency, endorsement and commission income from representation
of team sports athletes, aggregating $97,326. Such revenues received by the
Company during the same period in 1996 amounted to $41,237. This increase is
attributable to an increase in the number of player's represented by the
Company. During the nine months ended September 30, 1996, the Company purchased
tickets to bouts and then resold the tickets to aid in the distribution of
tickets. Such practice was not for the purpose of generating gain on the sale of
the tickets, and such practice was suspended in late 1996. Accordingly, there
was limited ticket revenues for the nine months ended September 30, 1996 of
$12,636, as compared to $31,535 for the 1997 period, when the Company started to
promote fights for its own boxers. Such revenues are largely offset by a
corresponding expense for promoting costs. In addition, in 1997, the Company
received $87,500 of television revenue for the fights it promoted.
Total expenses increased for the nine months ended September 30, 1997 to
$2,754,252 from $1,316,754 for the nine months ended September 30, 1996.
Promotion and other operating expenses increased to $2,381,991 for the nine
months ended September 30, 1997 as compared to $1,195,690 for the corresponding
1996 period as a result of increased expenses of (i) approximately $200,000 of
travel and entertainment expenses and signing bonuses of $105,000, incurred in
connection with the recruitment of professional football players and Agents for
the Team Sports Division and in connection with bouts for the Company's boxers,
and (ii) approximately $350,000 in increased payroll expenses as a result of the
hiring of professional NFL agents, the compensation of the Corporate officers
and additional staff personnel, and (iii) additional professional and consulting
fees of approximately $150,000 due to the public status of the Company in 1997.
The nine month period ended September 30, 1996 also included $72,807 of interest
expense attributable to the 10% promissory notes issued in connection with the
Company's private placement which originated in September 1995. Such notes were
repaid in full with the proceeds of the Company's Initial Public Offering in
October 1996. In the nine months ended September 30, 1997, operations include
$190,000 of expense related to an agreement with the a consultant, which the
Company has charged off due to non-performance, and $96,105 of expenses related
to the issuance of common stock to consultants to pay liabilities and claims.
Accordingly, the Company's net loss for the nine months ended September 30, 1997
increased to $2,366,594 from $1,257,430 for the corresponding 1996 period.
Liquidity and Capital Resources
Prior to October 1996, the Company's principal source of operating capital
had been provided by loans and capital contributions from the Company's
stockholders as well as private sales of the Company's debt securities. On
October 22, 1996, the Company sold 1,400,000 Units, each comprising one share of
Common Stock and one Redeemable Common Stock Purchase Warrant, in an Initial
Public Offering. Net proceeds to the Company was approximately $7.5 million. The
proceeds were used to repay approximately $2,150,000 of debt and $550,000 of
costs associated with the offering. The balance of the proceeds have been used
for working capital since October 1996. At September 30, 1997, the Company had
approximately $1,501,624 of working capital, of which $1,385,760 was cash and
short-term investments.
<PAGE>
The Company may relocate its administrative offices and boxing
facility. It is anticipated that the Company will incur expenditures of
approximately $150,000 in connection therewith. Management salaries (aggregating
approximately $650,000 per annum) and anticipated training expenses (estimated
at approximately $475,000, depending upon the number of bouts) represent the
expected significant uses of working capital during the next twelve months, as
well as recruitment expenses (estimated to approximate $650,000, subject to
variations depending upon player availability and recruiting success) and rent
(approximately $108,000 per annum).
On October 22, 1997, the Company, through its wholly-owned subsidiary,
Worldwide Bobcats Football, Inc., executed a preliminary agreement in the form
of term sheets to acquire all of the assets and assume certain specified
liabilities of Florida Sports Enterprises, L.P. which owns the Florida Bobcats
Arena Football team. The purchase price is $1,937,500 in cash plus 1,100,000
shares of unregistered Common Stock. The Company is currently attempting to
negotiate a Purchase and Sale Agreement relating to such acquisition and to
negotiate the final terms and conditions thereof. Assuming the execution of such
an agreement, the closing of the transaction will be dependent upon numerous
conditions and there can be no assurance that all of such conditions will be
satisfied or that the closing will occur. The consumation of the acquisition of
the Bobcats can be expected to require several million dollars to finance
acquisition costs and working capital for the operation of the team. In
addition, the Company may be required to provide a letter of credit to the Arena
Football League in connection with the league approval process. The Company
intends to conduct a private placement or public offering of its securities to
satisfy such financing requirements. There can be no assurance that the Company
will be successful in conducting such private placement or otherwise satisfying
such financing requirements.
The Company believes that the proceeds of its October 1996 initial public
offering will be sufficient to fund its operations over the next 3 months or
longer. There can be no assurance that the Company will have sufficient revenues
after such time to fund its operating requirements. Accordingly, the Company
will be required to seek additional financing through bank borrowings, debt or
equity financings or otherwise. There can be no assurance that any such
financing will be available to the Company on favorable terms, if at all, in the
future. On July 7, 1997, the Company sold 100,000 shares of its Common Stock in
a private transaction generating net proceeds of $125,000. Additionally, on
October 7, 1997, the Company commenced a Confidential Private Offering for the
sale of a minimum of 444,444 shares and a maximum of 1,555,556 shares of Common
Stock at $2.25 per share ($965,000 and $3,465,000, net proceeds, respectively).
On November 19, 1997, the Company held the initial closing of such private
offering, selling an aggregate of 492,222 shares, generating gross proceeds of
$1,107,500, The Company is continuing to seek to sell the remaining shares
offered pursuant to such private offering.
<PAGE>
PART II.
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities
(a) None
(b) None
(c) Incorporated by reference from Part II of the Registration
Statement on Form SB-2, Registration No. 333-8855, declared effective October
22, 1996.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE>
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.
Worldwide Entertainment & Sports Corp.
(Registrant)
Date November 19, 1997 /s/ Marc Roberts
Marc Roberts, President
Date November 19,1997 /s/ Roy Roberts
Roy Roberts, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from
Worldwide Entertainment & Sports Corp. Form 10-Q for the quarter ended September
30, 1997.
</LEGEND>
<CIK> 0001002325
<NAME> Worldwide Entertainment & Sports Corp.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-30-1997
<CASH> 339,740
<SECURITIES> 1,040,020
<RECEIVABLES> 142,149
<ALLOWANCES> 600
<INVENTORY> 0
<CURRENT-ASSETS> 1,939,639
<PP&E> 21,855
<DEPRECIATION> 41,836
<TOTAL-ASSETS> 1,973,305
<CURRENT-LIABILITIES> 438,015
<BONDS> 0
0
0
<COMMON> 53,178
<OTHER-SE> 1,535,290
<TOTAL-LIABILITY-AND-EQUITY> 1,973,305
<SALES> 0
<TOTAL-REVENUES> 372,251
<CGS> 0
<TOTAL-COSTS> 2,754,242
<OTHER-EXPENSES> 10,862
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,360,106)
<INCOME-TAX> 6,488
<INCOME-CONTINUING> (2,366,594)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,366,594)
<EPS-PRIMARY> (.45)
<EPS-DILUTED> 0
</TABLE>
