As filed with the Securities and Exchange Commission on October 13, 1998
Registration No. 333-
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form SB-2
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
(Name of small business issuer in its charter)
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<S> <C> <C>
Delaware 7941 22-3393152
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
29 Northfield Avenue
Suite 200
West Orange, New Jersey 07052
(973) 325-3244
(Address and telephone number of principal
executive offices and place of business)
MARC ROBERTS, President
Worldwide Entertainment & Sports Corp.
29 Northfield Avenue
Suite 200
West Orange, New Jersey 07052
(973) 325-3244
Fax: (973) 325-2215
(Name, address and telephone number of agent for service)
Copies to:
CRAIG S. LIBSON, ESQ.
PARKER DURYEE ROSOFF & HAFT
Fifth Avenue
ew York, New York 10017
(212) 599-0500
ax: (212) 972-9487
Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement
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If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box[ ].
CALCULATION OF REGISTRATION FEE
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Proposed
Proposed maximum
maximum aggregate Amount of
Title of each class of Amount to be offering price offering registration
securities to be registered registered per Share(1) price(1) fee
Common Stock, $.01 par value.......... 4,333,333 Shares $1.50 $ 6,500,000 $1,917.50
Common Stock, $.01 par value 433,333 Shares(2) $1.80 $ 779,999 $ 230.09
TOTAL .................................. $ 7,279,999 $ 2,147.59
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933.
(2) Represents Shares to be sold to the Underwriter upon exercise
of the Underwriter's Warrant.
The Registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Prospectus
Subject to Completion, October 13, 1998
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
Public Offering of a Minimum of 3,000,000 and a Maximum of 4,333,333 Shares
of Common Stock
Worldwide Entertainment & Sports Corp. (the "Company") is offering (the
"Offering") for sale shares of common stock, par value $.01 ("Common Stock") to
raise gross proceeds of a minimum of $4,500,000 (the "Minimum Amount") and a
maximum of $6,500,000 (the "Maximum Amount"). The number of shares of Common
Stock being offered (the "Shares") and the Offering price per Share will be
determined based upon the prevailing market price of the Common Stock.
The Common Stock is quoted on The Nasdaq SmallCap Market under the
symbol "WWES." On October 7, 1998, the closing bid price of the Common Stock as
reported by The Nasdaq SmallCap Market was $1.50 per share. It is anticipated
that the Offering price will be at or near the prevailing market price of the
Common Stock on the date of the Offering. Based upon such Offering price, the
number of Shares offered to achieve the Minimum Amount would be 3,000,000 and
the number of Shares offered to achieve the Maximum Amount would be 4,333,333.
The actual number of Shares offered will change depending on the fluctuation of
the per share price of the Common Stock. There can be no assurance that the
market for the Common Stock will continue to exist after the completion of this
Offering. For additional information regarding the factors considered in
determining the Offering price of the Shares, see "Risk Factors" and
"Underwriting."
We are offering the Shares on a "best efforts, all or none" basis with
respect to the minimum number of Shares being offered hereby, and on a "best
efforts" basis with respect to sales of additional Shares up to the maximum
number of Shares. The Underwriter will deposit the proceeds of this Offering in
a non-interest bearing escrow account maintained at Liberty Bank of New York
pending completion or termination of the Offering. The Underwriter, with the
consent of the Company, may elect to complete the Offering at any time after the
Underwriter shall have received and accepted subscriptions for the Minimum
Amount or it may terminate the Offering within the forty-five day period after
the date of this Prospectus. The Underwriter may also extend such date of
termination (the "Termination Date") by an additional forty-five days. During
the escrow period, subscribers may not have their subscription deposits
returned. Unless at least the Minimum Amount of Shares are sold prior to the
Termination Date, the Company shall return all proceeds promptly to subscribers
without deductions for commissions or expenses and without interest thereon.
Officers, directors and stockholders of the Company are entitled to purchase an
unlimited number of Shares in the Offering, including the entire Minimum Amount.
All Shares are being offered subject to prior sale, withdrawal or cancellation
of the Offering at any time. See "Description of Securities" and "Underwriting."
These securities involve a high degree of risk. See page 5 for "Risk Factors."
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Underwriting Proceeds to
Price to Public Discounts(1) Company(2)
Per Share .... $ $ $
Total Minimum .... $4,500,000 $ 450,000 $4,050,000
Total Maximum .... $6,500,000 $ 650,000 $5,850,000
(1) Does not reflect additional compensation to the Underwriter in the form of
(i) a non-accountable expense allowance of up to $135,000 if the Minimum
Amount is subscribed and $195,000 if the Maximum Amount is subscribed; (ii)
Warrants, exercisable over a period of four years commencing one year from
the date of this Prospectus to purchase up to 300,000 shares of Common
Stock if the Minimum Amount is subscribed and 433,333 shares of Common
Stock if the Maximum Amount is subscribed, each at 120% of the per share
price of the Common Stock in this Offering; (iii) a two year preferential
right of first refusal for certain future financings of the Company and
(iv) a consulting fee of $90,000 pursuant to a three (3) year Consulting
and Merger and Acquisition Agreement all of which is payable at the Closing
of the Offering. In addition, the Company has agreed to indemnify the
Underwriter against certain civil liabilities, including liabilities under
the Security Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company estimated
at approximately $570,000 including the Underwriter's non-accountable
expense allowance and consulting fee.
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BELL INVESTMENT GROUP INC
The date of this Prospectus is October ___, 1998.
[The following language is located on the left margin of the first page of
preliminary prospectus]
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
<PAGE>
[ARTWORK]
The Company is currently a reporting company under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and furnishes its
stockholders with annual reports containing audited financial statements after
the close of each fiscal year.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS OR EFFECTING A SYNDICATE COVERING
TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK OF THE COMPANY ON THE NASDAQ SMALL-CAP MARKET IN ACCORDANCE WITH RULE 103
OF REGULATION M. SEE "UNDERWRITING."
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial data, including the notes related thereto, appearing
elsewhere in this Prospectus. All share and per share data in this Prospectus
assume that all options and warrants outstanding on the date of this Prospectus
will not be exercised.
The Company
Worldwide Entertainment & Sports Corp. (the "Company") was established
in 1995 to engage in the business of providing management and agency services to
professional athletes and entertainers. The Company, either directly or through
its subsidiaries, provides such services principally to professional boxers,
football players and basketball players. The Company also offers marketing and
commercial endorsement agency services to professional athletes in all sports
and it markets and sells sports memorabilia as well.
In 1995 the Company succeeded to the business operations of entities
previously operated by Marc Roberts, the Company's Chief Executive Officer. Mr.
Roberts has managed professional boxers for over 19 years. The Company currently
is a party to exclusive management contracts with four boxers - Ray Mercer,
Charles Murray, Shannon Briggs and Danell Nicholson - pursuant to which the
Company retains a percentage, ranging from 15% to 27- 1/2%, of the boxers'
purses from all professional boxing contests and exhibitions during the term of
the contracts. Pursuant to those contracts, the Company is also entitled to
receive 10% to 20% of all fees, honoraria or other compensation payable to the
boxers for product endorsements, speaking engagements, personal appearances or
other commercial performances. In July 1998, the Company entered into a
Management Agreement by which it is entitled to 16-2/3% of the proceeds of the
fight purses earned by heavyweight Grant Cudjoe through July 2003. The Company
has also entered into an exclusive promoter's agreement with Alex Trujillo to
act as promoter for the fighter's bouts and has entered into a management
participation agreement with heavyweight Jesse Ferguson entitling the Company to
a fixed percentage of Mr. Ferguson's purses. For the year ended December 31,
1997 and the six months ended June 30, 1998, the Company recognized revenues of
$168,224 and $604,512, respectively, attributable to the Company's share of its
boxers' purses. The Company has recognized limited revenues relating to product
endorsements, speaking engagements, personal appearances or other commercial
performances from its boxers. The Company's success will depend in part on the
ability of its boxers to attain and sustain championship or top contender status
and consequently engage in matches with significant purses.
The Company formed its Worldwide Team Sports, Inc. ("WWTS") subsidiary
in January 1996 to employ, or enter into consulting arrangements with, agents
and contract advisors registered with professional sports governing
organizations to represent athletes in professional team sports. Since the
establishment of the Company's Worldwide Football Management Inc. ("WWFM") and
Worldwide Basketball Management, Inc. ("WWBM") subsidiaries in March 1997 and
August 1996, respectively, however, WWTS has been comprised of the Company's
Marketing Division and its sports Memorabilia Division. The Marketing Division
seeks to generate opportunities for non-sport exploitation of the names and
likenesses of the Company's athletes and other professional athletes as well.
For these efforts, the Company receives a percentage of any revenues generated
by such opportunities as a commission (typically ranging between 10% and 20 % of
the athletes' fee). From its Memorabilia Division, which the Company founded in
March 1998, the Company generates revenues from sales of professional football,
baseball, basketball and hockey memorabilia owned by the Company. The Company is
seeking additional opportunities in the areas of marketing and memorabilia
sales, but no assurances as to its success can be given. For the year ended
December 31, 1997 and the six months ended June 30, 1998, the Company recognized
revenues of $93,404 and $64,025, respectively, from the Marketing Division. For
the six month period ending June 30, 1998, the Company has recognized revenue of
$157,616 from the Memorabilia Division.
In March 1997, the Company created its WWFM subsidiary to house its
football agency business. WWFM provides player agent services to professional
football players, including contract negotiation and professional and personal
advisory services. Currently, WWFM lists over 20 active NFL players among its
client base. NFL Players
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Association regulations forbid corporations from acting directly as player
representatives. As a result, the Company's three registered NFL agents assign
to the Company the revenue (usually 2-3% of a player's annual salary) they earn
from the players they represent. For the year ended December 31, 1997 and the
six months ended June 30, 1998, the Company recognized revenues of $175,248 and
$44,570, respectively, from its football agency business.
In August 1996, the Company formed WWBM for the purpose of providing
player agent services to professional basketball players. Initially the Company
hired an NBA player representative to serve as the president of WWBM and to
operate the basketball agency business. Since a corporation is prohibited from
acting as a player's agent under NBA Player Association regulations, WWBM's
agent agreed to assign to the Company all of the agent's commissions generated
by the negotiation of contracts for any athlete for which he has or will
contract to provide services. In the 1996 NBA Draft, WWBM's agent represented
the player selected ninth overall. In the 1997 NBA Draft, WWBM's agent
represented two players selected in the first round and one player chosen in the
second round. WWBM's agent represented no players chosen in the 1998 NBA Draft.
Two of the players previously signed with WWBM have terminated their agreements
with the Company and WWBM has signed agreements with two veteran NBA players. In
August 1998, the Company and its WWBM's agent severed their relationship. No
other employees of the Company are registered NBA agents, although two of the
Company's registered NFL agents are in the process of obtaining registration as
NBA player agents. There can be no assurance such individuals will obtain such
registration or be successful in attracting professional basketball players as
clients. For the year ended December 31, 1997 and the six months ended June 30,
1998 the Company recognized revenues of $32,763 and $5,000, respectively, from
WWBM.
The Company's success in professional team sport athlete management
will depend on its ability to acquire existing sports agency practices, attract
and retain the services of industry professionals and in turn on the ability of
those professionals to undertake the representation of successful athletes and
to maintain those relationships for a substantial period of time.
Worldwide Entertainment & Sports Corp., organized under the laws of the
State of Delaware on August 15, 1995, is located at 29 Northfield Avenue, Suite
200, West Orange, New Jersey 07052, and its telephone number is (973) 325-3244.
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The Offering
The information set forth below and elsewhere in this Prospectus
regarding the Offering price per Share and the number of Shares being offered is
based upon the $1.50 closing price of the Common Stock as reported by Nasdaq on
October 7, 1998. The actual number of Shares and per Share Offering price, in
order to raise gross proceeds of a minimum of $4,500,000 and a maximum of
$6,500,000, will depend upon the prevailing price of the Common Stock as quoted
on the Nasdaq SmallCap Market.
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Securities Offered........................................ A minimum of 3,000,000 and a maximum of
4,333,333 Shares of Common Stock.
Offering Price............................................ $1.50
Common Stock Outstanding
Before Offering....................................... 7,137,197
Common Stock Outstanding After Offering
Minimum............................................... 10,137,197
Maximum............................................... 11,470,530
</TABLE>
Use of Proceeds
Possible acquisition by the Company of one or more businesses, the
development of new sports management divisions, the acquisition of new and
additional clients and funding working capital and other general corporate
activities. See "USE OF PROCEEDS."
Risk Factors
The Common Stock offered hereby involves a high degree of
risk. See "RISK FACTORS" beginning on page 5.
Nasdaq SmallCap Trading
Symbol................................................ WWES
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Summary Financial Data
The summary financial data should be read in conjunction with the
consolidated financial statements, including the notes thereto, appearing
elsewhere in this Prospectus and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
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Year Ended December 31, Six Months Ended June 30,
1996 1997 1997 1998
Statement of Operations Data
Total Income 332,378 590,227 211,739 923,015
Total Expenses 2,368,763 3,879,442 1,988,210 2,571,557
Loss from Operations (2,046,385) (3,289,215) (1,776,471) (1,648,542)
Net Loss (2,156,198) (3,184,957) (1,725,004) (1,598,807)
As at December 31, June 30, 1998
------------------------------- ---------------------------------------
1996 1997 Actual As Adjusted(1)
---- -------- --------------
Minimum Maximum
Balance Sheet Data
Current Assets 4,395,405 2,500,025 2,519,679 5,999,679 7,799,679
Total Assets 4,653,261 2,574,563 2,632,046 6,112,046 7,912,046
Current Liabilities 901,607 373,308 399,065 399,065 399,065
Total Liabilities 901,607 373,308 399,065 399,065 399,065
Stockholder's Equity 3,751,654 2,201,255 2,232,981 5,712,981 7,512,981
- -------------------------------
(1) Adjusted to reflect the anticipated application of the net proceeds from
the sale of the Minimum Amount and Maximum Amount, respectively, of Common
Stock offered hereby.
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RISK FACTORS
An investment in the Common Stock offered hereby is speculative and
involves a high degree of risk and should only be purchased by investors who can
afford to lose their entire investment. You should carefully consider the
following risks and speculative factors, as well as other information set forth
elsewhere in this Prospectus and the attachments hereto, prior to making an
investment in the Common Stock. This Prospectus contains, in addition to
historical information, forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially. Factors
that could cause or contribute to such difference include, but are not limited
to, those discussed below as well as those discussed elsewhere in this
Prospectus.
Operating Losses to Date
The Company incurred operating losses of approximately $3.2 million and
$2.1 million for the years ended December 31, 1997 and December 31, 1996,
respectively. As of December 31, 1997, the Company had an accumulated deficit of
approximately $6.2 million. For the six months ended June 30, 1998, the Company
incurred an operating loss of $1.6 million. Although the Company continues to
expanded its client base, there can be no assurance that the Company's future
operations will be profitable. See "Selected Financial Information,"
Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements and the notes
thereto.
Need for Additional Capital
The Company's capital requirements have been and will continue to be
significant. At June 30, 1998, the Company had stockholder's equity of
$2,232,981. The Company has been dependent primarily on sales of equity
securities to supplement revenues from operations in order to fund its capital
requirements to date. The Company is dependent on and intends to use a
significant portion of the proceeds of this Offering to conduct its ongoing
operations. The net proceeds of this Offering are expected to continue to fund
the Company's projected operations only through October 2000 and the Company may
thereafter be required to seek additional equity or debt financing to fund the
costs of its operations. If the Minimum Amount is not sold in this Offering, or
if the Company is unable to obtain additional financing when needed, it will
likely be required to curtail its operations. Any additional equity financing
may involve substantial dilution to the Company's then-existing stockholders.
See "Use of Proceeds."
Need for Additional Agents and Clients; Amount of Experience of Personnel
The success of the Company will depend on the ability of the Company to
attract and develop promising new boxing talent and to expand its WWTS, WWFM,
and WWBM operations so as to represent both a substantially greater number of
athletes and a larger percentage of athletes and companies with significantly
greater earning and marketing potential. Each of the Company's businesses are in
their development stages and will require additional capital to reach profitable
levels. The Company's boxing business relies predominantly on four fighters,
three of whom are at least 30 years old. The athletic careers of professional
fighters tend to be short and the Company must look to augment its stable of
fighters in the near future to increase revenues from boxing. The management of
WWTS, on the whole, has less experience in operating a sports marketing company
than many of its competitors, and the success of the business will depend in
large part on its ability to establish WWTS as an effective sports marketing
company. If such development fails to materialize or to generate sufficient
revenue, the Company may have to seek additional employees for WWTS with more
substantial experience. Likewise, the Company anticipates that in order to
attract an adequate number and caliber of professional athletes, and to augment
the agents currently working for WWFM and WWBM, the Company will need to enter
into employment or consulting agreements with additional registered agents who
have existing representation agreements with professional athletes and who have
experience negotiating such agreements. In August 1998, the Company and its only
registered NBA agent severed their relationship and, accordingly, the Company
will need to supplement its WWBM subsidiary with other registered NBA agents or
face a reduction or cessation in its basketball agency business. There can be no
assurance that the Company will be able to attract the quantity or caliber of
agents and/or professional athletes necessary to achieve and sustain profitable
operations. In addition, there can be no assurance that professional athletes
who
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are currently, or who may in the future be, under management or representation
contracts with the Company, will continue to engage in professional sports
through the term of their contracts or will renew such contracts upon their
expiration. The Company will need to incur significant promotional, marketing,
travel and entertainment expenses in the recruitment of professional team sports
athletes without any guarantee that the targeted athletes will enter into
representation agreements with the Company. See "Business."
Dependence Upon Athletes
Because the Company's revenues are derived from a specified percentage
of the income generated by the Company's clients and events, both the amount of
the Company's revenues and the likelihood that the Company will continue to
receive revenues is dependent upon the professional success of athletes, and the
continued popularity of professional sports. The income levels of the Company's
potential clients, both boxers and team sports athletes, and therefore the
revenues of the Company, can be subject to wide fluctuations, in most cases due
to circumstances beyond the control of the Company. See "Business."
Dependence Upon Chief Executive Officer and Others
The Company is highly dependent on Marc Roberts, the Company's
President and Chief Executive Officer. Mr. Roberts is the only executive officer
of the Company who has had prior experience in managing professional boxers. Due
to the personal nature of boxer-management relationships, there is a limit on
the number of boxers who can be effectively managed by Mr. Roberts. The number
of boxers which Mr. Roberts can effectively manage may vary, depending upon the
stage of the boxers' careers, their level of bout frequency and their success.
Although the Company has entered into a five-year employment agreement with Mr.
Roberts, and has obtained a $2,000,000 key person life insurance policy on Mr.
Roberts' life, the loss of the services of Mr. Roberts would likely have a
material adverse effect on the Company's business. Because a corporation cannot
be a signatory as a player's representative in either NFL or NBA player
representation agreements, the Company is expected to be dependent upon
retaining its relationships with the registered agents employed by the Company
to sustain the Company's relationships with the team sports athletes. The
Employment Agreements between the Company and each of its current and former
registered player agents provide for a sharing of agency fees generated by them
in the event of a termination of their employment. There can be no assurance
that the loss of the services of any of the Company's registered player's
agents, as has happened with the Company's NBA player's agent, will not hamper
the Company's business efforts in a given sport. See "Business" and "Management
- - Employment Agreements."
Competition
The Company's various businesses each face significant competition in
obtaining and maintaining management relationships with athletes. While the
sports agency market is comprised of numerous registered agents and business
managers, the industry is dominated by a small number of agencies which manage
the more successful and marketable athletes. A great many of these agencies have
significantly greater financial and personnel resources and recognition in the
industry than the Company. There can be no assurance that the Company will be
able to compete effectively in these markets. Since the Company's October 1996
initial public offering, additional companies such as SFX Entertainment, Inc.
have become public companies and have contributed to a consolidation of sports
management and marketing agencies. In addition, the Company's clients face
intense competition in achieving success and recognition in their respective
sports. There can be no assurance that any of the Company's clients will achieve
or sustain success or realize the financial rewards thereof. See "Business -
Competition."
Control by Officers and Directors
The Company's executive officers and directors beneficially own
approximately 37.9% of the Common Stock. Consequently, the Company's executive
officers and directors have substantial influence on the outcome of any matters
submitted to the Company's stockholders for approval, including the election of
directors. See "Management" and "Description of Securities."
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Limitation of Director Liability
The Company's Certificate of Incorporation provides that a director of
the Company will not be personally liable to the Company or its stockholders for
monetary damages for breach of the fiduciary duty of care as a director,
including breaches which constitute gross negligence, subject to certain
limitations imposed by the Delaware General Corporation Law. Thus, under certain
circumstances, neither the Company nor the stockholders will be able to recover
damages even if directors take actions which harm the Company. See "Management -
Directors and Executive Officers."
No Dividends and None Anticipated
The Company has not paid dividends on the Common Stock since its
inception. The Company intends to reinvest any earnings in its business to
finance future growth. Accordingly, the Board of Directors does not anticipate
declaring any cash dividends in the foreseeable future. See "Dividend Policy."
Potential Adverse Effect of Future Issuances of Preferred Stock
The Company is authorized to issue up to 5,000 shares of preferred
stock, par value $.01 per share. The preferred stock may be issued in one or
more series, the terms of which may be determined at the time of issuance by the
Board of Directors, without further action by stockholders, and may include
voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion and redemption rights
and sinking fund provisions. No preferred stock is currently outstanding and the
Company has no present plans for the issuance thereof. However, the issuance of
any such preferred stock could affect the rights of the holders of Common Stock,
and therefore reduce the value of the Common Stock. In particular, specific
rights granted to future holders of preferred stock could be used to restrict
the Company's ability to merge with or sell its assets to a third party, thereby
preserving control of the Company by present owners. See "Description of
Securities."
Broad Discretion in Application of Proceeds
The proceeds of this Offering will be applied to working capital, and
shall be used for general corporate purposes, including future acquisitions.
Accordingly, the Company will have broad discretion as to the application of
such proceeds.
See "Use of Proceeds."
Volatility of Market Price of Common Stock
The average daily trading volume of the Common Stock has generally been
low, which the Company believes has had a significant effect on the historical
market price of the Common Stock which has fluctuated between $7 and $1 per
share. As a result, such market price has been highly volatile and may not be
indicative of the market price in a more liquid market. The market price of the
Common Stock could be subject to significant fluctuations in response to a
number of factors, including the depth and liquidity of the market for the
Common Stock, investor perception of the Company and general economic and other
conditions, which may or may not relate to the Company's performance. See
"Description of Securities."
Effect of Outstanding Exercisable Securities; Dilution
As of September 30, 1998, the Company had currently exercisable
outstanding options to purchase an aggregate of 1,935,000 shares of Common Stock
at exercise prices from $1.50 to $2.875 per share and warrants to purchase up to
an aggregate 995,000 shares of Common Stock at $7.20 per share, and warrants to
purchase 31,000 shares and 25,000 shares at $2.25 per share and $6.00 per share,
respectively. This includes options and warrants granted to various directors,
officers, employees and consultants.
7
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During the respective terms of the Company's outstanding securities,
the holders thereof may be able to purchase shares of Common Stock at prices
substantially below the then-current market price of the Company's Common Stock
with a resultant dilution in the interests of the existing stockholders. In
addition, the exercise of outstanding derivative securities and the subsequent
public sales of Common Stock by holders of such securities pursuant to a
registration statement effected at their demand, under Rule 144 or otherwise,
could have an adverse effect upon the market for and price of the Company's
securities. See "Description of Securities."
Securities Market Factors
In recent years, the securities markets have experienced a high level
of volume volatility and market prices for many companies, particularly small
and emerging growth companies, have been subject to wide fluctuations in
response to quarterly variations in operating results. The securities of many of
these companies have experienced wide price fluctuations, which in many cases
were unrelated to the operating performance of, or announcements concerning, the
issuers of the affected stock. Factors such as announcements by the Company or
its competitors concerning innovations, new clients or procedures, government
regulations and developments or disputes relating to proprietary rights may have
a significant impact on the market for the Company's securities. General market
price declines or market volatility in the future could adversely affect the
future price of the Company's securities.
Escrow of Investors' Funds -- Minimum/Maximum Best Efforts Offering
Under the terms of this Offering, the Company is offering the Minimum
Amount worth of Shares on an "all or none," "best efforts" basis, and if the
Minimum Amount is attained, additional Shares will be offered on a "best
efforts" basis until the Maximum Amount is reached or the offering period ends,
which first occurs, unless the Offering is terminated earlier by the Company. No
commitment exists by anyone to purchase all or any part of the Shares.
Consequently, there is no assurance that the Minimum Amount will be attained,
and subscribers' funds may be escrowed for as long as 100 days (the 45 day
Offering Period, which may be extended by an additional 45 days, plus an
additional 10 business days to permit clearance of funds in escrow) and then
returned without interest thereon, in the event the Minimum Amount is not
attained within the Offering period. Accordingly, investors will not have the
use of their subscription funds during this period. In the event the Company is
unable to reach the Minimum Amount within the Offering period, the Offering will
be terminated. See "Underwriting."
No Assurance of Continued Nasdaq Quotation
The Board of Governors of the National Association of Securities
Dealers, Inc. has established certain standards for the initial quotation and
continued quotation of a security on Nasdaq. The standards for initial quotation
require, among other things, that an issuer have total assets of $4,000,000 and
capital surplus of at least $2,000,000; that the minimum bid price for the
listed securities be $3.00 per share; that the minimum market value of the
public float (the shares held by non- insiders) be at least $2,000,000, and that
there be at least two market makers for the issuer's securities. While the
Company has been approved for listing on Nasdaq, the Company's securities may be
delisted for a variety of reasons. Nasdaq may delist the Common Stock of the
Company if it finds it is in the public interest or if the Company fails to meet
maintenance standards. The maintenance standards require, among other things,
that an issuer have total assets of at least $2,000,000 and the capital and
surplus of at least $1,000,000; that the minimum bid price for the listed
securities be $2.00 per share; that the minimum market value of the "public
float" be at least $1,000,000 and that there be at least two market-makers for
the issuer's securities. A deficiency in either the market value of the public
float or the bid price maintenance standard will be deemed to exist if the
issuer fails the individual stated requirement for ten consecutive trading days.
If an issuer falls below the bid price maintenance standard, it may remain on
Nasdaq if the market value of the public float is at least $1,000,000 and the
issuer has $2,000,000 in equity. The Securities and Exchange Commission has
approved new maintenance requirements which were proposed by Nasdaq. These rules
require the Company to have either $2,000,000 net tangible assets or market
capitalization of $35,000,000 or $500,000 net revenue in two of its last fiscal
years. In addition the Company would have to have a public float of at least
500,000 shares. There can be no assurance that the Company will continue to
satisfy the requirements for maintaining a Nasdaq quotation. In addition, recent
proposals which would impose
8
<PAGE>
more strict compliance standards if enacted would make it more difficult to
maintain Nasdaq quotation for the Company's Common Stock. If the Company's
Common Stock were to be excluded from Nasdaq, it would adversely affect the
prices of such securities and the ability of holders to sell them, and the
Company would be required to comply with the initial listing requirements to be
relisted on Nasdaq.
If the Company is unable to satisfy Nasdaq's maintenance requirements,
then, unless the Company satisfies certain net asset tests, the Company's
securities would become subject to certain penny stock rules promulgated by the
Securities and Exchange Commission (the "Commission"). The penny stock rules
require a broker-dealer, prior to a transaction in a penny stock not otherwise
exempt from the rules, to deliver a standardized risk disclosure document
prepared by the Commission that provides information about penny stocks and the
nature and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its sales person in the transaction
and monthly account statements showing the market value of each penny stock held
in the customer's account. In addition, the penny stock rules require that prior
to a transaction in a penny stock held in the customer's account. In addition,
the penny stock rules require that prior to a transaction in a penny stock not
otherwise exempt from such rules, the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for a stock that becomes subject to the penny
stock rules. If the Company's Common Stock becomes subject to the penny stock
rules, investors in the Offering may find it more difficult to sell their
Securities.
Underwriter's Potential Influence on the Market
A significant number of the Securities offered hereby may be sold to
customers of the Underwriter. Such customers subsequently may engage in
transactions for the sale or purchase of such Securities through or with the
Underwriter. Although it has no obligations to do so, the Underwriter intends to
make a market in the Securities and may otherwise effect transactions in such
Securities. If is participates in such market, the Underwriter may influence the
market, if one develops, for the Securities. Such market-making activity may be
discontinued at any time. The prices and liquidity of the Securities may be
significantly affected by the degree, if any, of the Underwriter's participation
in such market. See "Underwriting."
Limited Experience of Underwriter
This Offering is the first offering for which the Underwriter has acted
as an underwriter in connection with a public offering of securities. The
Underwriter has likewise never acted as a co-manager in connection with a public
offering of securities. No assurance can be given that Bell Investment Group
Inc.'s limited public offering experience will not affect the ability to sell
the Minimum Amount of Shares to complete the Offering or will not affect
subsequent development of a trading market. Investors should consider this lack
of public offering experience in making an investment decision. See
"Underwriting."
9
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock in
this Offering are estimated to be approximately $3,480,000 if the Minimum Amount
is raised and $5,280,000 if the Maximum Amount is raised, after deducting the
estimated underwriting discounts and commissions and other offering expenses
payable by the Company. The Company intends to use the estimated net proceeds as
follows:
<TABLE>
<CAPTION>
Minimum Maximum
<S> <C> <C> <C> <C>
Use of Proceeds:
Acquisition of one or more businesses $1,200,000 34.5% $2,500,000 47.4%
Development of new divisions - additional clients $ 400,000 11.5% $ 400,000 7.6%
Working Capital and general corporate purposes,
including the continued upgrade of the Company's
computer hardware and software systems $1,880,000 54.0% $2,380,000 45.0%
---------- ------ ---------- ----
Total Use of Proceeds $3,480,000 100.0 % $5,280,000 100.0%
========== ====== ========= =====
</TABLE>
The foregoing represents the Company's present intentions for the use
of the proceeds of this Offering based on its currently contemplated operations,
business plan and currently prevailing economic and industry conditions. The
Company's business plan contemplates that the Company may acquire businesses or
introduce additional divisions and for the development of additional clients.
Although the Company has had and will continue to have discussions with
potential acquisition candidates it does not have any present agreements or
understandings with respect to any significant acquisitions. Changes in the
proposed expenditures may be made in response to, among other things, the
ability of the Company to complete a strategic acquisition, and changes in the
Company's plans, future revenues and expenditures, as well as changes in general
industry conditions.
The Company believes that the net proceeds of this Offering and cash
flow from operations will be sufficient to meet its immediate cash needs and
finance its plans for expansion for not less than twenty-four months from the
date of this Prospectus. This belief is based upon certain assumptions regarding
the Company's business and cash flow as well as prevailing industry and economic
conditions. The Company's funding requirements may vary significantly, depending
on how rapidly management seeks to expand the business and the expansion
strategies elected. Accordingly, the Company may, in the future, require
additional financing to continue to expand its business. There is no assurance
that the Company will be successful in obtaining additional financing, if
required, on favorable terms, or at all. If the Company were unable to obtain
additional financing, its ability to meet its current plan for expansion could
be materially and adversely affected. See "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
10
<PAGE>
PRICE RANGE OF COMMON STOCK
Market for Common Equity and Related Shareholder Matters
The Common Stock is traded on the Nasdaq SmallCap Market System under
the symbol "WWES". The following are the reported high and low closing sales
prices of the Company's Common Stock for each quarter since the Company initial
public offering in October 1996:
High Low
1996
Fourth Quarter 7 4 3/4
1997
First Quarter 53/8 1 3/4
Second Quarter 31/16 1
Third Quarter 3 1/4 15/32
Fourth Quarter 4 1 1/2
1998
First Quarter 21/8 17/16
Second Quarter 31/8 15/8
Third Quarter 25/8 11/8
On October 7, 1998, the closing sale price of the Common Stock reported
by NASDAQ was $1.50 per share. As of the date of this Prospectus, there were
approximately 142 registered holders of Common Stock of the Company.
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock since its
inception and does not intend to pay any dividends to the stockholders in the
foreseeable future. The Company currently intends to reinvest earnings, if any,
in the development and expansion of its business. The Board of Directors has
discretion over the declaration and payment of cash dividends by the Company in
the future and in such capacity will look to such factors as future earnings,
operations, funding requirements, the general financial condition of the Company
and such other factors that the Board may deem relevant in making such
determination.
11
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as
of June 30, 1998 and (ii) as adjusted to reflect the sale by the Company of the
Common Stock offered hereby and the application of the estimated net proceeds
therefrom. This table should be read in conjunction with the financial
statements of the Company, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Description of Capital Stock" included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
June 30, 1998
Actual As Adjusted(1)
<S> <C> <C> <C>
Minimum Maximum
Stockholders' equity:
Common Stock, par value $0.01 per share,
20,000,000 authorized 7,137,197 shares
outstanding actual, 10,137,197
shares outstanding as adjusted minimum,
11,470,530 shares outstanding as adjusted maximum $ 71,372 $ 101,372 $ 114,705
Additional paid-in capital $ 10,018,231 $14,488,231 $16,474,897
Accumulated deficit $ (7,856,622)(2)$(7,856,622)(2) $(7,856,622)(2)
Total stockholders' equity $ 2,232,981 $ 5,712,981 $ 7,512,981
Total capitalization $ 2,632,046 $ 6,112,046 $ 7,912,046
</TABLE>
- -------------------------------
(1) Adjusted to reflect the anticipated application of the net proceeds from
the sale of the Minimum Amount and the Maximum Amount, respectively, of the
Shares offered hereby.
(2) Includes amount of a Demand Note receivable on private issuance of Common
Stock in the amount of $12,350.
12
<PAGE>
SELECTED FINANCIAL DATA
The financial statements of the Company are the source for the selected
financial data as of and for the periods below. Rosenberg Rich Baker Berman &
Company PA audited the financial statements of the Company as of and for the
fiscal year ended December 31, 1996. Its report thereon is included elsewhere
herein. Friedman Alpren & Green LLP audited the Company's financial statements
as of and for the fiscal year ended December 31, 1997 and its report thereon is
included elsewhere herein. The selected financial data should be read in
conjunction with the financial statements, including the respective notes
thereto, appearing elsewhere in this Prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Statement of Operations Data:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Six Months
Fiscal Year Ended Ended
December 31, June 30,
1996 1997 1998
-------------- -------------- ---------
(unaudited)
Purse Income 232,437 168,224 604,512
Contract and Agency Income 30,424 208,009 49,570
Endorsements and Marketing Income 23,080 93,404 64,025
Total Income 322,378 590,227 923,015
Training and related expenses 199,725 74,830 438,597
Promotion and other operating expenses 2,069,038 3,804,612 2,132,960
Total Expenses 2,368,763 3,879,442 2,571,557
Loss from Operations (2,046,385) (3,289,215) (1,648,542)
Net Loss (2,156,198) (3,184,957) (1,598,807)
Loss Per Share $ (0.52) $ (0.59) $ (0.24)
Balance Sheet Data:
December 31, June 30,
1996 1997 1998
------------ ------------ --------
(unaudited)
Cash 791,505 745,137 1,041,805
Due from Boxers (less allowances) and Related Parties 92,458 377,184 307,464
Total Current Assets 4,395,405 2,500,025 2,519,679
Total Current Liabilities 901,607 373,308 399,065
Common Stock 51,533 62,622 71,372
Additional Paid-in Capital 6,763,561 8,396,247 10,018,231
Accumulated (deficit) (3,060,307) (6,245,264) (7,844,272)
Demand Note Receivable on Private (12,350) (12,350) (12,350)
Issuance of Common Stock
Stockholder's Equity 3,751,654 2,201,255 2,232,981
</TABLE>
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
General
Worldwide Entertainment & Sports Corp. (the "Company") 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
controlled by the Company's Chief Executive Officer. In January 1996, the
Company established its Teams Sports Division through the formation of Worldwide
Team Sports, Inc. ("WWTS"). 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"). In March 1997,
the Company established Worldwide Football Management Inc. ("WWFM"), as a
separate entity to continue its agency, marketing and management services to
professional football players. Due to the nature of these business operations
and the potential effect of the consolidation of such business within the
Company, the prior operating results of such separate businesses may not
necessarily be representative of the future results of operations of the
Company. The Company has only limited experience in the field of player agency
and contract advisory services.
In March 1998, for the purpose of promoting and marketing sports and
entertainment memorabilia, the Company established the Worldwide Memorabilia
Division of WWTS. The Company has exclusive rights to market a sports
memorabilia catalog pursuant to which the Company receives a fixed commission on
sales. In addition, the Company has accumulated a catalog of professional and
amateur football, baseball, basketball and hockey memorabilia. The catalog
includes autographed athletic attire, sport trading cards and sports
paraphernalia used by prominent athletes. The Company will seek to sell these
catalog items and other acquired memorabilia through various media including,
trade shows, mail order and retail sales. The Company has limited experience
with sports memorabilia sales.
Establishing and maintaining a presence in each of the Company's areas
of concentration, (i.e., boxing management and team sports player agency)
requires significant expenditures. Each sports specific division must retain the
services of qualified agents, 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 from up to 3% or 4%,
respectively, for professional football and basketball player contracts
(although often lower percentages are agreed upon) to 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 bouts. In addition, the size of the
Company's revenues can change based upon the success or failure of the Company's
boxers or the negotiation of player contracts with significant bonus provisions.
The Company's WWBM and WWFM subsidiaries can be expected to spend significantly
during the first eight months of each
14
<PAGE>
calendar year (particularly March through July) for recruitment and related
expenses, and to receive their revenues during the last four and first three
months of the year during the NBA and NFL 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. In August 1998, the Company severed its
relationship with its only NBA player's agent. Two of the Company's NFL player's
representatives are seeking to also become registered with the NBA as agents.
Accordingly, revenue and expenses attributable to WWBM are uncertain during the
ensuing twelve months.
Year Ended December 31, 1997 Compared with the Year Ended December 31, 1996
Revenues for the year ended December 31, 1997 were $590,227, as
compared to $322,378 for the year ended December 31, 1996. Purse income in the
1997 fiscal year decreased to $168,224 from $232,437 for the 1996 fiscal year as
a result of a decrease in the number of bouts with substantial purses. This
decrease was due in part to a scheduled opponent of Ray Mercer's canceling a
fight due to an injury and Mr. Mercer's failure to schedule any bouts during the
remainder of 1997 because he underwent surgery to correct a chronic neck injury.
This decrease was offset by an increase in contract agency fees to $208,009 in
fiscal 1997, as compared to $30,424 in fiscal 1996, as a result of the hiring of
an additional registered contract advisor by the Company's WWFM subsidiary and
the increase in the number of NBA and NFL players represented by the Company. In
addition, during 1997, the Company recognized television income in the amount of
$87,500, resulting from a televised fight on USA Network and, further, for the
fiscal year ended December 31, 1997 endorsement and marketing fee income
increased to $93,404, as compared to $23,080 for the 1996 fiscal period, as a
result of increased activities by the Marketing Division of WWTS.
Total expenses for the year ended December 31, 1997 increased to
$3,879,442, as compared to $2,368,763 in fiscal year 1996. Training and related
expenses decreased to $74,830 for the 1997 fiscal year from $199,725 for the
1996 fiscal year, as a result in the decrease in a number of bouts. Promotion
and other operating expenses increased to $3,804,612 for the 1997 fiscal year as
compared to $2,069,038 for the 1996 fiscal year, as a result in the increase in
total salaries as a result of the hiring of additional contract advisors and
marketing personnel, as well as increased promotional and recruiting expenses in
conjunction with the Company's increased level of activities in the player
agency and marketing areas. In addition, the Company incurred additional
expenses in 1997 in connection with several potential business acquisitions
which were ultimately not consummated.
As a result of the foregoing, net loss for the fiscal year ended
December 31, 1997 increased to $3,184,957 as compared to $2,156,198 for the
December 31, 1996 fiscal year.
Year Ended December 31, 1996 Compared with the Year Ended December 31, 1995
Net revenues for the year ended December 31, 1996, were $322,378, as
compared to $241,621, for the year ended December 31, 1995. During 1996, the
Company was actively engaged in the management of its four boxers, as compared
to 1995, during much of which the Company was actively managing only one boxer,
Mr. Briggs. Purse income increased to $232,437 for 1996 compared to $75,794 in
1995 as a result of an increase in the number of bouts and an increase in the
level of the purses. In addition, during 1996, the Company first recognized
endorsement and agency revenue representation of team sports athletes,
aggregating $53,504. No such revenues were received by the Company for 1995.
During the year ended December 31, 1995, 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.
Accordingly, ticket revenues for the year ended December 31, 1996 were $12,636,
compared to $144,227 for 1995. Such revenues are largely offset by a
corresponding expense for ticket costs. Therefore, this change does not result
in a significant impact on the Company's results of operations.
Total expenses increased for the year ended December 31, 1996,
increased to $2,368,763, from $1,077,037, for 1995. Promotion and other
operating expenses increased to $2,069,038, for 1996, as compared to $645,124
for 1995 as a result of (1) $315,730 of travel and entertainment expenses
incurred in connection with the recruitment of professional
15
<PAGE>
football players and Agents for Team Sports and in connection with bouts for the
Company's four boxers, and (2) $676,746, in payroll expenses as a result of the
hiring of the registered NFL Agent for the WWTS subsidiary and additional staff
personnel. In addition, there were approximately $324,389 of expenses for
promotional materials and other public relations expenses for the year. The year
ended December 31, 1996, also included $ 141,340, of interest expense
attributable to the 10% promissory notes issued in connection with the Company's
private placement which originated in September 1995, as well as $100,000 paid
in connection with the termination of an agreement with a trainer for one of the
Company's boxers. Accordingly, the Company's net loss for the year ended
December 31, 1996, increased to $2,156,198, from $869,303, for 1995.
Six Months Ended June 30, 1998 Compared with Six Months Ended June 30, 1997
Net revenues for the six months ended June 30, 1998 were $923,015, as
compared to $211,739 for the six months ended June 30, 1997. Purse income
increased to $604,512 for the 1998 period, as compared to $27,201 for the 1997
period as a result of the size of the purse for a Shannon Briggs heavyweight
championship fight against Lennox Lewis. In addition, during the six months
ended June 30, 1998, the Company recognized merchandise revenues from the sale
of memorabilia, which operation was started in March 1998. Television revenue in
1997 was from the receipts from a televised boxing card promoted and managed by
the Company. No similar operations were undertaken by the Company in 1998.
Total expenses for the six months ended June 30, 1998 increased to
$2,571,557, as compared to $1,988,210 for the six months ended June 30, 1997.
Training and related expenses increased to $438,597 for the six months ended
June 30,1998 from $330,733 for the 1997 period, as a result of the preparation
for the Briggs championship bout. Promotion and other operating expenses
increased to $2,132,960 for the 1998 six-month period as compared to $1,657,477
for the 1997 six months. The principal increase in these expenses relates to the
opening of the memorabilia division.
As a result of the foregoing, net loss for the six months ended June
30, 1998 decreased to $1,598,807 as compared to $1,725,004 for the comparable
June 30, 1997 period.
Liquidity and Capital Resources
The Company's principal source of operating capital has been provided
by public and private sales of the Company's equity securities, as supplemented
by revenues from operations. At June 30, 1998, the Company had working capital
of $2,120,614, which amount was primarily the remaining net proceeds from the
Company's private placements in the fourth quarter of 1997 and first quarter of
1998.
The Company's material commitments for capital expenditure are
management salaries, anticipated training expenses and recruitment expenses.
Management salaries are approximately $643,000 per annum, which could increase
if the Company develops a need for additional executive management. Training
expenses for the ensuing year are estimated at approximately $600,000, depending
upon the number of bouts. Recruitment and promotional expenses are estimated to
approximate $1,000,000, subject to variations depending upon player availability
and recruiting success. The foregoing represents the expected significant uses
of working capital during the next twelve months. Although the Company believes
that its current cash and cash equivalents will be sufficient to fund its
operations over the next 12 months or longer, there can be no assurance that the
Company will have sufficient revenues after such time to fund its operating
requirements. Ac cordingly, the Company may be required to seek additional
financing through bank borrowings, private or public debt or equity financing or
otherwise. There can be no assurance that any such financing will be available
to the Company on favorable terms, if at all.
16
<PAGE>
THE BUSINESS
The Company was organized in August 1995 for the purposes of succeeding
to the boxing management operations conducted by various entities controlled by
Marc Roberts and to engage in management of, and to provide agency services to,
athletes in other sports as well as to entertainers. In November 1995, the
Company entered into a management agreement with heavyweight prospect Shannon
Briggs, and acquired all of the assets and assumed all of the liabilities of
Shannon Briggs I, L.P., an entity controlled by Marc Roberts which had
previously managed Mr. Briggs. In 1995, the Company acquired Marc Roberts
Boxing, Inc., Merciless Management, Inc. and The Natural Management, Inc.,
entities owned by Marc Roberts through which he managed Tracy Patterson, Ray
Mercer and Charles Murray, respectively. Such corporations, together with Marc
Roberts Inc. and SB Champion Management Inc., corporations also owned by Mr.
Roberts, were subsequently merged into the Company, and the Company entered into
new management agreements with these boxers. The business of managing the boxers
is conducted through the Boxing Division of the Company.
In January 1996, the Company established its Team Sports Division
through the formation of Worldwide Team Sports, Inc. ("WWTS"), initially
concentrating in the business of representing professional football players. 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"). In March 1997, the Company established
Worldwide Football Management Inc. ("WWFM"), as a separate subsidiary to
continue to provide agency, marketing and management services to professional
football players and hired an additional registered contract advisor to serve as
its president. The Company intends to establish additional divisions within its
Team Sports Division or create separate wholly-owned subsidiaries for each
additional team sport into which the Company expands its operations. The Company
established two divisions of WWTS: (i) the Worldwide Memorabilia Division, in
March 1998, for the purpose of procuring, developing and consummating commercial
transactions involving sports and entertainment memorabilia, and; (ii) the
Worldwide Marketing Division, in 1997, for the purpose of developing commercial
and marketing opportunities for athletes and entertainers, including the
Company's clients.
The Boxing Division
The Company's boxing division is under the direct supervision of Marc
Roberts, the Company's President. Mr. Roberts has over 19 years experience in
the management of professional boxers. The Company's boxers have engaged in over
90 professional bouts while under Mr. Roberts' management (including time
periods prior to the formation of WWES). In addition to the management of the
boxers identified below, the Company continually seeks to selectively identify
promising young boxers to solicit management opportunities.
Professional Boxing
The sport of boxing is overseen primarily by four organizations - the
World Boxing Association ("WBA"), the World Boxing Council ("WBC"), the
International Boxing Federation ("IBF") and the World Boxing Organization
("WBO") which have established rules and regulations governing conduct in the
ring. Each of such entities, which are comprised of various foreign national
boxing commissions and certain state bodies, set their own rules, establish
their own medical and safety standards, create their own rankings and designate
their own "world champions." Each sanctions particular championship and official
title-elimination bouts. To hold a title in any of such organizations, a boxer
must compete in places, against opponents and under conditions specified by the
sanctioning body, one or more of which may sanction a particular bout.
Professional boxers are divided into 17 weight classes ranging from the
"heavyweight" division (190 lbs. and over) to the "strawweight" division (108
lbs. and under). Boxers are ranked within their weight class and predominantly
box opponents of the same or reasonably similar weight. Champions are crowned in
each division as well. Bouts can be as long as 12 rounds, usually reserved for
championship bouts, or as short as four rounds for bouts between young, untested
boxers.
17
<PAGE>
Boxing matches are judged by three judges under the rules dictated by
the state boxing authority of the state in which the bout is located. Unless
decided by a knockout or disqualification, bouts are won or lost according to a
system of points awarded to the boxer who landed the most, and most effective,
punches during a bout. A referee presides over a match as the third party in the
ring, insuring that the boxers fight in accordance with the rules. While the
judgment of the referees and the judges is generally not subject to further
review, the nature of bout judging is largely subjective. Therefore, it is
impossible to predict the outcome of a bout or, in turn, the professional
success of a boxer. A decision against a boxer can seriously set back his
development into a contender and thus his ability to earn substantial purses.
In addition to the boxers, judges and referees, the business of
professional boxing is driven by promoters and managers. Promoters are
responsible for contracting boxers to bout agreements with designated opponents,
arranging sites, negotiating broadcast rights contracts and establishing and
paying the gross purses to the boxers. Promoters generally are also authorized
to sell tickets for the matches they promote and to exploit and market all
ancillary rights to the bout, including without limitation, the broadcasting,
telecasting, recording or filming of such contests for exhibition on a live or
delayed basis in any and all media.
The role of a manager, such as the Company, is to advise its boxers on
career development, training and business planning matters, to solicit the
arrangement of matches with potential opponents, to advise the boxers regarding
participation in bouts requested by others, and to negotiate the terms thereof,
including purse payments, and the selection of opponents with promoters of
bouts. A manager's success is dependent upon, among other factors, its boxers
participating in bouts with increasingly higher purses, which is directly
related to such factors as the continued success of the boxers and the ability
of the manager to arrange contests and exhibitions of sufficient interest to the
public to warrant substantially greater purses. The Company believes that unless
and until a boxer attains championship or, in the case of a heavyweight, top
contender status, his purses will not be at a level which will generate
sufficient revenues for the Company to offset its costs and advances.
The recruitment and development of young professional boxers is a major
expense of boxer management. A would- be manager faces stiff competition from
other entities in pursuit of quality boxers. There are a limited number of
potential participants for bouts with significant purses and a limited number of
promoters to organize such bouts. The securing of a boxer as a client requires a
great deal of attention and a demonstration of a willingness and ability to
understand and appropriately handle the professional and personal needs and
aspirations of the athlete. The process can be time consuming and costly. Early
in a boxer's career, when revenues from his matches are too low to cover his
expenses and cost of living, a manager must advance the costs for the boxer's
professional and often personal needs, including, but not limited to, training
expenses, personal services, cost of food, clothing, shelter and medical costs.
It usually takes several years of boxing before a boxer reaches a level of
professional success whereupon the revenue from his boxing is sufficient to
support his career and to pay off his manager's advances. There can be no
assurance that any boxer who may be managed by the Company in the future, will
ever generate sufficient revenues to allow the Company to recoup its
expenditures.
The Boxers
With the recent retirement of Tracy Patterson from professional boxing
in 1998, the Company currently manages the following four professional boxers
pursuant to exclusive management contracts:
Raymond "Merciless Ray" Mercer was the 1988 Olympic heavyweight gold
medalist and has been boxing professionally since February 1989. Mr. Mercer was
formerly the WBO Heavyweight World Champion and the IBF Intercontinental
Champion. Mr. Mercer lost to Lennox Lewis in May 1996, and won in October 1996
against Tim Whitherspoon. Mr. Mercer did not engage in any bouts in 1997 as a
result of a neck injury and subsequent recovery from corrective surgery. Mr.
Mercer resumed his boxing schedule in 1998, and is currently ranked number 2 by
the WBC, number 3 by the WBA and number 4 by the IBF in their respective
heavyweight divisions.
Shannon Briggs has been boxing professionally since July 1992. Mr. Briggs
fought three times during 1996. He was victorious against Tim Ray and Eric
French, and lost to Darroll Wilson. Mr. Briggs fought four times in 1997,
winning all
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four matches. Mr. Briggs won by knockout against Eric French and Melton
Bowen in February and April, respectively. In June, Mr. Briggs won with a
technical knock out ("TKO") over Jorge Valdes. In November of 1997, Mr. Briggs
won a 12 round majority decision against George Foreman. In March 1998, Mr.
Briggs lost a title bout with Lennox Lewis, the WBC Heavyweight Champion. In
April 1998, Mr. Briggs renewed his management agreement for a five year term.
Danell Nicholson was a heavyweight on the 1992 U.S.A. Olympic team. Mr.
Nicholson lost a decision to the gold medalist Felix Savogne at the 1992
Olympics. After the 1992 Olympics Mr. Nicholson turned professional and has
since amassed a record of 29 wins, with 23 by knockout, and 3 losses. Mr.
Nicholson has won 6 consecutive bouts, the most recent victory, a first round KO
in Madison Square Garden in September 1998, coming under the Company's
management. The Company's management agreement with Mr. Nicholson, signed in
December 1997, expires in December 1999, at which time the Company has the
exclusive irrevocable option, but not the obligation, to extend the term of the
management agreement for an additional 24 month period.
Charles "The Natural" Murray has been boxing professionally since March
1989. Mr. Murray formerly held the North American Boxing Federation (a lesser
sanctioning body) Junior Welterweight Championship and until 1997, was ranked in
the top ten by each of the WBC, IBF and WBA. Mr. Murray previously held the IBF
Junior Welterweight World Championship. Mr. Murray won his most recent bout on
October 1st, 1998.
Each of these boxers has entered into a management agreement with the
Company pursuant to which the Company will supervise and direct the boxer's
training activities, negotiate business opportunities on behalf of the boxer and
oversee all marketing and promotional activities regarding the boxer. The
Company negotiates with promoters on behalf of its boxers to determine which
bouts each boxer will engage in and the terms of the purses to be paid for such
bouts. In exchange for providing such services, the Company retains a percentage
of the purses from all professional boxing contests and exhibitions and all
fees, honoraria or other compensation payable to the boxer for product
endorsements, speaking engagements, personal appearances or other commercial
performances. An amount equal to --up to 10% each of the purses as well as all
fees, honoraria or other compensation payable to the boxer is generally paid by
the boxer to his trainer. The balance of the purse is retained by the boxer.
Unless otherwise stated, the initial term of each of the management
contracts is five years, expiring at various dates in 2001 or late 2000.
Although the Company's management contracts are not subject to cancellation by
the boxers, there can be no assurance that such individuals will honor their
contractual obligations.
In April 1997, the Company entered into a promotional contract with Alex
Trujillo. Mr Trujillo turned professional in 1996. Mr. Trujillo is a
lightweight, with a record of 12-0, who competed in eight bouts in 1997. Mr.
Trujillo's promotional contract expires in 2001.
In July 1998, the Company entered into a Management Agreement to act as
Co-Manager for young heavyweight Grant Cudjoe. Pursuant to such agreement the
Company is entitled to receive 16-2/3% of all purse income generated by Mr.
Cudjoe's professional fights through 2003. Mr. Cudjoe won his first professional
fight in September 1998.
The Company has recently entered into an agreement with Jesse Ferguson
and his manager, pursuant to which the Company has the right to receive a fixed
percentage of the gross purse of any bout in which Mr. Ferguson engages. The
underlying contract between Mr. Ferguson and his manager expires in October
2000, with the manager having the ability to renew the contract, at his sole
discretion, for two successive 12 month periods.
For the year ended December 31, 1997, and the six months ended June 30,
1998, the Company recognized revenues of $168,224 and $604,512, respectively,
attributable to the Company's share of its boxers' purses. The Company has
recognized limited revenues relating to product endorsements, speaking
engagements, personal appearances or other commercial performances from its
boxers. Historically, boxers have not been actively solicited for such
opportunities, and therefore the generation of significant revenue in this
regard is uncertain. The Company nevertheless intends to seek to
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maximize these opportunities for its boxers through marketing opportunities.
There can be no guaranty of success in theseefforts.
Boxing Regulation
The management of professional boxers and other athletes is subject to
licensing and regulation by state athletic commissions and agencies. The
Company's President, Marc Roberts, has obtained licenses to act as a manager
from the governing agencies in New Jersey, New York and Nevada. Management
licenses were obtained in any other host states immediately prior to the bouts
held therein, and the Company, or its employees or representatives, as
applicable, will seek the appropriate licenses from other states as warranted.
The various state athletic commissions have their own rules and regulations
which govern boxing contests and events taking place in their states and have
promulgated their own standards for boxer-management contracts, including
maximum permissible duration and management fees. In some instances, such
provisions conflict with the legislation and rules and regulations of other
states, as well as with the terms of the Company's management agreements. To
date, the terms of the Company's management agreements have not restricted the
Company's boxers from engaging in bouts in other states. The Company's
management agreements provide, however, that in the event any provision of such
agreements is held invalid or unenforceable by a host state, such provision
shall be deleted or construed in accordance with the rules of the host state.
Difficulties or failure in obtaining or maintaining required licenses or
approvals from state athletic commissions or agencies or otherwise complying
with their rules or regulations could prevent the Company from enforcing its
rights under its management contracts or placing its boxers in contests or
exhibitions in certain states. To date, there have been no such difficulties
with the Company's management agreements.
Personal Injury Liability
The use of the Company's boxing training facility by professional boxers
and others entails a risk of liability claims for injuries sustained while
training or using equipment. The Company maintains liability insurance coverage
in the amount of $1,000,000 per occurrence and $2,000,000 in the aggregate. In
the event of a successful suit against the Company, lack or insufficiency of
insurance coverage could have a material adverse effect on the Company.
Team Sports Division
Worldwide Team Sports, Inc. ("WWTS") was originally formed for the
purpose of engaging in the business of providing contract negotiation, marketing
and advisory services to, and on behalf of, professional team sport athletes.
The Company intends to operate through sport-specific divisions employing
professionals with experience as agents and contract advisors ("Agents") in
their respective sports until such time, as in the case of basketball and
football, that the level of the Company's operations warrants the establishment
of a separate subsidiary in which the division would operate. The Company
intends to continue to seek to hire or engage consultants who are established
professionals with rosters of athletes in various professional sports. There can
be no assurance that any additional divisions will be successfully created or
that acquisitions of established sports agency practices will be successfully
completed. Since the establishment of WWFM and WWBM as separate entities, the
Team Sports Division has been comprised of its Marketing Division and its
Memorabilia Division. The Company will seek to integrate these operations of
WWTS with its other divisions so as to provide its clients with professional and
commercial services intended to enable athletes to maximize their earning
potential during their playing careers and to capitalize on the recognizability,
popularity and marketability of professional athletes in today's media saturated
sports environment.
Team Sports Agency
Agents conduct compensation negotiations on behalf of individual players
and also provide advice and counsel in all other areas of the players'
professional careers, including career management decisions (e.g., free agency
options), the development and execution of marketing strategies and endorsement
opportunities. In addition to establishing a relationship with athletes, a
knowledge of the league, team personnel, the league collective bargaining
agreements and the mechanics of the league's salary cap structure, which limits
the aggregate amount of salary a team can pay its players, are material to
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fulfilling the Agent's function. Agents must be able to assist their clients in
all stages of their careers. They must be familiar with the personnel needs of
the teams in the league to appropriately market and arrange showcases for their
rookie clients, and also must be familiar with each team's salary cap
limitations to best position veteran free agents to sign with a particular team.
In exchange for such services, an Agent generally receives between 2% to 4% of
his player's team salary each season (which includes the player's base salary,
signing bonus and any performance bonus actually received by the player), during
the length of the contract which the Agent negotiated for his client with a
team. That revenue stream continues for so long as the player is paid pursuant
to such contract, even if the client changes Agents during that span. Once that
contract is completed, a player is free to use another Agent with no obligation
to his former Agent. An Agent's success therefore depends as much on his ability
to maintain a long term relationship with his players and his ability to attract
new valuable veteran and rookie talent as on his ability to negotiate favorable
contracts for his players. Revenues generated by the renegotiation of a contract
originally negotiated by another Agent are based solely on the incremental
salary increase, if any, resulting from such renegotiation.
Worldwide Football Management Inc.
In January 1996, the Company established its involvement in the
representation of professional football players through WWTS and employed a
registered NFL contract advisor in connection therewith. In March 1997 the
Company hired a second registered contract advisor and established WWFM as a
separate, wholly-owned subsidiary for the purpose of continuing to provide
player agent services to professional football players, including, but not
limited to, contract negotiation, professional and personal advisory services,
and the identification and exploitation of endorsement and marketing
opportunities. In July 1998 the Company hired a third NFL players agent to
service its expanding roster of players, and to facilitate new relationships
with other athletes as well. WWFM seeks to establish relationships primarily
with those athletes whose athletic abilities and personal attributes make them,
in the opinion of WWFM's management, most likely to realize the maximum
financial benefit from their athletic careers under WWFM's direction. WWFM's
registered agents currently represent over 20 active NFL players, including,
among others, Antonio Freeman, Bobby Engram, Antonio London, O.J.
McDuffie, Rickey Dudley and Tyrone Wheatley.
For the fiscal year ended December 31, 1997 and the six month period
ending June 30, 1998, the Company's football agency business generated revenues
of $175,248 and $44,570, respectively.
The Company intends to further develop its football player agency
business through additions to WWFM's existing professional football player
clientele and through the hiring of additional Agents with existing football
agency businesses. The Company's success in the football agency arena will
depend on its ability to acquire existing sports agency practices, attract and
retain the services of football industry professionals, and in turn, on the
ability of those professionals to undertake the representation of successful
professional athletes and to maintain such relationships for a substantial
period of time. The NFL Collective Bargaining Agreement prohibits an
organization from serving as a player's Agent, and therefore the Company's
football agency business growth will be dependent upon its ability to retain and
maintain the services, as employees or consultants, of Agents who are willing to
assign the commissions generated thereby to the Company in exchange for a
salary, stock and other compensation.
Worldwide Basketball Management, Inc.
In August 1996, the Company hired a registered NBA player's agent and a
former NBA athlete with experience recruiting and handling athletes to manage
the Company's basketball business in connection with the formation of WWBM.
Through WWBM, the Company provides player agent services to professional
basketball players, including, but not limited to, contract negotiation,
professional and personal advisory services, and the identification and
exploitation of endorsement and marketing opportunities. WWBM intends to seek to
identify and establish relationships primarily with those athletes whose
athletic abilities and personal attributes make them, in the opinion of WWBM's
management, most likely to realize the maximum financial benefit from their
athletic careers under WWBM's direction. In the 1996 NBA Draft, WWBM's agent
represented the player selected ninth overall. In the 1997 NBA draft, WWBM's
agent represented two players selected in the first round and one selected in
the second round. The Company represented no players selected in the 1998 NBA
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Draft. Two of the players formerly signed to management contracts with WWBM have
since terminated their agreements with the Company. The Company has signed
representation agreements with two additional NBA veteran players.
For the fiscal year ended December 31, 1997 and the six month period
ending June 30, 1998, WWBM generated revenues of $32,763 and $5,000,
respectively.
NBA player agents are certified by the National Basketball Players
Association ("NBPA") and are regulated by the terms of the Regulations Governing
Player Agents which were adopted by the NBPA pursuant to the authority and duty
conferred upon the NBPA as the exclusive bargaining representative of NBA
players pursuant to Section 9(a) of the National Labor Relations Act. By
regulation, a player agent must be an individual and not a corporation or other
entity. Although the maximum fees which an Agent can charge or collect is 4% of
a player's compensation from the team, if an Agent negotiates a contract where
the player receives only the minimum season's compensation under the Collective
Bargaining Agreement, the Agent is entitled to only a $2,000 fee for such
season. An Agent may also receive a greater percentage, often 15% to 20%, of a
player's compensation from endorsements and other sources of income. Pursuant to
the NBPA Regulations, the salaries earned by NBA rookies is fixed depending upon
the position the player is selected in the draft. As a result, agency fees
earned for negotiating rookie contracts are often limited to a small percentage.
In August 1998, the Company, the NBA agent and the former NBA player
hired in connection with the formation of WWBM severed their relationship. None
of the Company's other employees are NBA agents, however, two of the Company's
other employees, each a registered NFL agent, are seeking registration with the
NBA as agents. There can be no assurance such employees will obtain such
registration or be successful in attracting professional basketball players as
clients. If such employees fail to obtain such registration or the Company
cannot retain the services of another NBA registered agent, there can be no
assurance that the Company will be able to maintain its basketball agency
business.
Worldwide Marketing Division
The WWTS Marketing Division caters to the development of commercial and
marketing opportunities for athletes and entertainers, including the Company's
clients. The Marketing Division seeks to generate opportunities for non-sport
exploitation of all of the Company's clients' names and personalities by
focusing on the lucrative merchandising, endorsement, public appearance and
licensing opportunities available to today's better known athletes. For these
efforts, the Company receives a percentage of any revenues generated by these
opportunities as a commission, customarily ranging between 10% and 20%. The
Marketing Division also arranges marketing opportunities and public appearances
for athletes of other agencies, in which event the Company customarily shares up
to 50% of the commission generated. The Marketing Division exclusively
represents the Company's athletes, the NASCAR racing teams of LAR Motorsports
and Brewco Motorsports, and Kevin and Brian Delaney, professional snowboarders.
For the fiscal year ended December 31, 1997 and the six month period
ended June 30, 1998, the Marketing Division generated revenues of $93,404 and
$64,025, respectively.
Worldwide Memorabilia Division
In March 1998, for the purpose of promoting and marketing sports and
entertainment memorabilia, the Company established the Worldwide Memorabilia
Division of WWTS. The Company has exclusive rights to market a sports
memorabilia catalog owned by an employee of the Division, pursuant to which the
Company receives a fixed commission on sales. In addition, the Company markets
its own catalog of professional and amateur football, baseball, basketball and
hockey memorabilia. The catalog includes autographed athletic attire, sport
trading cards and sports paraphernalia used by prominent athletes. The Company
will seek to sell such items and other acquired memorabilia through various
mediums including, trade shows, mail order and retail sales. For the six month
period ending June 30, 1998 the Memorabilia Division generated $157,616 in
revenues.
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Competition
The Company faces intense competition from an increasingly crowded field
of sports agents. As professional athletes' salaries continue to grow, and the
opportunities for additional revenues from commercial exploitation and
endorsements expand, more agents enter into this field, which has limited
barriers to entry. In spite of the growing number of agents, each major
professional sport is dominated by one or two major agencies, representing a
substantial number of players, including those who generate the highest
salaries. This concentration of the recognized revenue generating athletes in
the hands of a few agents presents a potential barrier which could prevent WWFM
and WWBM from realizing their growth objectives.
The Marketing Division also faces competition from more established and
experienced agencies such as Nike Sports Management, Steiner Sport Marketing,
The Marquee Group, Inc., and Advantage International, which currently provide
endorsement opportunities to athletes. There are no barriers to entry in this
industry and success is dependent upon establishing and maintaining
relationships with persons and entities capable of providing endorsement
opportunities and identifying trends and issues to capitalize on fleeting
popular currents. Since the Company's October 1996 initial public offering,
additional companies such as SFX Entertainment, Inc. and Magicworks
Entertainment Incorporated have become public companies and have contributed to
a consolidation of sports management and marketing agencies.
The boxers managed by the Company face intense competition from numerous
professional boxers in their respective weight classes both in the boxing ring
as well as for participation in bouts and press coverage. Such individuals also
compete for access to the services of promoters who have sufficient resources to
arrange bouts with large purses. Many boxers have long-term arrangements with
promoters, potentially providing such boxers with an advantage in arranging such
bouts. There can be no assurance that the individuals managed by the Company
will be able to compete successfully on any of these levels. Further, the
Company will be competing with numerous other managers and promoters, including
Don King Productions, Top Rank, Shelly Finkel Management, Cedric Kushner and
Main Events, many of which may have greater financial resources or recognition
in the industry than the Company.
Employees
At October 7, 1998, the Company and its subsidiaries in the aggregate
had 19 employees. Three of such persons perform executive functions, three are
Agents, three are marketing executives and ten perform clerical or
administrative functions. The Company believes the number of persons currently
employed is adequate to conduct the Company's current level of business
operations. Because of the service nature of the sports management industry, the
Company intends to continue to seek to add new management personnel to expand
into additional sports and to add to the number of players represented by the
Company. See "Management."
Properties
The Company's principal executive offices are currently located in West
Orange, New Jersey on a month-to-month rental basis. The Company currently
occupies approximately 1,500 square feet of space, for which the Company pays a
monthly base rental of approximately $1,650. The Company leases its boxing
training facility, comprising approximately 2,000 square feet, on a
month-to-month basis, at a base monthly rental of $1,400. The Company intends to
relocate its training facility because the Company does not believe these
facilities are adequate for its present and projected needs. The Company
believes it will be able to locate suitable space at base rental amounts similar
to those currently paid by the Company.
Legal Proceedings
There are no material legal proceedings to which the Company is a party.
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MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
Name Age Position
Marc Roberts 39 President, Chief Executive Officer,
President of Worldwide Team Sports,
Inc. and Director
Roy Roberts 59 Chief Financial Officer, Director
Allan Cohen, M.D. 56 Director
Dan Drykerman 50 Director
Herbert F. Kozlov 45 Director, Secretary
Harvey Silverman 57 Director
Joel Segal 34 President, Worldwide Football
Management Inc.
Marc Roberts has been President and Chief Executive Officer of the
Company since its inception in August 1995. Since 1992, Mr. Roberts has been
engaged in the management of the Company's boxers through the Company's
corporate predecessors. Mr. Roberts is involved in various real estate,
restaurant and business ventures as a passive investor, none of which occupies a
significant portion of his business time.
Roy Roberts has been Chief Financial Officer of the Company since its
inception and as a director of the Company since July 1996. Mr. Roberts devotes
his full time and attention to the Company. Since 1991, Mr. Roberts has served
as the President of Sparkle Industries, a commercial maintenance company in New
Jersey. He also served, until 1995, as the Chairman and Chief Operating Office
of Palisades Entertainment, Inc., a motion picture film distributor specializing
in special interest, rock and roll and animation films. Mr. Roberts is Marc
Roberts' father.
Allan Cohen, M.D. has been a director of the Company since July 1996. Dr.
Cohen is engaged in the practice of medicine, specializing in gastroenterology,
and has been President of Gastroenterology Associates, a professional
corporation, since 1974 and is President of the Medical Staff at Muhlenburg
Hospital in Plainfield, New Jersey. Dr. Cohen is Marc Robert's uncle.
Dan Drykerman has been a director of the Company since July 1996. Mr.
Drykerman has been the Operating Partner of Drykerman Investment Group, an
investment partnership (f/k/a Drykerman Enterprises) since 1976.
Herbert F. Kozlov has served as general counsel to the Company since
its inception, and as a director of the Company since July 1996. Mr. Kozlov has
been a practicing attorney for more than the past 20 years and is currently a
partner in the firm of Parker Duryee Rosoff & Haft A Professional Corporation.
Mr. Kozlov is also a member of the Boards of Directors of HMG Worldwide
Corporation, Alpha Hospitality Corporation, and a number of privately held
companies.
Harvey Silverman has been a director of the Company since July 1996. Mr.
Silverman is a Senior Managing Director of Spear Leeds & Kellogg in New York,
where he has been employed since 1963. Mr. Silverman is a Governor on the
American Stock Exchange and a director of Intermarket Clearing Corp.
Joel Segal has been President of WWFM since April 1997. Mr. Segal has been
a registered NFL contract advisor for more than the past five years. Prior to
joining WWFM, Mr. Segal engaged in such business as a sole proprietor. Mr. Segal
is an attorney admitted to practice in the states of New York and Connecticut.
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Directors serve until the next annual meeting or until their successors
are elected and qualified. Officers serve at the discretion of the Board of
Directors, subject to rights, if any, under contracts of employment. Directors
will receive no cash compensation for their services to the Company as
directors, but will be reimbursed for expenses actually incurred in connection
with attending meetings of the Board of Directors and are eligible to
participate in the Company's Stock Option Plan.
The General Corporation Law of Delaware permits a corporation through
its Certificate of Incorporation to eliminate the personal liability of its
directors to the corporation or its stockholders for monetary damages for breach
of fiduciary duty of loyalty and care as a director, with certain exceptions.
Exceptions include a breach of the director's duty of loyalty, acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of law, improper declarations of dividends, and transactions from which the
directors derived an improper personal benefit. The Company's Certificate of
Incorporation exonerates its directors from monetary liability to the fullest
extent permitted by this statutory provision.
The Company has been advised that it is the position of the Securities
and Exchange Commission that insofar as the foregoing provision may be invoked
to disclaim liability for damages arising under the Act, that provision is
against public policy as expressed in the Act and is therefore unenforceable.
Key Employee
The Company has executed a five year employment agreement with Ryan
Schinman, a registered contract advisor with the NFL. In addition to acting as
contract advisor for athletes, Mr. Schinman devotes a significant portion of his
time and attention to developing marketing opportunities for the Company and its
clientele. Mr. Schinman is 26 years old and, prior to joining the Company in
January 1996, was employed for three years by Athletes and Artists Ltd., a
sports and entertainment management agency. Pursuant to his employment
agreement, Mr. Schinman receives a salary of $100,000 per annum plus bonuses in
the discretion of the board of directors.
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Executive Compensation
The following table sets forth the aggregate compensation paid by the
Company to the Chief Executive Officer and President, and certain other
executive officers of the Company for services rendered to the Company by such
persons during the year ended December 31, 1997.
Annual Compensation(1)(2)
Salary Bonus Options/SARs
Name and Principal Position ($) ($) (#)
--------------------------- ----- ----- ----
---------------
Marc Roberts
Chief Executive Officer, President $215,000 - 140,000
Roy Roberts
Chief Financial Officer $120,000 - 40,000
Michael Goodson(3)
President, Worldwide Basketball $130,000 - -
Management, Inc.
Erik Rudolph(3)
Chief Executive Officer, Worldwide $130,000 - -
Basketball Management, Inc.
Joel Segal
President, Worldwide Football $94,230 $75,000 -
Management, Inc.
(1) The Company did not make any restricted stock awards, grant any stock
appreciation rights or make any long-term incentive plan payments to the
named executive officers during 1997.
(2) Other compensation in the form of perquisites and other personal benefits
has been omitted where the aggregate amount of such perquisites and other
personal benefits constituted the lesser of $50,000 or 10% of the total
annual salary and bonus of the Officer for the year.
(3) The Company has terminated its employment agreements with Messrs. Goodson
and Rudolph in August 1998.
Compensation of Directors
The Company has no standard arrangements, pursuant to which the
directors of the Company are compensated.
Employment Agreements
Marc Roberts entered into a five-year employment agreement with the
Company commencing January 1, 1996 which provides for a base annual salary of
$190,000 with annual minimum guaranteed increases of $25,000. Mr. Roberts shall
also be paid an annual bonus of an amount equal to a minimum of 10% of the
pretax operating income of the Company before income taxes, depreciation and
amortization. Bonuses in excess of that amount shall be determined by the
Company's Board of Directors or its executive compensation committee, if any.
Mr. Roberts shall also be entitled to participate in the Company's incentive
stock option plan and shall be granted a minimum of 30% of the stock options to
be issued by the plan at an exercise price of 110% of the fair value of the
stock, as determined by the Board of Directors, on the date of grant. The
agreement provides that upon termination of Mr. Roberts' employment without
cause or upon certain changes in control of the Company resulting in Mr.
Roberts' termination, he will be entitled to receive any accrued but unpaid
amounts due him under the agreement from the period prior to his termination. In
addition, the Company is obligated to pay Mr. Roberts (i) within five (5) days
of notice of termination, an amount equal to sixty percent (60%) of the present
value of the sum of
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(x) all salary which would have been earned but for such termination for a
period of 2.99 years commencing on the date of such termination based on Mr.
Roberts' then current salary, plus (y) the present value of an amount determined
by multiplying the amount of incentive compensation earned by Mr. Roberts for
the last fiscal year of the Company preceding termination by 2.99 ("Severance
Compensation"). The remaining forty percent (40%) of the Severance Compensation
shall be paid to Mr. Roberts in twelve (12) equal monthly installments
commencing on the first month after the month in which he was terminated. In the
event of Mr. Roberts' termination for cause, or if Mr. Roberts voluntarily
terminates the agreement within its first two years, the Company is under no
obligation to pay him his compensation beyond the date of termination. If Mr.
Roberts voluntarily resigns from the Company after the second anniversary of his
agreement, he shall be entitled to receive all of the compensation and benefits
he would be afforded if he had been terminated without cause. Mr. Roberts'
agreement provides that Mr. Roberts will not compete with the Company for a one
(1) year period after the termination of his employment. The Company has
obtained a $2,000,000 key person life insurance policy on Mr. Roberts' life
naming the Company as beneficiary.
In connection with the formation of WWBM, Erik Rudolph, a registered
NBA player's agent, and Michael Goodson, a former NBA player active in player
relations and recruiting, signed five year employment agreements with WWBM,
effective September 1, 1996, pursuant to which Messrs. Rudolph and Goodson
assigned their respective rights and interests in the revenues generated by (i)
Samaki Walker, Jason Osborne and Shawnelle Scott, and (ii) any players Messrs.
Rudolph and Goodson signed to valid player's representation agreements during
their employment by WWBM. Messrs. Rudolph and Goodson were each to receive a
salary of $130,000 per annum during the term of their contracts, and each also
received a signing bonus of $50,000 in October 1996. In addition, they were to
share certain bonus compensation based on WWBM's annual revenue. WWBM's
agreements with each of Messrs. Goodson and Rudolph were terminated in August
1998. As stated in those employment agreements, in the event of the non-renewal
of the employment agreements, or their termination for any reason, Messrs.
Goodson and Rudolph would (i) be reassigned the rights to the revenues from Mr.
Walker's contract payable after such termination, and any revenues to be derived
from Mr. Osborne, who currently does not have a professional basketball
contract, and (ii) pay WWBM (a) 50% of the revenues from all other players
signed during the terms of their employment (including Mr. Scott) until the
Company recoups all of the amounts funded by the Company, and (b) 30% of such
revenues thereafter. Mr. Goodson has agreed to forego any compensation that may
have been due to him from his contract with WWBM, and the Company and Mr.
Rudolph are currently in negotiation on an appropriate settlement.
In connection with the formation of WWFM as a separate entity, the
Company entered into an employment agreement with Joel Segal, a registered NFL
player's agent, effective as of April 16, 1997, pursuant to which Mr. Segal
assigned the rights and interests to the revenue generated by any individual
with whom Mr. Segal signs to a valid representation agreement, or with whom
material discussions regarding entering a representation agreement are had by
Mr. Segal, the Company or its employees or affiliates. Mr. Segal's base salary
shall be $140,000 during the term of the employment agreement, with a signing
bonus of $75,000. Pursuant to his employment agreement Mr. Segal is a 20% owner
of WWFM but if he remains employed by the Company on December 31, 1998 either he
or the Company may cause a merger between WWFM and the Company to cause an
exchange of 200,000 shares of the Company's Common Stock for Mr. Segal's 20%
stake in WWFM. WWFM would then become a wholly-owned subsidiary of the Company.
The Company intends to enter into a share exchange agreement with Mr. Segal
prior to December 31, 1998 to effectuate such share exchange.
Stock Option Grants
In September 1997, the Company granted to each of its directors options
under the Company's Stock Option Plan, exercisable over a ten year period, at an
exercise price of $2.875 per share. Messrs. Drykerman, Silverman and Cohen
received an option to purchase 45,000 shares of Common Stock of the Company. Mr.
Kozlov received an option to purchase 98,000 shares of common stock of the
Company. These grants were made in conjunction with the cancellation of options
granted in December 1996 to each of its four non-employee Directors to purchase
15,000 shares of Common Stock at an exercise price of $5.00 per share. Mr. Roy
Roberts and Mr. Marc Roberts received options to purchase 40,000 and 25,000
shares of common stock of the Company, respectively. Mr. Marc Roberts also
received, outside the Company's Stock
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Option Plan, an option to purchase 115,000 shares of Common Stock of the
Company, also exercisable over a ten year period, at an exercise price of $2.875
per share.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information concerning stock
ownership of all persons known by the Company to own beneficially 5% or more of
the outstanding shares of the Company's Common Stock, each director, and all
officers and directors of the Company as a group as of October 1, 1998.
Number Percentage of Common Stock
Name and Address1 of Shares Beneficially Owned
Marc Roberts 1,718,9662 21.2%
Roy Roberts 248,3343 3.0%
Allan Cohen, M.D. 176,6674 2.2%
Dan Drykerman 175,0005 2.2%
Herbert F. Kozlov 464,0006 5.7%
Harvey Silverman 212,3347 2.6%
All officers and
directors as a group (7 persons)8 3,075,301 37.9%
1 The address of all of the beneficial owners is that of the Company's
principal executive office.
2 Includes 200,000 shares which may be acquired upon the exercise of
currently exercisable options and warrants.
3 Includes 165,000 shares which may be acquired upon the exercise of
currently exercisable options and warrants.
4 Includes 160,000 shares which may be acquired upon the exercise of
currently exercisable options and warrants.
5 Includes 172,500 shares which may be acquired upon the exercise of
currently exercisable options and warrants.
6 Does not include shares and warrants to acquire additional shares held by
members of a law firm of which Mr. Kozlov is a member. Mr. Kozlov disclaims
beneficial ownership of such shares. Includes 8,000 shares held under the NYUGMA
for the benefit of his minor children and 173,000 shares which may be acquired
upon the exercise of currently exercisable options.
7 Includes 120,000 shares which may be acquired upon the exercise of
currently exercisable options. 8 Includes 959,500 options which may be acquired
upon the exercise of currently exercisable options.
Stock Option Plan
On July 1, 1996, the Company adopted the 1996 Stock Option Plan (the
"SOP") covering 500,000 shares of the Company's Common Stock, $.01 par value,
pursuant to which officers, directors and key employees of the Company are
eligible to receive incentive and/or non-qualified stock options. The SOP is
administered by the Board of Directors or a committee designated by the Board of
Directors. The selection of participants, allotment of shares, determination of
price and other conditions of purchase of options is determined by the Board or
committee at its sole discretion. The purpose of the SOP is to attract and
retain persons instrumental to the success of the Company. Incentive stock
options granted under the SOP are exercisable for a period of up to 10 years
from the date of grant at an exercise price which is not less than the fair
market value of the Common Stock on the date of the grant, except that the term
of an incentive stock option granted under the SOP to a stockholder owning more
than 10% of the outstanding Common Stock may not exceed five years and its
exercise price may not be less than 110% of the fair market value of the Common
Stock on the date of the grant. At December 31, 1997, options to purchase up to
435,000 shares have been granted under the SOP.
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CERTAIN TRANSACTIONS
From time to time Marc Roberts has made loans and advances to the Company
and the Company has advanced funds to Mr. Roberts. In June 1996, Mr. Roberts
repaid $200,000 of amounts due to the Company, thereby eliminating the balance
due from Mr. Roberts. Subsequent to June 1996, Mr. Roberts made additional loans
to the Company. At December 31, 1996, $169,000 was due to Mr. Roberts. Mr.
Roberts has agreed to forego repayment of such amounts until the Company has
generated operating revenue in excess of such amount. In 1997, the Company
repaid the remaining amount due on such note held by Mr. Roberts.
Pursuant to a Shareholders Agreement among Messrs. Goodson and Rudolph
and the Company, upon the occurrence of certain events, including the
termination of the employment of Messrs. Rudolph and Goodson, the shares of WWBM
held by Messrs. Rudolph and Goodson (representing 20% of the outstanding shares
of WWBM) will be exchanged for up to an aggregate of 300,000 shares of Common
Stock of the Company, depending upon the time of such exchange and the financial
condition of WWBM as of the time of such exchange. The Shareholders Agreement
was terminated effective August 1998 and Mr. Goodson has agreed to forego any
compensation to which he was entitled to receive thereunder and he has
surrendered his shares of WWBM Common Stock to the Company. The Company and Mr.
Rudolph are currently negotiating an appropriate settlement.
Pursuant to a Shareholders Agreement among Joel Segal, WWFM and the
Company, if upon or after December 31, 1998, Segal is a licensed NFL Player's
Agent in good standing with the NFL Player's Association and employed by the
Company and if Segal meets certain productivity incentives, then either Segal or
the Company can elect to effectuate a merger of WWFM and the Company which would
result in an exchange of the shares of WWFM held by Mr. Segal, representing 20%
of the outstanding shares of WWFM, for 200,000 shares of Common Stock of the
Company. The Company and Mr. Segal have agreed to enter into a definitive share
exchange agreement, in lieu of effectuating the merger, to consummate the
proposed share exchange prior to December 31, 1998.
The Company believes the terms and conditions of the foregoing
transactions are no less favorable to the Company than those available from
unaffiliated parties. Future transactions between the Company and any affiliate
will be on terms and conditions approved by the Board of Directors.
DESCRIPTION OF SECURITIES
Common Stock
General
The Company is authorized to issue 20,000,000 shares of Common Stock,
$.01 par value per share, of which 7,137,197 shares are currently outstanding
and held of record by approximately 142 holders of record as of June 30, 1998.
Holders of the Common Stock are entitled to one vote for each share held of
record on all matters to be voted on by stockholders. There are no preemptive,
subscription, conversion or redemption rights pertaining to the Common Stock.
Holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors from funds legally available therefor and to
share ratably in the assets of the Company available upon liquidation,
dissolution or winding up. The holders of Common Stock do not have cumulative
voting rights for the election of directors and, accordingly, the holders or
more than 50% of the Common Stock voting for the election of directors are able
to elect all directors. All of the outstanding Common Stock is duly authorized,
validly issued, fully paid and non-assessable, and the Common Stock issuable
upon exercise of the Company's outstanding warrants and options, has been duly
authorized and reserved for issuance upon the exercise of the Company's
outstanding warrants and options and, upon issuance, will be validly issued,
fully paid and non-assessable.
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Dividends
The Company has not paid or declared any cash dividends since its
formation and intends to retain earnings, if any, for the operation and
expansion of its business. The payment by the Company of dividends, in the
future, rests within the discretion of its Board of Directors and will depend
on, among other things, the Company's earnings, its capital requirements and its
financial condition.
Warrants
In connection with a private placement commenced in September 1995
through July 1996 of an aggregate of $1,990,000 of promissory notes, the Company
issued warrants to purchase up to 995,000 shares of Common Stock at an exercise
price of $7.20 at any time commencing on October 22, 1996 and prior to the fifth
anniversary of their issuance. The Warrants provide for adjustment of the
exercise and for a change in the number of shares issuable upon exercise to
protect holders against dilution in the event of a stock dividend, stock split,
combination or reclassification of the Common Stock. The Warrants do not confer
upon the Warrant holder any voting or other rights of a stockholder of the
Company. The holders of these warrants were not granted any registration rights
relating to the warrants or the shares underlying such warrants.
On May 13, 1998, the Board of Directors of WWES authorized the issuance
of 31,000 warrants to purchase common stock of the Company, exercisable at $2.25
per share, with a 5-year term.
Redeemable Warrants
In connection with the Company's public offering on October 22, 1996,
and pursuant to a warrant agreement (the "Warrant Agreement") among the Company,
William Scott & Company L.L.C. as underwriter ("William Scott") and the
Company's transfer agent and warrant agent, the Company issued 1,400,000
Redeemable Warrants each to purchase one share of the Company's Common Stock at
$7.20 per share at any time after October 22, 1997 and before the close of
business on October 22, 2002.
The Redeemable Warrants are redeemable by the Company on 30 days' prior
notice at any time subsequent to October 22, 1997 at a redemption price of $.05
per Redeemable Warrant provided the last sale price of the Common Stock for any
20 consecutive trading days ending within 15 days of the notice of redemption
averages in excess of $9.00 per share.
Unit Purchase Option
Pursuant to an Underwriting Agreement between the Company and William
Scott entered into in connection with the public offering of the Company's
Common Stock in October 1996, the Company has agreed to sell to William Scott or
its designees, for nominal consideration, a Unit Purchase Option to purchase up
to 140,000 Units each consisting of one share of the Company's Common Stock and
one Redeemable Warrant convertible into one share of the Company's Common Stock
at the same terms and condition set forth above, except that the Redeemable
Warrants issued pursuant to the Unit Purchase Option are not subject to
redemption by the Company. The Unit Purchase Option will be exercisable during
the four-year period commencing October 22, 1997 at an exercise price of $9.90
per Unit, subject to adjustment in certain events to protect against dilution,
and were not transferable until October 22,1997 except to officers of William
Scott. The Company has agreed to register, during the four-year period
commencing October 22, 1997, on one occasion upon request of the holder(s) of a
majority of the Unit Purchase Option, the securities issuable upon exercise
thereof under the Securities Act, such registration to be at the Company's
expense. The Company has also granted certain "piggyback" registration rights to
holders of the Unit Purchase Option.
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Options
On July 1, 1996, the Company adopted the 1996 Stock Option Plan (the
"Plan"), which provides that certain options granted thereunder are intended to
qualify as "incentive stock options" under Section 422A of the Internal Revenue
Code. Nonqualified options may also be granted under the Plan. The Plan
authorizes the issuance of qualifying option to purchase 500,000 shares. The
option price per share for the incentive stock option will be determined at the
time of grant.
On September 16, 1997, 435,000 qualifying options were granted, with an
exercise price of $2.875, and 11,000 options were granted outside the Plan with
an exercise price of $2.875, all for a term of ten years.
On December 9, 1997, the Board of Directors of the Company granted
50,000 and 115,000 nonqualifying options exercisable at $2.00 and $2.875 a
share, respectively, with a 5-year term, and 147,500 nonqualifying options
exercisable at $2.875 a share, with a ten year term.
On January 28, 1998, the Board of Directors of the Company authorized
the issuance of 320,000 nonqualifying options, exercisable at $1.50 a share,
with a ten year term.
In September 1998, the Board of Directors of the Company authorized the
issuance of 1,083,000 nonqualifying options ranging in price from $1.44 through
$2.875 per share.
Transfer Agent and Warrant Agent
American Stock Transfer & Trust Company, New York, New York serves as
transfer agent for the Common Stock and Warrant Agent for the Redeemable
Warrant.
Preferred Stock
The Certificate of Incorporation of the Company authorizes the issuance
of 5,000 shares of preferred stock. The Board of Directors, within the
limitations and restrictions contained in the Certificate of Incorporation and
without further action by the Company's stockholders, has the authority to issue
shares of preferred stock from time to time in one or more series and to fix the
number of shares and the relative rights, conversion rights, voting rights, and
terms of redemption, liquidation preferences and any other preferences, special
rights and qualifications of any such series. Any issuance of preferred stock
could, under certain circumstances, have the effect of delaying or preventing a
change in control of the Company and may adversely affect the rights of holder,
of Common Stock. The Company has no present plans to issue any shares of
preferred stock.
Delaware Anti-Takeover Statute
The Company is subject to Section 203 of the Delaware General
Corporation Law ("Section 203") which, subject to certain exceptions, prohibits
a Delaware corporation from engaging in any "business combination" with any
"interested stockholder" for a period of three years following the date that
such stockholder became an interested stockholder, unless: (i) prior to such
date, the Board of Directors of the corporation, approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by persons who
are directors and also officers and by employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
(iii) on or subsequent to such date, the business combination is approved by the
Board of Directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
66-2/3% of the outstanding voting stock which is not owned by the interested
stockholder. Under Section 203, the restrictions described above also do not
apply to certain business combinations proposed by an interested
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stockholder following the announcement or notification of one of certain
extraordinary transactions involving the corporation and a person who had not
been an interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors and which transaction is approved or not opposed by the majority of
the board of directors then in office.
Section 203 generally defines a business combination to include: (i)
any merger or consolidation involving the corporation and the interested
stockholders; (ii) any sale, transfer, pledge or other disposition of 10% or
more of the assets of the corporation to the interested stockholder; (iii)
subject to certain exceptions, any transaction which results in the issuance or
transfer by the corporation of any stock of the corporation to the interested
stockholder; (iv) any transaction involving the corporation which has the effect
of increasing the proportionate share of the stock of any class or series of the
corporation beneficially owned by the interested stockholder; or (v) the receipt
by the interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
UNDERWRITING
The Company has entered into an Underwriting Agreement with Bell
Investment Group Inc. (the "Underwriter"). Pursuant to the terms of the
Underwriting Agreement, the Underwriter has agreed to attempt to sell the
Minimum Amount of the Shares on a "best efforts all or none basis" and, once the
Minimum Amount has been subscribed for, the Underwriter shall attempt to sell up
to the Maximum Amount of the Shares on a "best efforts" basis until the Offering
is either terminated or completed, which ever is sooner. This Offering is the
Underwriter's first as the managing underwriter for a public offering.
The Shares will be offered for a period of forty-five (45) days from
the date of this Prospectus, which period may be extended for an additional
forty-five (45) days upon mutual agreement between the Company and the
Underwriter (the "Offering Period"). The Company intends to extend the Offering
beyond forty-five (45) days if the Minimum Amount is not raised during the
initial forty-five (45) days. If the Underwriter is unable to raise the Minimum
Amount within the Offering period, this Offering will terminate and all funds
will be returned to subscribers in full, without interest or deduction for
commissions or other expenses relating to the Offering. All funds received by
the Underwriter will be transmitted promptly to an escrow account maintained by
Liberty Bank of New York, pursuant to the terms of an escrow agreement.
Purchasers of the Shares will not receive Shares unless and until the funds are
released from escrow pursuant to the terms of the escrow agreement. Officers and
directors of the Company may purchase Shares in the Offering. However, officers
and directors who acquire Shares will not be allowed to transfer such securities
for one year without the consent of the Underwriter.
Subject to attaining the Minimum Amount in this Offering, the Company
has agreed to pay the Underwriter a sales commission of ten percent (10%) of the
aggregate offering price of the Shares (the "Underwriter Sales Commission"), and
a nonaccountable expense allowance of 3% of the gross proceeds of the Offering.
The Company has also agreed to sell to the Underwriter warrants to purchase the
Company's Common Stock in an amount equal to ten percent (10%) of the Common
Stock sold by the Underwriter (or participating underwriters or broker-dealers)
in the Offering, which Warrants may be exercised during a four (4) year period
commencing on that date which is twelve (12) months after the date of this
Prospectus. The exercise price of the Underwriter's Warrant shall be an amount
equal to 120% above the purchase price for the Common Stock in this Offering.
The Underwriter has the right to engage other broker-dealers which are
members of the National Association of Securities Dealers, Inc. (the
"Participating Dealers") to assist in the offer and sale of the Shares, and may
allow such Participating Dealers up to 100% of the Underwriter Sales Commission
and the nonaccountable expense allowance. In this regard, the Underwriter will
enter into a Participating Dealer Agreement with each Participating Dealer (a
copy of which
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is filed as an exhibit to the Registration Statement of which this Prospectus is
a part). The Underwriter may purchase Shares for accounts over which it has
discretionary authority, however, at this time the Underwriter has no intention
to do so.
In connection with the Offering, the Company has entered into an
agreement whereby it: (i) agrees to employ the Underwriter as its Management and
Financial Consultant for a three year period commencing with the date of the
Closing at a fee equal to $2,500 per month payable in one lump sum of $90,000 at
Closing; and (ii) grants the Underwriter a right of first refusal for a period
of 24 months from the Effective Date of the Offering for any offering of
securities by the Company which is structured to raise gross proceeds of up to
120% of the gross proceeds of this Offering.
The Company has also agreed that it will, for a period of two years,
engage a designee of the Underwriter as an advisor to its Board of Directors to
attend all meetings of the Company's Board of Directors. In lieu of the
appointment of such Advisor, however, the Underwriter, in its sole discretion,
shall have the right to designate one person for election as a Director of the
Company. The Company has agreed to compensate such Advisor or Underwriter's
Nominee Director to the same extent the Company compensates its non-employee
Directors for out-of-pocket expenses incurred in attending Board Meetings and
otherwise discharging the duties of a Director of the Company.
In the Underwriting Agreement, the Company has agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the federal
securities laws, or to contribute to payments which the Underwriter may be
required to make in respect thereof. The Company has been advised by the U.S.
Securities and Exchange Commission that, in the opinion of the Commission, such
indemnification for liabilities arising under the federal securities laws is
against public policy as expressed in the Securities Act of 1933, and is,
therefore, unenforceable.
Marc Roberts, the President and Chief Executive Officer of the Company
has agreed not to sell, transfer or assign any of his shares of Common Stock for
a period of 12 months from the date of this Prospectus without the prior written
consent of the Underwriter. The remaining officers and directors of the Company
have agreed to refrain from selling, transferring or assigning their shares of
the Company's Common Stock for a period of 9 months from the date of this
Prospectus without the prior written consent of the Underwriter. All of the
Company's officers and directors, including Mr. Roberts, have agreed not to
sell, transfer or assign any shares of Common Stock they may acquire by
exercising their currently existing options to acquire Common Stock of the
Company for a period of 12 months from the date of this Prospectus.
In connection with the Offering, certain underwriter and selling group
members (if any) who are qualified market makers on The Nasdaq Stock Market may
engage in passive market making transactions in the Common Stock on the Nasdaq
Stock Market in accordance with Rule 103 of Regulation M under the Securities
Exchange Act of 1934, as amended, during the five business days prior to the
pricing of the Offering before the commencement of offer or sale of the Common
Stock. Passive market makers must comply with applicable volume and price
limitations and must be identified as such. In general, a passive market maker
must display its bid at a price not in excess of the highest independent bid for
such security; if all independent bids are lowered below the passive market
maker's bid, however, such bid must then be lowered when certain purchase limits
are exceeded.
Certain persons participating in the Offering may overallot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market industry by entering stabilizing bids or effecting syndicate covering
transactions. A stabilizing bid means the placing of any bid or effecting of any
purchase for the purpose of pegging, fixing or maintaining the price of the
Common Stock. A syndicate covering transaction means the placing of any bid on
behalf of the underwriting syndicate or the effecting of any purchase to reduce
a short position created in connection with the Offering. Such transaction may
be effected on The Nasdaq Stock Market, in the over-the-counter market, or
otherwise. Such stabilizing, if commenced, may be discontinued at any time.
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LEGAL MATTERS
Certain legal matters relating to the securities offered hereby will be
passed upon for the Company by Parker Duryee Rosoff & Haft A Professional
Corporation, New York, New York. Herbert F. Kozlov, a member of Parker Duryee
Rosoff & Haft, beneficially owns 283,000 shares of Common Stock and holds
options to acquire an additional 173,000 shares. Mr. Kozlov also serves as
Secretary and a director of the Company. Parker Duryee Rosoff & Haft, as a firm,
owns 65,000 shares of Common Stock of the Company. Other individual members of
such firm own shares of Common Stock, as well as five year warrants to purchase
an additional 25,000 shares of Common Stock at an exercise price of $6.00 per
share.
EXPERTS
The financial statements (except as they apply to unaudited periods)
and schedules of the Company included in this Prospectus and Registration
Statement have been audited for Fiscal Year 1997 by Friedman Alpren & Green LLP,
independent certified public accountants, as stated in their report appearing
elsewhere herein and therein and are included in reliance upon such reports
given upon the authority of that firm as experts in accounting and auditing.
Financial Statements for Fiscal Year 1996 were audited by Rosenberg Rich Baker &
Berman, a Professional Association.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement on Form SB-2 under the Act, covering
the securities offered by this Prospectus. For further information with respect
to the Company and the securities offered, reference is made to the Registration
Statement and the exhibits filed as part thereof, which may be examined without
charge and copies of such material can be obtained at prescribed rates from the
Public Reference Section maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete. In each instance reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
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INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report F-1, F-2
Consolidated Balance Sheet as of December 31, 1997 and 1996 F-3
Consolidated Statement of Operations
Years Ended December 31, 1997 and 1996 F-4
Consolidated Statement of Cash Flows
Years Ended December 31, 1997 and 1996 F-5
Notes to Consolidated Financial Statements F-7 - F-16
Unaudited Condensed Consolidated Balance Sheets
As of June 30, 1998 F-17 - F-18
Unaudited Condensed Interim Consolidated Statements of Operations
For the Six Months Ended June 30, 1998 and 1997 F-19
Unaudited Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1998 and 1997 F-20
Notes to Consolidated Financial Statements F-21 - F-25
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INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
We have audited the accompanying consolidated balance sheet of
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES as of December 31, 1997,
and the related consolidated statements of operations, cash flows and changes in
stockholders' equity for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES as of December 31, 1997,
and the results of their operations and their cash flows for the year then ended
in conformity with generally accepted accounting principles.
Friedman Alpren & Green LLP
New York, New York
February 19, 1998, except for
Note 11, as to which the date
is March 27, 1998
F-1
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INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of Worldwide Entertainment
& Sports Corp. and Subsidiaries
29 Northfield Avenue
West Orange, New Jersey 07052
We have audited the accompanying balance sheet of Worldwide Entertainment &
Sports Corp. and Subsidiaries as of December 31, 1996 and the related statements
of operations, stockholders' equity and cash flows for the year then ended.
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 audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Worldwide Entertainment &
Sports Corp. and Subsidiaries as of December 31, 1996 and the results of its
operations and its cash flow for the year then ended in conformity with
generally accepted accounting principals.
ROSENBERG RICH BAKER BERMAN & COMPANY, PA
Maplewood, New Jersey
February 18, 1997
F-2
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
------------- ---------
Current assets
Cash and cash equivalents, including restricted cash of
$120,000 in 1996 $ 745,137 $ 791,505
Certificates of deposit 1,060,049 300,000
Marketable securities - 3,098,760
Accounts and loans receivable, less allowance for doubtful
accounts of $15,000 and $600 295,765 12,396
Prepaid expenses and other current assets 21,890 57,136
Due from boxers, less allowance of $141,121 and $38,853 377,184 92,458
Deposit - 43,150
------------- -------------
Total current assets 2,500,025 4,395,405
Property and equipment - at cost, less accumulated depreciation 21,029 56,195
Other assets
Deferred consulting expense - 150,000
Due from related party, less allowance of $46,559 and $30,710 46,559 30,711
Security deposits 6,950 5,950
Other - 15,000
------------- -------------
$ 2,574,563 $ 4,653,261
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 217,964 $ 488,110
Note payable, bank - 25,515
Escrow payable 155,344 149,156
Due to related party - 168,826
Advance on letter of credit - 70,000
------------- -------------
Total current liabilities 373,308 901,607
------------- -------------
Stockholders' equity
Preferred stock, $.01 par value; 5,000 shares authorized,
none issued - -
Common stock, $.01 par value; 20,000,000 shares authorized,
6,262,197 and 5,153,255 shares issued 62,622 51,533
Additional paid-in capital 8,396,247 6,763,561
Accumulated deficit (6,245,264) (3,060,307)
Demand note receivable for common stock ( 12,350) ( 12,350)
Unrealized gain on marketable securities - 9,217
------------- -------------
2,201,255 3,751,654
------------- -------------
$ 2,574,563 $ 4,653,261
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
--------------- -----
Revenues
Purses $ 168,224 $ 232,437
Contract and agency fees 208,009 30,424
Endorsements and marketing fees 93,404 23,080
Television income 87,500 -
Commissions - 22,793
Ticket revenues 33,090 12,636
Merchandise revenues - 1,008
--------------- ---------------
590,227 322,378
--------------- ---------------
Expenses
Training and related expenses 74,830 199,725
Promotion and other operating expenses 3,804,612 2,069,038
Other - 100,000
--------------- ---------------
3,879,442 2,368,763
--------------- ---------------
Loss from operations ( 3,289,215) ( 2,046,385)
--------------- ---------------
Other income (expenses)
Interest and dividend income 103,240 21,941
Interest expense - ( 141,340)
Other 6,807 10,916
--------------- ---------------
110,047 ( 108,483)
--------------- ---------------
Loss before income taxes ( 3,179,168) ( 2,154,868)
Income taxes 5,789 1,330
--------------- ---------------
Net loss ( 3,184,957) ( 2,156,198)
Accumulated deficit, beginning of year ( 3,060,307) ( 904,109)
--------------- ---------------
Accumulated deficit, end of year $( 6,245,264) $( 3,060,307)
=============== ===============
Weighted average of common shares outstanding 5,369,127 4,116,096
=============== ===============
Basic loss per share $( .59) $ (.52)
============== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
-------------- ----------
Cash flows from operating activities
Net loss $ (3,184,957) $ (2,156,198)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 7,226 24,014
Provision for doubtful accounts 126,788 -
Common stock issued for consulting and other services 284,470 -
Stock-based compensation 26,338 -
Realized gain on marketable securities ( 9,217) -
Gain on sale of transportation equipment ( 6,289) -
Changes in assets and liabilities -
Accounts receivable ( 406,437) ( 12,396)
Due from or to boxers ( 288,446) 58,900
Prepaid expenses and other assets 242,396 ( 73,373)
Escrow payable 6,188 126,250
Due to related party ( 168,826) -
Accounts payable and accrued expenses ( 270,146) 107,949
Advance on letter of credit ( 70,000) 70,000
-------------- --------------
Net cash used in operating activities ( 3,710,912) ( 1,854,854)
-------------- --------------
Cash flows from investing activities
Purchase of certificates of deposit ( 760,049) -
Proceeds (purchases) of marketable securities 3,098,760 ( 3,389,543)
Acquisition of property and equipment - ( 39,045)
Advances to stockholder - 131,956
Proceeds from sale of transportation equipment 34,229 -
Due from related party ( 15,848) -
-------------- -----------
Net cash provided by (used in) investing activities 2,357,092 ( 3,296,632)
-------------- --------------
Cash flows from financing activities
Issuance of common stock 1,332,967 6,499,092
Deferred costs in connection with proposed public offering - 47,148
Proceeds from notes payable and debt - 31,000
Repayment of notes payable and debt ( 25,515) ( 1,181,385)
-------------- --------------
Net cash provided by financing activities 1,307,452 5,395,855
-------------- --------------
Net increase (decrease) in cash and cash equivalents ( 46,368) 244,369
Cash and cash equivalents, beginning of year 791,505 547,136
-------------- --------------
Cash and cash equivalents, end of year $ 745,137 $ 791,505
============== ==============
Supplemental cash flow disclosures
Interest paid $ - $ 141,340
Income taxes paid 26,338 -
Noncash financing activities
Issuance of common stock for consulting and other services 284,470 -
Stock-based compensation charged to expense 6,489 880
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 - ORGANIZATION
Descriptions of companies included in the accompanying consolidated
financial statements are as follows:
Worldwide Entertainment & Sports Corp. ("WWES"), which was
incorporated in Delaware on August 15, 1995 to provide management, agency
and marketing services to professional athletes and entertainers,
principally boxers.
Worldwide Team Sports, Inc. ("WWTS"), a wholly owned subsidiary which
was incorporated in Delaware on January 23, 1996 to provide management,
agency and marketing services to professional athletes, principally
football players.
Worldwide Basketball Management, Inc. ("WWBM"), which was incorporated
in Delaware on August 1, 1996 to provide management, agency and marketing
services to basketball players. WWBM is owned 80% by WWES, and the
remaining 20% is owned by two principals formerly associated with Impact
Sports Management, LLC ("Impact").
Worldwide Football Management, Inc. ("WWFM"), which was incorporated
in Delaware on March 10, 1997 to provide management, agency and marketing
services to football players. WWFM is owned 80% by WWES, and the remaining
20% is owned by an individual who is a certified player's agent listed with
the National Football League Players Association. WWFM was inactive in
1997.
Worldwide Sports Promotion, Inc. ("WWSP"), a wholly owned subsidiary which
was incorporated in Delaware on March 4, 1997 to provide marketing and
promotional services to professional athletes, principally boxers.
Worldwide Bobcats Football, Inc. ("WWBF"), a wholly owned subsidiary which
was incorporated in Delaware on October 17, 1997 to purchase the Florida Bobcats
arena football team. Management has since decided not to purchase the team.
F-6
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of WWES,
its wholly owned subsidiaries and its 80% owned subsidiaries (collectively,
the "Company"). All significant intercompany balances and transactions have
been eliminated.
As discussed in Note 1, WWES has an 80% ownership interest in WWBM;
the remaining 20% interest is owned by the two officers of WWBM. Net losses
of WWBM for the years ended December 31, 1997 and 1996 were approximately
$308,000 and $553,000, respectively. The accumulated deficit of the
minority interest exceeded the minority interest in the equity capital of
WWBM as of December 31, 1997 and 1996 by approximately $172,000 and
$111,000, respectively. Such excesses were charged against WWES, the
majority interest, and was reflected in the statement of operations for the
years ended December 31, 1997 and 1996.
Marketable Securities
Marketable securities at December 31, 1996 consisted of debt
securities which were classified as available-for-sale in accordance with
the provisions of Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities",
and are reported at their fair value of $3,098,760. Unrealized gains and
losses were reflected as a separate component of stockholders' equity.
Due from Athletes
The Company makes unsecured interest-free loans to boxers and other
athletes. Repayments by boxers are made from authorized deductions from
fight purses.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed
using primarily accelerated methods over the estimated useful lives of the
assets, which range from 5 to 7 years.
F-7
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
New Accounting Pronouncement
In February 1997, SFAS No. 128, "Earnings per Share", was issued. It
establishes standards for computing and presenting earnings per share
("EPS"), replaces the presentation of primary EPS with a presentation of
basic EPS, and requires dual presentation, where applicable, of basic and
diluted EPS on the face of the consolidated statement of operations. SFAS
No. 128 was effective for financial statements issued for periods ending
after December 15, 1997. The adoption of SFAS No. 128 did not affect the
Company's EPS data for the years ended December 31, 1997 and 1996.
Basic Loss Per Share
Basic loss per share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the year.
Diluted EPS has not been presented because its effect would have been
anti-dilutive.
Revenue Recognition
Purse revenue represents a percentage of a boxer's purse, and is
recognized upon completion of a fight. Ticket and commission revenues are
recognized at the time of the fight. Contract and agency fee revenues are
recognized during the various athletic seasons on a pro rata basis. Such
revenues are therefore recognized from the period November 1 through May 1
for basketball, and September 1 through January 1 for football.
Use of Estimates
Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
F-8
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
WWES and its subsidiaries file a consolidated Federal income tax
return.
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes", determining deferred tax assets and
liabilities using the liability method. Deferred taxes are recognized on
net operating loss carryforwards and differences between financial
reporting and income tax bases of assets and liabilities, using enacted
income tax rates.
Stock-Based Compensation
In 1996, WWES adopted the provisions of SFAS No. 123, "Accounting for
Stock-Based Compensation", which prescribes accounting and reporting
standards for all stock-based compensation plans, including employee stock
options, restricted stock, and stock appreciation rights. In accordance
with SFAS No. 123, the Company recognizes expense for stock-based awards
based on the estimated fair value on the date of the grant (see Note 7).
Cash and Cash Equivalents
For purposes of the statement of cash flows, all highly liquid
investments with original maturities of three months or less are considered
to be cash equivalents.
The Company maintains cash balances in several financial institutions,
which are insured by the Federal Deposit Insurance Corporation for up to
$100,000 at each institution. At December 31, 1997, the Company's uninsured
cash balances were approximately $1,128,000, including certificates of
deposit.
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform to the current year presentation.
F-9
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
1997 1996
----------- ------
Gym equipment and furniture $ 56,575 $ 56,450
Transportation equipment - 31,000
Leasehold improvements 7,116 7,116
----------- -----------
63,691 94,566
Less - Accumulated depreciation
and amortization 42,662 38,371
----------- -----------
$ 21,029 $ 56,195
=========== ===========
Depreciation expense was $7,226 and $11,027 for the years ended
December 31, 1997 and 1996, respectively.
4 - ESCROW PAYABLE
The Company is holding funds in escrow on behalf of two boxers until
release is requested.
F-10
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5 - INCOME TAXES AND DEFERRED INCOME TAXES
Income taxes and components of deferred tax assets are as follows:
December 31,
1997 1996
------ -------
Income taxes
State income taxes $ 5,789 $ 1,330
================ ===============
Deferred tax assets
Net operating loss carryforwards $ 2,103,258 $ 786,977
Stock-based compensation 8,955 -
---------------- ---------------
2,112,213 786,977
Less - Valuation allowance (2,112,213) (786,977)
---------------- -----------------
Net deferred tax asset $ -0- $ -0-
=============== ===============
The Company has available net operating loss carryforwards of
approximately $6,245,000, which may be utilized to reduce any Federal
taxable income through 2012.
6 - COMMON STOCK
On October 22, 1996, WWES, in its initial public offering, sold
1,400,000 units (the "Units"). Net proceeds were $6,499,091. Each Unit
consisted of one share of common stock, $.01 par value, of WWES, and one
redeemable common stock purchase warrant to purchase one share of common
stock at $7.20 during the period October 22, 1996 to March 21, 2001.
Additional shares have been sold or issued by WWES as follows:
On July 15, 1997, sold 100,000 shares of restricted common stock
in a private offering for $125,000.
On August 19, 1997, issued 250,000 shares of restricted common
stock, with a fair value of $157,500, for consulting services
rendered by a consulting firm.
F-11
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6 - COMMON STOCK (Continued)
On September 16, 1997, issued a total of 83,500 shares of
restricted common stock, with a fair value of $120,240, to seven
individuals for consulting and other services.
In November and December 1997, sold 664,442 shares of restricted
common stock in a private offering at $2.25 a share, for a total
of $1,494,994.
7 - STOCK OPTION PLAN
On July 1, 1996, WWES adopted the 1996 Stock Option Plan (the "Plan"),
which provides that certain options granted thereunder are intended to
qualify as "incentive stock options" under Section 422A of the Internal
Revenue Code. Nonqualified options may also be granted under the Plan. The
Plan authorizes the issuance of qualifying options to purchase 500,000
shares. The option price per share for the incentive stock option will be
determined at the time of grant, but will not be less than the fair market
value of the common stock on such date or, in the case of a 10%
stockholder, no less than 110% of the fair market value of the stock on the
grant date.
On September 16, 1997, 435,000 qualifying options were granted, with
an exercise price of $2.875, and 11,000 options were granted outside the
Plan with an exercise price of $2.875, all for a term of 10 years.
On December 9, 1997, the Board of Directors of WWES granted 50,000 and
115,000 nonqualifying options exercisable at $2.00 and $2.875 a share,
respectively, with a 5-year term, and 147,500 nonqualifying options
exercisable at $2.875 with a 10-year term.
On January 28, 1998, the Board of Directors of WWES authorized the
issuance of 320,000 nonqualifying options, exercisable at $1.50 a share,
with a 10-year term.
WWES accounts for stock options under the fair value method, pursuant
to SFAS No. 123 (see Note 2). The fair value of these options was
calculated at the date of grant using a Black-Scholes option pricing model
assuming a risk-free interest rate of 5.47% and a volatility factor of
expected market price of WWES's common stock of 130%. Under the provisions
of SFAS No. 123, WWES's compensation expense arising from the grant of
stock options for the year ended December 31, 1997 was $26,338. The related
deferred tax asset of $8,955 was recorded based on a 34% tax rate for the
resulting temporary difference.
F-12
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8 - LIFE INSURANCE POLICIES
WWES is the owner and beneficiary of $950,000 in life insurance
policies on the lives of boxers, and is also the owner and beneficiary of a
$2,000,000 life insurance policy on the life of its chief executive
officer.
9 - RELATED PARTY TRANSACTIONS
WWES made payments of $31,696 and $61,421 on behalf of Impact during
the years ended December 31, 1997 and 1996, respectively. The receivable
from the related party is noninterest-bearing and unsecured.
Boxing tickets purchased in 1996 at a cost of $28,453 from a company owned
by the principal officer were used for promotional purposes and
reflected in other operating expenses in 1996. There were no similar
purchases in 1997.
10 - COMMITMENTS AND OTHER MATTERS
Management Contracts
The Company has entered into long-term management contracts with a
number of professional boxers, football players and basketball players. The
Company generally receives between 15% and 27- 1/2% of purses from boxing
matches and approximately 20% of the fees from endorsements, public
appearances and commercials. Football and basketball player contracts are
for the term of their player contracts. The Company generally receives up
to 4% of players' compensation and 10% to 20% of fees earned for
endorsements and marketing.
Settlement Agreements
In August 1997, WWES settled disputes with consultants, issuing 11,000
shares of unregistered common stock for services rendered having a fair
value of $6,749.
On August 29, 1996, a settlement was reached with a trainer for a
boxer which provided for the termination of a contract with the trainer.
Total payments of $100,000 were made on this settlement.
F-13
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10 - COMMITMENTS AND OTHER MATTERS (Continued)
Letter of Credit
At December 31, 1997, WWES has a $100,000 open letter of credit
collateralized by its $100,000 certificate of deposit.
Consulting and Advisory Agreement
On December 5, 1997, WWES entered into a consulting and advisory
arrangement with respect to a $3,000,000 private placement of equity
securities. The consulting fee will be 8% of any equity capital raised. In
addition, if WWES closes on at least $1,000,000 of the private placement,
the consultant will be entitled to purchase 100,000 shares of WWES common
stock at $2.75 a share at any time from the date of closing through
November 30, 2002.
Employment Agreements
WWES has entered into a five-year employment agreement with a key
executive commencing January 1, 1996, which provides for a base annual
salary of $190,000 and annual minimum guaranteed increases of $25,000. The
agreement also provides for an annual bonus based on WWES income, as
defined, and includes a termination provision. The executive is entitled to
participate in WWES's incentive stock option plan and will be granted a
minimum of 30% of the stock options to be issued by the plan at an exercise
price of 110% of the fair value of the stock. WWES has obtained a
$2,000,000 key person life insurance policy on this executive's life, with
WWES as beneficiary.
In connection with its formation, WWBM entered into five-year
employment agreements with two key executives, effective September 1, 1996.
The agreements provide each executive with an annual salary of $130,000, a
bonus of $50,000 and additional bonuses based on net revenues of WWBM. WWES
is committed to fund up to $700,000 of operating expenses of WWBM, which
will increase to $1,000,000 if WWBM achieves certain performance goals tied
to the successful recruitment of NBA players. WWES has the right to
terminate the agreement if WWBM's aggregate costs of operations exceed
these funding obligations.
In connection with its formation, WWFM signed a five-year employment
agreement with a key executive, effective April 16, 1997, which provides
for annual compensation of $140,000, a signing bonus of $75,000, and an
automobile allowance of $1,000 a month.
F-14
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
10 - COMMITMENTS AND OTHER MATTERS (Continued)
Stockholder Agreements
The minority stockholders of WWBM, who are also officers of WWBM,
entered into a stockholder agreement with WWES, providing that, in the
event WWES desires to sell all of its shares of WWBM common stock to an
unrelated third party, and the purchaser demands to purchase all of the
outstanding shares, then the minority stockholders are required to sell all
of their shares to the purchaser or effectuate a share exchange. In the
event of termination of employment, they may elect to effectuate a
share-for-share exchange of shares with the common stock of WWES, based on
exchange rates, as defined. These stockholders may elect the share exchange
if either a minimum player threshold is met or WWBM has achieved after-tax
earnings of $6,000,000.
The minority stockholder of WWFM, who is also an officer of WWFM,
entered into a stockholder agreement with WWES, providing that, in the
event WWES desires to sell all of its shares of common stock to an
unrelated third party and the purchaser demands to purchase all of the
outstanding shares, then the minority stockholder will be required to sell
all of his shares to the purchaser or elect to effectuate a share exchange
for shares of WWES in accordance with provisions of the agreement.
Lease Agreement
On February 10, 1997, WWES entered into a limousine lease. Future
annual minimum lease payments required under the noncancelable operating
lease are as follows:
Year Ending
December 31,
1998 $ 25,000
1999 25,000
2000 25,000
2001 20,000
-----------
$ 95,000
F-15
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11 - SUBSEQUENT EVENTS
Between January 1, 1998 and March 27, 1998, the Company sold 660,000
restricted shares of common stock in connection with several private
placement transactions for an aggregate amount of $1,485,000. Commission
costs of approximately $25,000 were incurred and, in addition, 50,000
restricted shares of common stock were issued to an agent in connection
with the sales.
F-16
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS
<S> <C>
Cash and cash equivalents $ 1,041,805
Certificates of deposit 518,480
Accounts receivable, less allowances for doubtful accounts of $90,000 292,236
Prepaid expenses and other current assets 32,279
Due from boxers and other related parties, net of allowances of $225,580 307,464
Inventory of memorabilia 327,415
-------------
Total Current Assets 2,519,679
PROPERTY AND EQUIPMENT-AT COST, net of accumulated
depreciation 48,885
OTHER ASSETS
Due from related party 49,531
Security deposit and other assets 13,950
63,481
Total assets $ 2,632,046
------------
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
F-17
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998
(Unaudited)
LIABILITIES
<TABLE>
<CAPTION>
<S> <C>
CURRENT LIABILITIES:
Accounts payable $ 72,957
Accrued expenses 170,164
Escrow funds and amounts due boxers 155,344
Income taxes payable 600
-----------------
Total Current Liabilities 399,065
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized 20,000,000 shares;
shares issued 7,137,197 71,377
Additional paid-in capital 10,018,231
Accumulated deficit (7,844,272)
Demand note receivable on private issuance of Common Stock (12,350)
2,232,981
-----------------
Total Liabilities and Stockholders' Equity $ 2,632,046
-----------------
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
F-18
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended June 30,
1998 1997
---- ----
Purse income $ 604,512 $ 27,201
Commission income 47,292
Contract and agency fees 49,570
Marketing fees 64,025
Television income 87,500
Endorsement income 38,825
Ticket revenues 31,105
Merchandise revenues 157,616 27,108
---------------- --------------
923,015 211,739
---------------- --------------
Training and related expenses 438,597 330,733
Promotion and other 2,132,960 1,657,477
operating expenses
2,571,557 1,988,210
---------------- --------------
Loss from operations (1,648,542) (1,776,471)
---------------- --------------
Other income and (expenses):
Interest and dividend income 50,793 68,748
Interest expense
Other 2,172 (10,792)
52,965 57,956
---------------- --------------
Loss before income taxes (1,595,577) (1,718,515)
Income taxes 3,230 6,489
NET LOSS $ (1,598,807) $ (1,725,004)
================ ==============
LOSS PER SHARE $ (0.24) $ (0.33)
================= =============
WEIGHTED AVERAGE 6,672,554 5,153,255
============== =============
See notes to Unaudited Condensed Consolidated Financial Statements.
F-19
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash Flow from Operating Activities $ (1,669,056) $ 613,418
Cash Flows from Investing Activities ( 498,413) (1,383,525)
Cash Flows from Financing Activities 1,467,311 1,500
-------------------- ------------------------
Net Increase (Decrease) in Cash and Cash Equivalents 296,668 ( 768,607)
Cash and Cash Equivalents at Beginning of Period 745,137 1,091,505
----------------- ----------------
Cash and Cash Equivalents at End of Period $ 1,041,805 $ 322,898
================= =================
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Income Taxes $ 1,703 $ 6,489
==================== ==================
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
F-20
<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, principally to boxers, football and
basketball players.
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 six months
ended June 30, 1998, are not necessarily indicative of results to be
expected for the entire year ending December 31, 1998.
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. and Worldwide
Football Management, Inc., which companies are 80% owned. The excess of
the accumulated deficits of these 80% owned subsidiaries over the equity
capital thereof has been included in the operations of the Parent
Company (WWES).
2. Purse revenue is recognized upon completion of a fight, as a
percentage of the boxer's purse. Ticket and commission revenues are
recognized at the time of the fight. Contract and agency fee revenues
are recognized ratably over the various athletic seasons. Merchandise
revenue is recognized upon the sale of memorabilia merchandise.
3. Basic net loss per share is computed by dividing net loss by the
weighted average number of shares of Common Stock outstanding during the
year. Diluted EPS has not been presented because its effect would be
anti-dilutive.
4. The Company files a consolidated federal income tax return and has
net operating loss carryforwards for Federal income tax purposes,
expiring in 2018 amounting to approximately $8,000,000, and other
differences for tax purposes amounting to approximately $20,000. No
deferred tax asset is shown on the accompanying condensed consolidated
balance sheet due to a related valuation allowance equal to the balance
of the deferred tax asset.
F-21
<PAGE>
5. For purposes of the statement of cash flows, all highly liquid
investments with original maturities of three months or less are
considered to be cash equivalents. Cash balances are maintained in
several financial institutions insured by the Federal Deposit Insurance
Corporation. At June 30, 1998, the Company's uninsured cash balances
amounted to approximately $320,300.
F-22
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
6. Inventory is stated at cost or market, which ever is lower. Cost is
determined by the first-in, first-out method.
NOTE C - SALE OF COMMON STOCK
On October 22, 1996, the Company sold 1,400,000 Units (the Units). Net
proceeds were $6,499,091. Each Unit consisted of one share of common
stock, $.01 par value, of WWES, and one redeemable common stock
purchase warrant to purchase one share of common stock at $7.20 during
the period October 22, 1996 to October 21, 2001.
Additional shares have been sold or issued by WWES as follows:
On July 15, 1997, sold 100,000 shares of restricted common stock in a
private offering for $125,000.
On August 19, 1997, issued 250,000 shares of restricted common stock,
with a fair value of $157,500, for consulting services rendered by a
consulting firm.
On September 16, 1997, issued a total of 83,500 shares of restricted
common stock, with a fair value of $120,240, to seven individuals for
consulting and other services.
In November and December 1997, sold 664,442 shares of restricted common
stock in a private placement at $2.25 a share, for a total of
$1,494,994.
During the first quarter of 1998, the Company sold 660,000 restricted
shares of common stock in connection with several private placement
transactions for an aggregate amount of $1,485,000. The costs in
connection with these sales amounted to approximately $ 50,000.
During the second quarter of 1998, the Company issued 215,000
restricted shares of common stock, with a fair value of $194,000, in
connection with legal, consulting and other services rendered on behalf
of the Company.
NOTE D - STOCK OPTION PLAN
July 1, 1996, WWES adopted the 1996 Stock Option Plan (the Plan), which
provides for the issuance of qualifying options to purchase 500,000
shares. Nonqualified options may also be granted. At December 31, 1997,
there were 485,000 qualifying options outstanding at prices ranging
from $2.00 to $2.875, per share. Nonqualifying options outstanding
amounted to 273,500 shares at $2.875, per share.
F-23
<PAGE>
On January 28, 1998, the Board of Directors of WWES authorized the
issuance of 320,000 nonqualifying options, exercisable at $1.50 a
share.
NOTE E - COMMITMENTS AND OTHER MATTERS
The Company has entered into long-term management contracts with a
number of professional boxers, football players and basketball players.
The Company receives varying rates of purses, contracts, public
appearances and compensation, depending upon the sport and applicable
rules of the professional sports associations.
F-24
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE E - COMMITMENTS AND OTHER MATTERS-CONTINUED
The Company has entered into employment agreements with key executives
which are for five year terms from inception, and include, among other
things, signing bonuses, automobile allowances and additional bonuses
based upon agreed upon circumstances.
The minority stockholders of WWBM and WWFM have entered into stockholder
agreements with WWES, providing that, in the event WWES desires to sell
all of its shares in these subsidiaries to an unrelated third party,
then the minority stockholders are required to sell all of their shares
to the purchaser to effectuate a share exchange. Other provisions are
included in the agreements governing termination of employment and loans
and exchanges with the minority stockholders.
F-25
<PAGE>
[BACK COVER]
<TABLE>
<S> <C>
No underwriter, dealer, salesperson or other person has been authorized to
give any information or to make any representations other than those contained
in this Prospectus. You should not rely on such information or representations WORLDWIDE ENTERTAINMENT & SPORTS CORP.
as having been authorized by the Company or the Underwriter. Neither the
delivery of this Prospectus nor any sale made hereunder should, under any
circumstances, be deemed to be a representation that there has been no change in
the affairs of the Company since the date hereof or that the information
contained herein is correct as of any date subsequent to the date hereof. This Minimum of 3,000,000 Shares and a
Prospectus does not constitute an offer to sell or a solicitation of an offer to Maximum of 4,333,333 Shares of
buy any securities offered hereby by anyone in any jurisdiction in which such Common Stock
offer or solicitation is not authorized or in which the person making such offer
or solicitation is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.
-------------------
TABLE OF CONTENTS
Page
Prospectus Summary............................. 1
Risk Factors................................... 5
Use of Proceeds................................ 10
Price Range of Common Stock.................... 11
Dividend Policy................................ 11 PROSPECTUS
Capitalization................................. 12
Selected Financial Data........................ 13
Management's Discussion and Analysis of
Financial Condition and Plan of
Operation.............................. 14
Business.................................... 17
Management.................................. 24
Principal Stockholders...................... 28
Certain Transactions........................ 29
Description of Securities................... 29
Underwriting................................ 32 BELL INVESTMENT
Legal Matters............................... 34 GROUP INC.
Experts..................................... 34
Additional Information...................... 34
Index to Financial Statements............... 35
-------------------
October ___, 1998
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers.
The following states the general effect of all statutes, charter
provisions, by-laws, contracts or other arrangement under which any controlling
person, director or officer of the Company is insured or indemnified in any
manner against liability which he may incur in his capacity as such:
Article SIXTH of the Certificate of Incorporation of the Company
provides, in pertinent part:
(5) The Corporation shall, to the full extent permitted by Section 145
of the Delaware General Corporation Law, as amended, from time to time,
indemnify all persons whom it may indemnify pursuant thereto.
(6) A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the directors
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware Law, or (iv) for any
transaction from which the director derived an improper personal benefit.
(7) Each person who was or is made a party or is threatened to be made
a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer, of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another Corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and provided, however, that, except as provided in
paragraph (7) hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
board of directors of the Corporation. The right to indemnification conferred in
this Article SIXTH shall be a contract right and shall include the right to be
paid by the Corporation the expenses incurred in defending any such proceeding
in advance of its final disposition; provided, however, that if the Delaware
General Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Article SIXTH or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
II-1
<PAGE>
(8) If a claim under paragraph (6) of the Article SIXTH is not paid in
full by the Corporation within thirty days after a written claim has been
received by the Corporation, the claimant may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expenses of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the Corporation. Neither the failure of the Corporation (including its Board
of Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard or conduct, shall be a defense to the action or
create a presumption that the claimant has not met the applicable standard of
conduct.
(9) The right to indemnification and the payment of expenses incurred
in defending a proceeding in advance of its final disposition conferred in this
Article SIXTH shall not be exclusive or any other right which any person may
have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, by-law; agreement, vote of stockholders or disinterested
directors or otherwise.
(10) The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another Corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
The Company's amended and restated By-Laws provides, in pertinent part:
ARTICLE IV. INDEMNIFICATION. Each director or officer who the
Corporation is empowered to indemnify pursuant to the General Corporation Law
(or any applicable law at the time in effect) shall be indemnified by the
Corporation to the full extent permitted thereby. The foregoing right of
indemnification shall not be deemed to be exclusive of any other such rights to
which those directors and officers seeking indemnification from the Corporation
may be entitled, including, but not limited to, any rights of indemnification to
which they may be entitled pursuant to any agreement, insurance policy, other
by-law or charter provision, vote of shareholders or directors, or otherwise. No
repeal of amendment of this Article IV shall adversely affect any rights of any
person pursuant to this Article IV which existed at the time of such repeal or
amendment with respect to acts or omissions occurring prior to such repeal or
amendment.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the Company's estimates of the expenses
to be incurred by it in connection with the issuance and distribution of the
securities being registered, other than underwriting discounts and commissions:
II-2
<PAGE>
Securities and Exchange Commission registration fee....... $ 2,148
NASD registration fee..................................... $ 1,278
NASDAQ listing fee........................................ $ 7,500
Printing registration statement and other documents....... 75,000
Fees and expenses of Registrant's counsel................. $150,000
Underwriter's expense allowance........................... $195,000
Underwriter's Consulting fee.............................. $ 90,000
Accounting fees and expenses.............................. $ 20,000
Blue Sky expenses......................................... $ 20,000
Miscellaneous............................................. $ 9,074
----------
Total...................... $570,000
========
Item 26. Recent Sales of Unregistered Securities.
Described below is information regarding all securities that have been
issued by the Company over the past three years without registering the
securities under the Securities Act.
Commencing in September 1995 and ending in June 1996, the Company
privately sold an aggregate of 39.8 units ("Units"), resulting in net proceeds
to the Company of $1,990,000, each consisting of (a) a $50,000 promissory note
bearing interest at a rate of 10% per annum payable in full upon the earlier of
(i) the Company's receipt of at least $3,000,000 from an underwritten public
offering of the Company's securities (the "Initial Public Offering") or (ii) 18
months after the date of the closing of the unit investment (the "Placement
Closing Date") and (b) a warrant to purchase 25,000 shares of the Company's
Common Stock exercisable for a period of five years from the Placement Closing
Date, provided that an Initial Public Offering is consummated during such five
year exercise period, at an exercise price per share equal to 120% of the price
per share in the Initial Public Offering. Messrs. Drykerman and Cohen purchased
1.5 and 1 Unit, respectively, through such private placement.
In November 1995, the Company entered into an Asset Acquisition
Agreement with Shannon Briggs Boxing I, L.P. (the "Briggs Partnership") to
acquire all of the assets of the Briggs Partnership. Marc Roberts is the sole
shareholder of the general partner of the Briggs Partnership, S.B.Champion
Management, Inc. In accordance with the terms of the Asset Acquisition
Agreement, the existing management agreement with Shannon Briggs was terminated,
and a new management agreement was entered into between the Company and Shannon
Briggs. Pursuant to the Asset Acquisition Agreement, the Company was authorized
to issue to the Briggs Partnership 500,000 shares of Common Stock.
In December 1995, Marc Roberts assigned all of his shares in Merciless
Management Inc., The Natural Management Inc. Marc Roberts Inc., S.B. Champion
Management, Inc. and Marc Roberts Boxing, Inc., to the Company in exchange for
an additional 239,164 shares of Common Stock. Each of those companies was
subsequently merged into the Company.
In May 1996, the Company agreed to issue 33,334 shares of its Common
Stock to Summit Management Group in connection with the execution of a
Consulting Agreement between the Company and Summit Management Group.
On July 15, 1997, the Company sold 100,000 shares of restricted common
stock in a private offering for $125,000.
On August 19, 1997, the Company issued 250,000 shares of restricted
common stock, with a fair value of $157,500, for consulting services rendered by
a consulting firm.
II-3
<PAGE>
On September 16, 1997, the Company issued a total of 83,500 shares of
restricted common stock, with a fair value of $120,240, to seven individuals for
consulting and other services.
In November and December 1997, pursuant to Rule 506 of Regulation D
promulgated under the Act, the Company sold 664,442 shares of restricted common
stock in a private placement at $2.25 a share, for a total of $1,494,994.
During the first quarter of 1998, the Company sold 660,000 restricted
shares of common stock in connection with several private placement transactions
pursuant to Rule 506 of Regulation D, promulgated under the Act, for an
aggregate amount of $1,485,000. The costs in connection with these sales
amounted to approximately $50,000.
During the second quarter of 1998, the Company issued 215,000
restricted shares of common stock, with a fair value of $194,000, in connection
with legal, consulting and other services rendered on behalf of the Company.
Except as otherwise indicated above, the above transactions were
private transactions not involving a public offering and were exempt from the
registration provisions of the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof. No underwriter was engaged in connection with the
foregoing sales of securities.
II-4
<PAGE>
Item 27. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
<S> <C>
1.1 -- Form of Underwriting Agreement
1.2* -- Form of Selected Dealers Agreement
3.1(a)** -- Certificate of Incorporation of the Registrant.
3.1(b)** -- Certificate of Amendment Filed August 21, 1995
3.1(c)** -- Certificate of Amendment filed July 18, 1996
3.1(d)** -- Certificate of Ownership and Merger among the Registrant, Merciles
Management Inc., The Natural Management Inc., Marc Roberts Inc., S.B.
Champion Management, Inc. and Marc Roberts Boxing, Inc. filed July 19, 1996
3.2** -- Amended By-Laws of the Registrant.
4.1** -- Form Certificate representing the Common Stock, par value $.01 per share.
4.2** -- Form of Redeemable Warrant
4.3** -- Form of Warrant issued in private placement
4.4* -- Form of Underwriter's Share Purchase Warrant
4.5* -- Escrow Agreement among the Underwriter, the Company and Liberty Bank of
New York
5.1* -- Opinion of Parker Duryee Rosoff & Haft A Professional Corporation
10.1** -- 1996 Stock Option Plan.
10.2** -- Employment Agreement between Registrant and Marc Roberts
10.3** -- Employment Agreement between Registrant and Ryan Schinman
10.4** -- Management Agreement between the Registrant and Shannon Briggs
10.5** -- Management Agreement between the Registrant and Tracy Patterson
10.6** -- Management Agreement between Registrant and Charles Murray
10.7** -- Management Agreement between Registrant and Ray Mercer
</TABLE>
II-5
<PAGE>
Exhibit
Number Description of Exhibit
10.8** -- Form of Subscription Agreement between Registrant and Private
Placement Investors
10.9** -- Asset Purchase Agreement between Registrant and Shannon Briggs I,
L.P., as amended
10.10** -- Asset Purchase Agreement between the Company and Erik Rudolph
10.11** -- Asset Purchase Agreement between the Company and Michael Goodson
10.12** -- Shareholder's Agreement among the Company, Erik Rudolph and
Michael Goodson
10.13** -- Omitted
10.14*** -- Employment Agreement between the Company and Joel Segal
10.15*** -- Shareholder's Agreement among the Company, Joel Segal and
WWFM
21.01*** -- Subsidiaries of the Registrant.
23.01 -- Consent of Friedman Alpren & Green LLP
23.02 -- Consent of Rosenberg Rich Baker Berman & Company AP
23.03* -- Consent of PDRH (to be included in Exhibit 5.1)
24.01 -- Power of Attorney (contained on signature page)
- -----------------------------
* To be filed by amendment.
** Incorporated by reference to the Company's Registration Statement on
Form SB-2, File No. 333-08855 deemed effective by the Securities and Exchange
Commission on October 22, 1996.
*** Incorporated by reference to the Company's filing on Form 10-K for the
fiscal year 1997 filed with the Securities and Exchange Commission on April 9,
1997.
Item 28. Undertakings.
The Company hereby undertakes to file, during any period in which
offers or sales are being made, a post-effective amendment to this Registration
Statement (i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933; (ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement; notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the
II-6
<PAGE>
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement; and (iii) to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement.
The Company hereby undertakes that, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The Company hereby undertakes to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
The Company hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Company, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or controlling
person of the Company in the successful defense of any action suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant hereby certifies that it has reasonable grounds to believe that it
meets all of the requirements of filing on Form SB-2 and authorizes this
Amendment to this registration statement to be signed on its behalf by the
undersigned, in the City of New York, State of New York, on October 13, 1998.
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
By: /s/ Marc Roberts
Marc Roberts
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Marc Roberts his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this registration
statement and all documents relating thereto, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to this registration statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Marc Roberts Director, President and Chief Executive October 13, 1998
- ------------------------ Officer (Principal executive officer)
Marc Roberts
/s/ Roy Roberts Director (Principal accounting and October 13, 1998
- ----------------------------- financial officer)
Roy Roberts
Director October 13, 1998
- -----------------------
Allan Cohen
/s/ Dan Drykerman Director October 13, 1998
- ---------------------------
Dan Drykerman
/s/ Herbert Kozlov Director October 13, 1998
- -------------------
Herbert Kozlov
- ------------------- Director October 13, 1998
Harvey Silverman
</TABLE>
II-8
<PAGE>
EXHIBIT 1.1
Worldwide Entertainment & Sports Corp.
___________ Shares of Common Stock
UNDERWRITING AGREEMENT
October __, 1998
Bell Investment Group, Inc.
75 Maiden Lane - 10th Floor
New York, NY 10038
Gentlemen:
Worldwide Entertainment & Sports Corp., a Delaware corporation (the "Company"),
has authorized 20,000,000 shares of Common Stock, par value $.01 per share
("Common Stock"), of which as of the date hereof 7,137,197 shares are issued and
outstanding and __________ of the remaining shares are reserved for issuance
pursuant to options and warrants described in the Prospectus as hereinafter
defined. The Company proposes to issue and sell through Bell Investment Group,
Inc. (sometimes referred to as "Bell" and sometimes as the "Underwriter"),
__________ shares (the "Shares") of its authorized but unissued shares of Common
Stock (the "Common Stock").
The Underwriter will act as agent for the Company in connection with the
secondary public offering of a minimum of _________ Shares ("Minimum Shares")
and a maximum of __________ Shares ("Maximum Shares") on a "best efforts" basis.
Unless the context otherwise indicates, the term "Company" shall include the
Company and its Subsidiaries. The Shares are more fully described in the
registration statement, which the Company has furnished to you, acting as
Underwriter. This is to confirm the arrangement with respect to the purchase of
the Shares.
<PAGE>
1. Representations and Warranties of the Company. The Company represents
and warrants to, and agrees with the Underwriter that:
(a) A registration statement on Form SB-2 for the registration of the Common
Stock has been prepared by the Company in conformity with the applicable
provisions of the Securities Act of 1933, as amended (the "Act"), and the
applicable rules, regulations, releases and instructions (the "Rules under the
Act") of the Securities and Exchange Commission (the "Commission"), and has been
filed with the Commission; and one or more amendments to said registration
statement, copies of which have heretofore been delivered to the Underwriter,
has or have been filed by the Company; and the Company may file on or prior to
the effective date an additional amendment to the registration statement.
Included in the registration statement are__________ shares of the Common Stock
of the Company (the "Warrant Shares") which may be used upon the exercise of
warrants issued to the Underwriter pursuant to Section 9 of this Agreement
("Underwriters Warrants"). As used in this Agreement, the term "Registration
Statement" refers to and means the registration statement, and all amendments
thereto, including the prospectus, exhibits and financial statements, at the
time it becomes effective; and the term "Prospectus" refers to and means the
prospectus included in the Registration Statement at the time it becomes
effective, except that, if the prospectus first filed by the Company Pursuant to
Rule 424(b) of the Rules under the Act shall differ from the Prospectus, the
term Prospectus shall mean the Prospectus filed pursuant to Rule 424(b). The
Company will not file at any time any amendment or supplement to the
Registration Statement without previous advice to the Underwriter, nor if the
same shall be objectionable in form or substance to the Underwriter or
Underwriter's counsel.
(b) The Commission has not issued any order preventing or suspending the use of
any preliminary prospectus (the "Preliminary Prospectus") with respect to the
Shares and each Preliminary Prospectus conformed in all material respects with
the requirements of the Act and the Rules under the Act and has not included any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements not misleading, except
that the foregoing shall not apply to statements in, or omissions from, any
written information furnished to the Company by the Underwriter specifically for
use in the preparation thereof.
(c) When the Registration Statement shall become effective and at all times
subsequent thereto, up to and including the Closing Date, as hereinafter
defined, and when any post-effective amendment thereof shall become effective,
the Registration Statement and the Prospectus (and any post-effective amendment
thereof or the Registration Statement as supplemented) will fully comply with
the applicable provisions of the Act and the Rules under the Act with respect
thereto and the Registration Statement and the Prospectus and any further
amendments or supplements thereto will contain all statements which are required
to be stated therein in accordance with the Act and the Rules under the Act and
neither the Registration Statement nor the Prospectus will contain any untrue
statement of a material fact or
<PAGE>
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and when the Prospectus is
filed with the Commission pursuant to Rule 424(b) of the Rules under the Act and
at all times subsequent thereto, up to and including the Closing Date, the
Prospectus (and the Prospectus as amended or supplemented, if the Company shall
have filed with the Commission any amendment thereof or supplement thereto) will
fully comply with the provisions of the Act and the Rules under the Act and will
not contain any untrue statement of a material fact and will not omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, not misleading; provided, however, that the Company
makes no representations or warranties as to the information contained in or
omitted from the Registration Statement or the Prospectus or any amendment
thereof or supplement thereto in reliance upon and in conformity with
information furnished in writing to the Company by the Underwriter specifically
for use in connection with the preparation thereof.
(d) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware; the
Company's operating subsidiaries are Worldwide Team Sports, Inc., Worldwide
Football Management, Inc. and Worldwide Basketball Management, Inc. (the
"subsidiaries" or individually the "subsidiary"); the Company and each
subsidiary has full corporate power and authority to own or lease its properties
and conduct its business, present and proposed, as described in the Registration
Statement and Prospectus; and the Company and its subsidiaries are each duly
qualified to do business as a foreign corporation and in good standing in each
jurisdiction in which the location of its property or the character of its
operations make such qualification necessary. The Company and its subsidiaries
each hold all material licenses, certificates and permits from governmental
authorities necessary for the conduct their business as described in the
Prospectus and own or possess adequate rights to use all material rights in use
in the conduct of their businesses and have not received any written notice of
conflict with the asserted rights of others in respect thereof and do not know
of any proceeding pending or threatened seeking to cancel, terminate, or limit
such licenses, certificates or permits.
(e) The financial statements and schedules (including the related notes)
included in the Registration Statement and the Prospectus present fairly the
financial position, results of operations, stockholders' equity and changes in
financial position of the Company and its subsidiaries as of the respective
dates and for the respective periods indicated, all in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved.
(f) The accountants who have examined and reported on the audited financial
statements filed with the Commission as parts of the Registration Statement and
the Prospectus are independent public accountants as required by the Act and the
Rules under the Act.
(g) Except as may be reflected in or contemplated by the Registration
Statement or
<PAGE>
the Prospectus, subsequent to the dates as of which information is given in the
Registration Statement and the Prospectus, and prior to the Closing Date (i)
there shall not be any material adverse change in the financial condition, in
the results of operations or the general affairs of the Company or any of the
subsidiaries; (ii) there shall not have been any material transaction entered
into by the Company or any subsidiary, other than transactions in the ordinary
course of business; (iii) neither the Company nor any subsidiary shall have
incurred any material obligations, contingent or otherwise other than in the
ordinary course of business; (iv) there shall not have been nor will there be
any change in the capital stock or long or short term debt (except current
payments) of the Company or any subsidiary; (v) there shall not have been any
issuance of options, warrants, convertible securities or other rights to
purchase the common stock of the Company or any subsidiary, or (vi) there shall
not have been any material adverse change or any development involving a
prospective material adverse change in the condition (financial or other),
business, key personnel, properties, prospective results of operations or net
worth of the Company or any subsidiary.
(h) Neither the Company nor any subsidiary is in violation of its articles of
incorporation or by-laws or, to its knowledge, in violation of any franchise,
license, permit, judgment, decree, order, statute, rule or regulation, which
violation is material to the Company or such subsidiary, or in default in the
performance or observance of any obligation, agreement or condition contained in
any note or other evidence of indebtedness or in any mortgage, indenture or loan
agreement or any other agreement or instrument to which the Company or its
subsidiaries is a party or by which it or any of their respective properties may
be bound or affected in any respect which, in any such case, is material to the
Company or such subsidiary. The Company has full right, power and authority to
enter into and perform this Agreement and to issue, sell and deliver the Shares
and the Underwriter's Warrants to be issued and sold by it as provided in this
Agreement. The execution and delivery of this Agreement, the fulfillment of the
terms set forth herein and the consummation of the transactions contemplated
herein will not conflict with or constitute a breach of, or a default under, the
articles of incorporation or by-laws of the Company or any subsidiaries or any
material agreement, or any indenture or other instrument by which the Company or
any of its subsidiaries or any of their respective properties may be bound, or
any applicable franchise, license, permit, judgment, decree, order, statute,
rule or regulation. Except as required by the Act, the Securities Exchange Act
of 1934, as amended, (the "Exchange Act") and applicable state securities laws,
no consent, approval, authorization or order of any governmental agency or
governmental authority is required in connection with the consummation of the
transactions contemplated by this Agreement on the part of the Company or the
subsidiaries.
(i) Each contract to which the Company or any subsidiary is a party and to which
reference is made in the Registration Statement and Prospectus has been duly and
validly executed by the Company, is in full force and effect in all material
respects in accordance with its terms and none of such contracts has been
assigned by the Company or its subsidiaries and the Company and its subsidiaries
know of no present
<PAGE>
situation or condition or fact which would prevent compliance with the terms of
such Mcontracts, as amended to date.
(j) The Company and each subsidiary have filed all Federal, state and other tax
returns which are required to be filed by any agency or other governmental
authority, and paid all taxes shown due on such returns and all assessments
received by it to the extent such taxes have become due. All taxes with respect
to which the Company and its subsidiaries are obligated have been paid or
adequate accruals have been set up to cover any such unpaid taxes.
(k) The Company and each of its subsidiaries have good and marketable title,
free and clear of all liens, encumbrances and defects, except liens for current
taxes not due and payable, to all their respective property and assets which are
stated to be owned by them in the Registration Statement and the Prospectus,
subject only to liens and encumbrances disclosed in the Prospectus and such
exceptions as are not material to and do not adversely affect the present or
prospective business of the Company or any subsidiary. The properties, including
any equipment, stated to be leased by the Company or any subsidiary in the
Registration Statement and the Prospectus are held under valid, subsisting and
enforceable leases with only such exceptions which collectively are not material
and do not have a material adverse affect on the present or prospective business
of, or the use of such property by the Company or any subsidiary.
(l) The Company has an authorized outstanding capitalization as set forth or
contemplated in the Prospectus and based on sale of the Shares will have, on the
Closing Date, the adjusted capitalization as set forth or contemplated in such
Prospectus under the caption "Capitalization;" all of the outstanding shares of
Common Stock of the Company have been validly authorized and issued and are
fully paid and non-assessable and none of such shares of Common Stock was issued
in violation of the pre-emptive rights of any stockholder of the Company; the
Shares have been duly authorized and, when issued and paid for pursuant hereto,
and the Warrant Shares when issued and paid for upon exercise of the
Underwriter's Warrants in accordance with their terms, will be validly issued,
fully paid and non-assessable, will pass valid title to the holders thereof,
free and clear of any lien, encumbrance or claim and all corporate action
required to be taken for the authorization, issuance and sale of such securities
has been validly and sufficiently taken; the holders of the outstanding shares
of Common Stock (including the Shares and Warrant Shares) are not and will not
be subject to any liability as shareholders. Except as set forth in the
Registration Statement or in the Prospectus, or as otherwise disclosed by the
Company to the Underwriter, on the effective date of the Registration Statement
and the Closing Date there will be no pre-emptive or other rights to subscribe
for or purchase any of the Common Stock or any options, warrants, agreements or
similar rights calling for the issuance by the Company or its subsidiaries of
any of their securities.
(m) The Common Stock, Shares and Warrant Shares conform to the description
thereof in the Prospectus and such description conforms with the rights set
forth in the
<PAGE>
instruments defining the same.
(n) The delivery of any payment for the Underwriter's Warrants to be sold by the
Company as set forth in Paragraph 9 of this Agreement will pass good and
marketable title thereto free and clear of any and all liens, encumbrances,
charges and claims; and the Company will have, on the effective date of the
Registration Statement and at the time of delivery of the Underwriter's
Warrants, full legal right and power and all authorization and approval required
by law to sell, transfer and deliver the Underwriter's Warrants in the manner
provided hereunder.
(o) The Company does not know of any outstanding claim for services in the
nature of a finder's fee or origination fee with respect to the sale of the
Shares hereunder resulting from its acts for which the Underwriter or the
Company may be responsible.
(p) There are no contracts or other documents which are required by the Act to
be filed as exhibits to the Registration Statement which have not been so filed;
and the exhibits which have been filed are complete and correct copies of the
documents of which they purport to be copies, and all agreements referred to in
the Registration Statement or filed as exhibits to the Registration Statement to
which the Company or any subsidiary is a party or by which any of them is or may
be bound or to which any of their assets, properties or businesses is or may be
subject have been duly and validly authorized, executed and delivered by the
Company or its subsidiary and constitute the legal, valid and binding agreements
of the Company or a subsidiary in accordance with their respective terms and no
default or, any event which with the giving of notice or passage of time would
constitute a default, has occurred under any such agreement.
(q) The Company and its subsidiaries make and keep accurate books and records
reflecting their assets and maintain internal accounting controls which provide
reasonable assurance that (i) transactions are executed in accordance with
management's authorization, (ii) transactions are recorded as necessary to
permit preparation of the Company's and each subsidiary's financial statements
and to maintain accountability for the assets of the Company, (iii) access to
the assets of the Company and its subsidiaries is permitted only in accordance
with management's authorization, and (iv) the recorded accountability of the
assets of the Company and its subsidiaries is compared with existing assets at
reasonable intervals.
(r) The Company has the full right, power and authority to enter into this
Agreement and this Agreement has been duly and validly authorized, executed and
delivered by the Company and is a validly binding agreement enforceable in
accordance with its terms.
(s) Neither the Company nor any of its subsidiaries has at any time during the
past five years; (i) made any unlawful contributions to any candidate for
political office, or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to
<PAGE>
any state, Federal or foreign government officer or official, or other person
charged with similar public or quasi-public duties (other than payments required
or permitted by applicable law).
(t) The conditions for use of a registration statement on Form SB-2 set forth in
the General Instructions to Form SB-2 have been satisfied with respect to the
Company and the Registration Statement conforms to the requirements of such
Form.
(u) Neither the Company nor any subsidiary maintains any "employee benefit plan"
as defined in Section 3(3) of the Employment Retirement Income Security Act of
1974.
(v) Neither the Company nor any subsidiary is an "investment company" as defined
in Section 3(a) of the Investment Company Act of 1940, as amended.
(w) The Company has its properties adequately insured.
(x) Except as set forth in the Registration Statement and Prospectus, there are
no actions, suits or proceedings pending before or by any court or governmental
agency, authority or body, or any arbitrator, which might result in judgments
against the Company or its subsidiaries not adequately covered by insurance or
which collectively might result in any material adverse change in the condition
(financial or other), business prospects, net worth or results of operations of
the Company and its subsidiaries and, to the best of the Company's knowledge, no
such action, suit or proceeding is contemplated or threatened.
(y) The Company has not taken and will not take, directly or indirectly, any
action designed to cause or result in, or which has constituted, the
stabilization or manipulation of the price of the Common Stock, Shares or
Warrant Shares to facilitate the sale or resale of the Shares.
2. Agreements of and with the Underwriter.
(a) The Company hereby employs the Underwriter as its exclusive agent to offer
the Shares to the public upon the terms and conditions set forth herein.
(b) Subject to the accuracy of the representations and warranties on the part of
the Company as of the date hereof and as of the Closing Date and to the due
performance by the Company of its covenants and obligations hereunder and
subject to the Registration Statement becoming effective and to the terms and
conditions of this Agreement, including the right of the Underwriter to
terminate its obligations under this Agreement as more fully set forth in
paragraph 8 hereof, the Underwriter hereby agrees to act as the exclusive agent
of the Company for a period of forty-five (45) days from the Effective Date (or
ninety (90) days if so agreed upon in writing by the Underwriter and the
Company), and during such agreed period (hereinafter referred to
<PAGE>
as "Offering Period") and commencing within three (3) business days after the
Effective Date, agrees to use its best efforts to offer and sell the Shares for
the account of the Company in accordance with and as set forth in the
Registration Statement and the Prospectus.
(c) The price at which the Underwriter shall offer and sell the Shares as agent
for the Company shall be $__________ per Share. Provided that the Minimum Shares
to be offered are sold and paid for, the Company shall allow a commission to the
Underwriter of $ _____ per Share sold. Such commissions are to be paid out of
the proceeds of the sale of the Shares and may be deducted by the Underwriter on
the Closing Date from the amount due the Company.
(d) Any and all funds received from the sale of the Shares to be offered by the
Company, without deduction therefrom whatsoever, including but not limited to,
any underwriting commission or selling group concession or otherwise, shall be
forthwith deposited in an escrow account at ____________________ ("Escrow
Agent") by noon of the next business day following their receipt. All subscriber
checks will be made payable to the Escrow Agent only, not to the Underwriter or
selected dealers. In the event all the Minimum Shares are not sold within
forty-five (45) days after the Effective Date (or ninety (90) days if so agreed
upon in writing by the Underwriter and the Company), then all sums so deposited
shall be returned to the subscribers for such Shares without interest, and
without any expenses of ____________________ for opening, maintaining and
closing such escrow account.
(e) The Underwriter may associate itself with such other brokers as it may deem
necessary or desirable in the circumstances and upon such terms and conditions
as it may determine, which brokers shall for the purposes of this Agreement be
deemed Underwriters. The representations, warranties, covenants and agreements
set forth in this Agreement shall run to and be in effect with and between any
such other Underwriters and the parties hereto, the same as if any such other
Underwriters were parties to this Agreement, except with respect to certain
differing rights as may be provided by the terms of an Agreement Among
Underwriters, a copy of which, if entered into, shall be furnished to the
Company.
(f) The Underwriter may also form a selling group comprised of dealers who are
members of the National Association of Securities Dealers, Inc. (which group may
include the Underwriter), for the purpose of effecting the distribution of the
Shares, and the Underwriter may allow a commission or discount to any such
dealers comprising such selling group in an amount or amounts to be determined
by the Underwriter, and the Underwriter may vary, in its discretion, any such
commission or discount between such dealers. Such discount or commission may be
reallowed to other dealers or members of the selling group. Payment of such
discount, commission or reallowance shall be the sole responsibility of the
Underwriter and shall be payable only in the event of the sale by the Company of
all but not less than all of the minimum Shares.
<PAGE>
3. Delivery and Payment.
Delivery and payment for the Shares shall be made at the offices of Parker,
Duryee, Rosoff & Haft in New York City on such date and at such time (such date
and time being herein sometimes referred to as the "Closing Date"), as the
Underwriter may specify in writing, but such date shall not be later than five
(5) business days after the expiration of the Offering Period (as extended),
provided, however, that if counsel for the Company or for the Underwriter deem
it necessary that either a further amendment to the Registration Statement or
supplement to the Prospectus be filed prior to the Closing Date, the Closing
Date shall be on a date to be thereafter fixed by the Underwriter on notice to
the Company, such date to be not earlier than the third business day, nor later
than the twelfth business day after the effective date of such amendment or the
date of filing with respect to such supplementary prospectus. The Closing Date
and the place of delivery may be changed by written agreement between the
Company and the Underwriter. On the Closing Date the Company shall deliver such
number of Shares as designated by the Underwriter on 48 hours prior notice
against payment to or upon the order of the Company of the purchase price for
such Shares by certified or bank cashier's check or checks payable in New York
Clearing House funds. The Shares shall be registered in such names and
denominations as the Underwriter shall have designated upon not less than
forty-eight hours prior notice to the Company. For the purpose of expediting the
checking and packaging of the Shares, the Company shall make the certificates
representing the Shares available in the City of New York for inspection by the
Underwriter not later than 24 hours prior to the Closing Date.
4. Covenant. The Company covenants and agrees with the Underwriter that:
(a) The Company will use its best efforts to cause the Registration Statement
and any amendments thereto to become effective and will advise the Underwriter
immediately and, if requested by the Underwriter, will confirm such advice in
writing (i) when the Registration Statement has become effective and when any
post-effective amendment thereto becomes effective, or when any supplement to
the Prospectus or any amended Prospectus has been filed, (ii) of any request by
the commission for any amendments or supplements to the Registration Statement
or the Prospectus or for any additional information, (iii) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of any
Preliminary Prospectus or the institution or threat of any proceedings for that
purpose, (iv) of the happening of any event which in the judgment of the Company
makes any material statement in the Registration Statement or the Prospectus
untrue or which requires any changes to be made in the Registration Statement or
the Prospectus in order to make any material statements therein not misleading,
and (v) of the suspension of the qualification of the Shares for offering or
sale in any jurisdiction, or the institution or threatening of any proceeding
for that purpose. The Company will use its best efforts to (i) prevent the
issuance of any such stop order or of any order preventing or suspending the use
of the Registration
<PAGE>
Statement or Prospectus and (ii) if issued, to obtain the lifting or removal of
such order as soon as possible.
(b) The Company will not at any time, whether before, on, or after the effective
date of the Registration Statement, file any amendment to the Registration
Statement or supplement to a Preliminary Prospectus to the Prospectus of which
the Underwriter shall not previously have been advised and furnished with
copies, or to which the Underwriter shall have reasonably objected in writing or
which is not in compliance with the Act and the Rules under the Act.
(c) The Company will deliver to the Underwriter, without charge, a reasonable
number of copies of the Registration Statement, including all financial
statements (two of which shall be signed) and include all exhibits filed
therewith and any amendments or supplements thereto.
(d) Prior to the effective date of the Registration Statement, the Company will
have delivered to the Underwriter, without charge, in such quantities as the
Underwriter may have reasonably requested, copies of each form of Preliminary
Prospectus. The Company consents to the use of each form of Preliminary
Prospectus by the Underwriter, and by dealers prior to the effective date of the
Registration Statement.
(e) The Company will deliver to the Underwriter and each Selected Dealer,
without charge, immediately after the effective date of the Registration
Statement and thereafter from time to time as many copies as they may reasonably
request of the Prospectus and of any amended or supplemented Prospectus.
(f) If during such period of time as in the opinion of the Underwriter or its
counsel a prospectus relating to this financing is required to be delivered
under the Act, any event occurs as a result of which the Prospectus as then
amended or supplemented would include any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading or if it
shall be necessary during any time after the effective date of the Registration
Statement to amend or supplement the Prospectus to comply with the Act or the
Rules under the Act, the Company will forthwith notify the Underwriter thereof
and prepare and file with the Commission and furnish and deliver to the
Underwriter and to others whose names and addresses are designated by the
Underwriter, all at the cost of the Company, a reasonable number of the amended
or supplemented Prospectus which as so amended or supplemented will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the Prospectus as amended or supplemented not
misleading in the light of the circumstances when it is delivered to a purchaser
or prospective purchaser, and which will comply in all respects with the Act and
the Rules under the Act, and cause any amendment of the Registration Statement
containing an amended Prospectus to be made effective as soon as possible. In
case the Underwriter is required to deliver a prospectus ninety days or more
after the effective date of the Registration Statement
<PAGE>
and prior to the expiration date of the Warrants, the Company, upon the request
of the Underwriter and at the expense of the Company, will prepare promptly such
prospectus or prospectuses as may be necessary to permit compliance with the
requirements of Section 10 of the Act.
(g) For a period of five years from the effective date of the Registration
Statement, the Company will deliver to the Underwriter (i) after each fiscal
year, the Company's Form 10-K with respect to such year at the time such Form
10-K is filed with the Commission and, if no Form 10-K is required to be filed,
such financial data with respect to such year as would be required to be filed
by the Company with the Commission pursuant to the instructions to Form 10-K
under the Exchange Act, prepared in accordance with generally accepted
accounting principles and practices as at the end of such fiscal year and for
the twelve months then ended, and covered by a report of independent certified
public accountants; (ii) after each of the first three fiscal quarters of the
Company, the Company's Form 10-Q with respect to such quarter at the time such
Form 10-Q is filed with the Commission and, if no Form 10-Q is required to be
filed, such financial data with respect to such quarter as would be required to
be filed by the Company with the Commission pursuant to the instructions to Form
10-Q under the Exchange Act, all in reasonable detail and certified by the
Company's principal financial or accounting officer; (iii) copies of its annual
report and any other reports or communications (financial or other) of the
Company at the time it is mailed to its stockholders or filed with the
Commission; (iv) two copies of every press release and every material news item
and article in respect of the Company and its affairs at the time it is released
by the Company; (v) copies of transfer reports from its transfer agent; and (vi)
such additional documents and information with respect to the Company and its
affairs as the Underwriter may from time to time reasonably request.
(h) The Company will make generally available to its security holders, in the
manner specified in Rule 158(b) under the Act, and deliver to the Underwriter as
soon as practicable, but in no event later than 45 days after the end of its
first fiscal quarter ending 12 months after the effective date of the
Registration Statement, a consolidated earnings statement (which need not be
audited) meeting the requirements of said Rule 158(b) covering a period of at
least twelve months beginning not earlier than the effective date of the
Registration Statement.
(i) The Company will use the net proceeds to be received by it from the sale of
the Shares substantially in the manner and for the purposes set forth in the
Prospectus and will file Form S-R if required by Rule 463 promulgated under the
Act.
(j) The Company will deliver to the Underwriter true and correct copies of the
Company's and each subsidiary's articles of incorporation and all amendments
thereto, such copies to be certified by the secretary of the Company and each
subsidiary respectively; true and correct copies of the By-Laws of the Company
and each subsidiary and of the minutes of all meetings of the directors and
stockholders of the
<PAGE>
Company and each subsidiary held prior to the Closing Date; and true and correct
copies of all material contracts to which the Company and each subsidiary is a
party.
(k) Prior to any public offering of the Shares the Company will cooperate with
the Underwriter and its counsel in connection with the registration or
qualification of the Sharesand the Warrant Shares for offering and sale by the
Underwriter and dealers under the Securities or Blue Sky laws of such states as
the Underwriter may designate and will file such consents to service of process
or other documents as may be necessary in order to effect such registration or
qualification, and so long as any Warrants or Underwriter's warrants shall
remain outstanding the Company will take all reasonable steps to continue the
eligibility in such states of theWarrant Shares. The Company shall bear the
expenses, (not to exceed $7,500 exclusive of expenses) incurred in filing for
qualification and in qualifying the Sharesand the Warrant Shares under the
securities or Blue Sky laws of such states, including the fees and charges of
the various states, the cost of a printed memorandum with respect thereto. The
Company shall not be required however, to qualify as a foreign corporation or
sign a general consent to service of process in any jurisdiction where it is not
now subject. In each jurisdiction where any of its securities shall have been
qualified as above provided, the Company will file such reports and statements
with respect thereto as may be required by the applicable governmental or
administrative body.
(l) During the period from the Closing Date to the date the rights represented
by the Underwriter's Warrants either have been fully exercised or have lapsed,
the Company will at all times have authorized and reserved a sufficient number
of shares of its common stock to provide for the exercise of the Underwriter's
Warrants.
(m) The Company will pay and bear, whether or not the transactions contemplated
hereunder are consummated or this Agreement is prevented from becoming
effective, or is terminated, all costs and expenses incident to the performance
of its obligations under this Agreement, including all expenses incident to the
authorization of the Shares and their issuance and delivery to the purchasers,
any original issue taxes in connection therewith, all transfer taxes, if any,
incident to the initial sale of the Shares to the purchasers, the fees and
expenses of the Company's counsel and accountants, the costs and expenses
incident to the issuance, sale and delivery of the Warrant Shares, the costs and
expenses incident to the preparation, printing and filing under the Act of the
Registration Statement (including financial statements), any Preliminary
Prospectus and the Prospectus and any amendments or supplements thereto; the
printing and distribution of this Agreement, the Selected Dealer Agreement, the
Blue Sky survey, the certificates for the Common Stock, the issuance and
delivery of the Shares, the filing fees of the Securities and Exchange
Commission and the filing fees and legal fees related to dealings with the
National Association of Securities Dealers, Inc. and any state regulatory
agencies, the fees of the escrow agent, the cost of preparing and filing all
exhibits to the Registration Statement, the cost of furnishing to the
Underwriter copies of the Registration Statement and Prospectus as herein
provided.
<PAGE>
(n) The Company will pay to Underwriter a non-accountable expense allowance of
3% of the total gross proceeds of the Shares purchased at Closing. The expense
allowance is to be paid out of the proceeds of the sale of the Shares and may be
deducted by Underwriter on the Closing Date from the amount due to the Company.
(o) Prior to the Closing Date, the Company will cooperate with Underwriter in
such investigation as Underwriter may make or cause to be made of the
properties, business and operations of the Company in connection with the sale
and public offering of the Shares and will make available to Underwriter in
connection therewith such information as Underwriter may request.
(p) The Company has appointed American Stock Transfer and Trust Company as
Transfer Agent for the Common Stock.
(q) During a period of 90 days from the effective date of the Registration
Statement, the Company will not issue, sell or otherwise dispose of, directly or
indirectly, any shares of Common Stock (or any securities convertible into or
exercisable for the Common Stock) other than the Shares and Underwriter's
Warrants being sold by the Company or securities issued pursuant to outstanding
options and warrants and will not grant any options under existing stock option
plans, without Underwriter's prior written consent.
(r) Marc Roberts, the President and Chief Executive Officer of the Company, has
agreed not to sell, transfer or assign any of his shares of Common Stock for a
period of twelve (12) months from the date of this Prospectus without the prior
written consent of the Underwriter. The remaining officers and directors of the
Company have agreed to refrain from selling, transferring or assigning their
shares of the Company's Common Stock for a period of nine (9) months from the
date of this Prospectus without the prior written consent of the Underwriter.
All of the Company's officers and directors, including Mr. Roberts, have agreed
not to sell, transfer or assign any shares of Common Stock they may acquire by
exercising their currently existing options to acquire Common Stock of the
Company for a period of twelve (12) months from the date of this Prospectus.
(s) The Company will comply with the Act, Rules under the Act and the Exchange
Act and the rules and regulations of the Commission promulgated under the
Exchange Act so as to permit the continuance of sales of, and dealings in, the
Common Stock and Shares under the Act and under the Exchange Act.
(t) The Company will deliver to Underwriter bound volumes of copies of all
documents and appropriate correspondence filed or received from the Commission
and all closing documents.
<PAGE>
(u) For a period of two (2) years from the date of the Prospectus the Company
shall, at the request of Underwriter nominate a designee of Underwriter to the
Board of Directors of the Company and the persons delivering agreements pursuant
to paragraph 6(r) hereof shall deliver their agreement on the Closing Date to
vote their shares of the Company's Common Stock for the election of such
designee.
(v) The Company will use its best efforts to maintain the "key man" insurance on
his life in the amount of $1,000,000.
(w) The Company shall have delivered to Underwriter the Agreement of each of its
security holders having registration rights to register shares under the
Registration Statement the good and valid waivers of any rights they may have
for inclusion of their securities of the Company in the Registration Statement
or its certificate that no security holder has such rights.
5. Conditions of Underwriter's Obligations. The obligations of the Underwriter
to sell the Shares is subject to the continuing accuracy of and compliance with
the representations and warranties on the part of the Company contained herein
as of the date hereof and as of the Closing Date, to the performance by the
Company of its obligations and covenants hereunder, to the absence from any
certificates, opinions, written statements or letters furnished to the
Underwriter or to its counsel of any misstatement or omission that is material
to the sale of the Shares by the Underwriter and to the following additional
conditions:
(a) The Registration Statement shall have become effective not later than 5:00
P.M., New York time, on the date of this Agreement, or such later date or time
as shall have been consented to by the Underwriter; no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been instituted or shall be pending,
threatened or contemplated by the Commission; and any request for additional
information on the part of the Commission (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with, and no
amendments or supplements to the Registration Statement or Prospectus shall have
been filed to which the Underwriter and its counsel have not given their
consent.
(b) All corporate action taken and all legal opinions and proceedings relating
to the Shares, Underwriter's Warrants, and Warrant Shares, the Registration
Statement and the Prospectus and all other matters incident thereto and to the
transactions to which this Agreement relate shall be reasonably satisfactory to
Underwriter's counsel and they shall have been furnished with such certificates,
documents and information as
they may request in this connection.
(c) The Company shall have performed each of the agreements herein contained and
required to be performed by it at or prior to the Closing Date.
<PAGE>
(d) On the Closing Date (i) the Registration Statement and the Prospectus and
any amendments or supplements thereto shall contain all statements which are
required to be stated therein in accordance with the Act and the Rules under the
Act and shall in all material respects conform to the requirements of the Act
and the Rules under the Act and neither the Registration Statement nor the
Prospectus nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, (ii)
since the respective dates as of which information is given in the Registration
Statement and the Prospectus there shall have been no material adverse changes
in the business, property or financial condition of the Company from that set
forth in the Registration Statement and the Prospectus, and there shall have
been no material transaction, contract or agreement entered into by the Company
which is not referred to in the Registration Statement and the Prospectus, (iii)
no action, suit or proceeding at law or in equity shall be pending or, to the
knowledge of the Company, threatened against the Company which would be required
to be set forth in the Registration Statement and the Prospectus other than as
set forth therein, and no proceedings shall be pending or, to the knowledge of
the Company, threatened against the Company before or by any Federal, state or
other commission, board or administrative agency wherein an unfavorable
decision, ruling or finding would have a material adverse effect upon the
business, property, financial condition or income of the Company, and (iv) the
Company shall not have declared or made any payments of dividends or made any
acquisitions of capital stock or made any other distribution on outstanding
Shares of capital stock other than as set forth in the Registration Statement.
(e) The Underwriter shall receive on, and as of the Closing Date, the favorable
opinion of Parker, Duryee, Rosoff & Haft, a professional corporation, counsel
for the Company, addressed to the Underwriter, in form and substance
satisfactory to counsel to the Underwriter, to the effect that:
(i) the Company and its subsidiaries are each corporations in good standing,
duly organized and validly existing under the laws of their state of
incorporation, and have full corporate power pursuant to their Certificates of
Incorporation and By-Laws to own their properties and to conduct their business,
present and proposed, as set forth in the Prospectus;
(ii) the Company and its subsidiaries are each duly qualified to transact the
business in which it is engaged and are in good standing in each jurisdiction in
which its ownership or lease of property requires such qualification or
registration, (naming such jurisdictions), except where the failure to so
qualify would not have a material adverse effect on the Company;
(iii) the Company does not own or control any operating subsidiaries except the
subsidiaries as set forth in the Prospectus and the Company owns all of the
capital stock of the subsidiaries, as set forth in the Prospectus, free and
clear of any liens,
<PAGE>
claims or encumbrances;
(iv) the Company has an authorized and outstanding capitalization as set forth
in the Registration Statement; all of the outstanding shares of capital stock of
the Company have been duly and validly authorized and issued and are fully paid
and non-assessable and such shares are not, and the Shares to be sold by the
Company hereunder are not, subject to the preemptive right of any shareholder of
the Company, the Shares to be sold by the Company have been validly authorized
and, when issued, will be fully paid and non-assessable; and the Warrant Shares
issuable upon exercise of the Underwriter's Warrants have been validly
authorized and reserved for issuance and when issued upon exercise of the
Underwriter's Warrants will be validly issued, fully paid and non-assessable;
(v) the Common Stock and Shares of the Company conform as to legal matters to
the description thereof contained in the Prospectus and such description
conforms to the rights set forth in the instruments defining the same, and the
certificates for the Shares delivered at the Closing are in due and proper form.
(vi) this Agreement has been duly and validly authorized, executed and delivered
by the Company and is a valid and binding agreement of the Company in accordance
with its terms, subject as to enforcement of remedies, to the discretion of a
court with respect to the application of equitable principles and to applicable
bankruptcy, insolvency, moratorium and other laws now or hereafter in effect
affecting the rights of creditors generally and except that such counsel need
not express an opinion with respect to the indemnification and contribution
provisions set forth in Paragraphs 6 and 7 of this Agreement; the Company has
the corporate power to sell and deliver the Shares pursuant to the provisions of
this Agreement and valid marketable title thereto, free and clear of any claims,
liens and encumbrances will pass to the purchasers thereof; to the best of such
counsel's knowledge after reasonable investigation, the execution, performance
and delivery of this Agreement and the consummation of the transactions
contemplated in this Agreement to be performed by the Company do not conflict
with, result in a breach of, or constitute a default under the Company's or any
subsidiaries' certificate of incorporation, by-laws, or any indenture, mortgage,
deed of trust, voting trust agreement, note agreement or other agreement or
instrument known to counsel to which the Company or any of its subsidiaries is a
party or, to the best of such counsel's knowledge, any statute, order, rule or
regulation of any court, regulatory body, administrative agency or governmental
body having jurisdiction over the Company or any of its subsidiaries;
(vii) to the knowledge of such counsel, no consent, approval, authorization or
order of any court or governmental agency or body is required for the
performance by the Company or any of the subsidiaries of the transactions
contemplated in this Agreement to be performed by it or them, except for such
consents, approvals, authorizations or orders as need be obtained under the Act
and such as may be required under the securities laws of any jurisdiction in
connection with the offer hereby. Such counsel
<PAGE>
need not express any opinion with respect to compliance with the securities laws
of the respective states.
(viii) (1) the Registration Statement has become effective under the Act, and,
to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been instituted or are pending or threatened; and (2) the
Registration Statement, the Prospectus and each amendment thereof or supplement
thereto (except for the financial statements and notes thereto and other
financial and statistical information included therein, as to which such counsel
need express no opinion) comply as to form in all material respects with the
requirements of the Act and the Rules under the Act.
(ix) the Underwriter's Warrants to be sold by the Company have been duly
authorized and constitute valid and binding obligations of the Company subject
as to enforcement of remedies to the discretion of a court with respect to the
granting of equitable relief and to applicable bankruptcy, insolvency,
moratorium and other laws now or hereafter in effect affecting the rights of
creditors generally;
(x) In addition to the legal opinions set forth above, such counsel shall
indicate in such letter that, nothing has come to the attention of counsel which
would lead such counsel to believe that the Registration Statement or the
Prospectus (in either case, as amended or supplemented, if amended or
supplemented) contains any untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary in order to make the
statements therein not misleading; however, such counsel need not otherwise
undertake to determine independently and, therefore, need not assume any
responsibility for, the accuracy, completeness or fairness of the statements
contained in the Registration Statement and Prospectus except to the extent set
forth in clause (vi) above and such counsel need express no opinion with respect
to the financial statements, schedules and other financial data contained in the
Registration Statement and Prospectus.
In rendering the foregoing opinion, such counsel may rely, as to any matters of
fact upon which such opinion is predicated, on certificates and written
statements of state officials and certificates and written statements of
officers and representatives of the Company and other responsible persons, in
each case to the extent deemed appropriate by such counsel. Copies of all such
certificates shall be furnished to counsel for the Underwriter on the Closing
Date.
(f) At the time this Agreement is executed and at the Closing Date, Friedman,
Alpren & Green shall have furnished to the Underwriter letters dated
respectively as of the date of this Agreement and as of the Closing Date in form
and substance satisfactory to the Underwriter, confirming that they are
independent public accountants within the meaning of the Act and the Rules under
the Act, and stating in effect that: (i) in their opinion, the financial
statements of the Company including supporting schedules, examined by them
included in the Registration Statement
<PAGE>
comply as to form in all material respects with the applicable accounting
requirements of the Act and the Rules under the Act; (ii) on the basis of a
limited review of the latest consolidated interim financial statements or other
available financial books and records of the Company (which interim financial
statements or books and records shall be as of a date not more than 45 days
prior to the Closing Date) subsequent to the date of their audit, and such other
records of the Company as may in their judgment be appropriate, inspection of
the minute books of the Company since the date of audit and consultations with
and inquiries of officers or other persons responsible for financial accounting
matters of the Company as to transactions and events since December 31, 1997 and
other specified procedures and inquiries, nothing has come to their attention
which would cause them to believe that during the period from December 31, 1997
to a specified date not more than five business days prior to the date of this
Agreement and the Closing Date there has been any change in the capital stock or
long term debt of the Company, or decreases in consolidated net current assets
or net assets compared with the amounts shown in the December 31, 1997 balance
sheet included in the Registration Statement, except for losses incurred in the
ordinary course of the Company's development stage activities or for changes,
increases or decreases which the Registration Statement discloses have occurred
or may occur; (iii) on the basis of inquiries and procedures conducted by them,
including a reading of the latest available unaudited interim financial
statements of the Company, inquiries of officials of the Company responsible for
operational, financial and accounting matters, a reading of the minute books of
the Company and other specified procedures and inquiries, nothing has come to
their attention that caused them to believe that (A) any unaudited Company
financial statements set forth in the Registration Statement and the Prospectus
do not comply as to form in all material respects with the applicable accounting
requirements of the Act and the Rules and Regulations under the Act or are not
fairly presented in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the audited financial
statements; and (iv) on the basis of their examinations referred to in their
reports included in the Registration Statement and Prospectus and the limited
review, procedures, consultations and inquiries referred to above, nothing has
come to their attention which in their judgment would indicate that the
statements appearing in the Registration Statement under the caption "Experts"
and the omission of an answer to item 13 of Form SB-2 (insofar as it relates to
them) and the figures and percentages under the captions "Prospectus Summary,"
"Risk Factors," "Dilution," "Capitalization," "Business," "Transactions with
Management," and "Principal Stockholders" to the extent such statements, figures
and percentages are derived from accounting records of the Company, do not
fairly and accurately set forth the information purported to be shown.
(g) The Underwriter shall have received on the Closing Date certificates, dated
as of the Closing Date, signed by the President and the Chief Financial Officer
of the Company certifying that:
(i) No stop order suspending the effectiveness of the Registration Statement
is in
<PAGE>
effect and no proceedings for such purpose are pending or are, to their
knowledge, threatened by the Commission;
(ii) They do not know of any litigation, instituted or threatened, against the
Company or the subsidiaries of a character required to be disclosed in the
Registration Statement which is not disclosed therein; they do not know of any
contracts which are required to be summarized in the Prospectus which are not so
summarized; and they do not know of any material contracts required to be filed
as exhibits to the Registration Statement which are not so filed;
(iii) To the best of their knowledge, neither the Registration Statement nor the
Prospectus as amended or supplemented, if amended or Supplemented, contains an
untrue statement of any material fact required to be stated therein or necessary
to make the statements therein not misleading; and, since the effective date of
the Registration Statement, to the best of their knowledge, there has occurred
no event required to be set forth in an amended or supplemented Prospectus which
has not been so set forth;
(iv) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any material
adverse change in the condition of the Company or the subsidiaries, financial or
otherwise, or in the results of each of their operations, except as reflected in
or contemplated by the Registration Statement and the Prospectus, and except as
so reflected or contemplated since such date there has not been any material
transaction entered into by the Company or the subsidiaries;
(v) Neither the Company nor the subsidiaries is delinquent in the filing of any
federal, state, municipal or other jurisdiction's tax return or the payment of
any federal, state, municipal or other jurisdiction's taxes; they know of no
proposed re- determination or re-assessment of taxes, adverse to the Company or
the subsidiaries; and the Company and the subsidiaries have paid or provided by
adequate reserves for all known tax liabilities;
(vi) They know of no material obligation or liability of the Company or the
subsidiaries, contingent or otherwise, not disclosed in the Registration
Statement and Prospectus and required to be disclosed therein;
(vii) This Agreement, the consummation of the transactions herein contemplated,
and the fulfillment of the terms hereof, will not result in a material breach by
the Company or the subsidiaries of any terms of, or constitute a material
default under the Company's or subsidiaries' respective Certificates of
Incorporation or By-Laws, or any indenture, mortgage, lease, deed of trust, bank
loan or credit agreement or any other agreement or undertaking of the Company or
the subsidiaries;
(viii) The financial statements and schedules filed with and as part of the
<PAGE>
Registration Statement present fairly the financial position of the Company and
the subsidiaries as of the dates thereof, all in conformity with generally
accepted principles of accounting applied on a consistent basis throughout the
periods involved;
(ix) Except as otherwise set forth in the Registration Statement and the
Prospectus, all licenses, approvals or permits from the Federal, state or local
governments and agencies thereof having jurisdiction over the Company and the
subsidiaries required for the conduct of any material aspect of the business or
operations of the Company and the subsidiaries, have been obtained and are in
effect and there are no proceedings pending or to their knowledge, threatened,
to seek to compel, terminate or limit such licenses, approvals or permits;
(x) Neither the Company nor any of the subsidiaries have sustained an insured or
uninsured loss on account of fire, flood, accident or other calamity;
(xi) Subsequent to the respective dates as of which information is given in the
Registration Statement and Prospectus, except as may otherwise be referred to
therein, neither the Company nor the subsidiaries have prior to the Closing
Date, either (i) issued any securities or incurred any liability or obligation,
direct or contingent, for borrowed money, or (ii) entered into any material
transaction other than in the ordinary course of business. The Company has not
declared, paid or made any dividend or distribution of any kind on its capital
stock;
(xii) All representations and warranties set forth in this Agreement are true
and correct as of the date hereof and the Company has complied with all of its
agreements herein contained to be performed on its part on or before the Closing
Date;
(xiii) No order suspending the sale of the Shares prior to the Closing Date in
any jurisdiction designated to the Company pursuant to Paragraph 4(k) hereof has
been issued on or prior to the Closing Date and no proceedings for that purpose
have been instituted or, to the knowledge of such officers, shall have been or
be threatened;
(h) The Company shall have performed each of the agreements herein contained and
required to be performed by at or prior to the Closing Date.
The Company shall have furnished to the Underwriter such other and further
certificates, documents, and opinions as the Underwriter may reasonably request
(including certificates of officers) as to the accuracy, at and as of the
Closing Date, of the representations and warranties of the Company herein, as to
the performance by the Company of its obligations hereunder, and as to other
conditions concurrent and precedent to the Underwriter's obligations hereunder.
Any certificate signed by an officer of the Company and delivered to the
Underwriter or to the Underwriters' counsel at the Closing will also be deemed a
representation and warranty by the Company to the Underwriter as to the
statements made therein.
<PAGE>
If any of the conditions specified in this Paragraph 5 shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written statements or letters furnished to the Underwriter or to
Underwriter's counsel pursuant to this Paragraph 5 shall not be in all material
respects reasonably satisfactory in form, and substance to the Underwriter and
to the Underwriter's counsel, this Agreement and all obligations of the
Underwriter hereunder may be canceled at, or at any time prior to, the Closing
Date by the Underwriter. Notice of such cancellation shall be given to the
Company in writing, or by telegraph confirmed in writing.
6. Indemnification. (a) The Company agrees to indemnify and hold harmless the
Underwriter, its officers, directors, employees and agents and each person, if
any who controls the Underwriter within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act (the "Exchange Act"), against any and all
loss, liability, claim, damage and expense whatsoever (including but not limited
to attorneys' fees and any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based upon any untrue or
alleged untrue statement of a material fact contained (i) in any Preliminary
Prospectus, the Registration Statement or the Prospectus (as from time to time
amended or supplemented) or (ii) in any application or other document or
communication (in this Paragraph 6 collectively called "application") executed
by or on behalf of the Company or based upon written information furnished by or
on behalf of the Company, filed in any jurisdiction in order to qualify the
Shares under the Securities laws thereof or filed with the Commission or any
securities exchange; or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in reliance upon and
in conformity with written information furnished to the Company by the
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment or supplement thereof or in any
communication to the Commission or any securities exchange or in any
application, as the case may be.
If any action is commenced against the Underwriter or any of its officers,
directors, employees, agents or controlling persons (an indemnified party) in
respect of which indemnity may be sought against the Company pursuant to the
foregoing paragraph, such indemnified party or parties shall promptly notify the
indemnifying party in writing of the commencement of such action and the
indemnifying party shall assume the defense of such action, including the
employment of counsel (satisfactory to such indemnified party or parties) and
payment of expenses. Such indemnified party or parties shall have the right to
employ its or their own counsel in any such case but the fees and expenses of
such counsel shall be at the expense of such indemnified party in connection
with the defense of such action or the indemnifying party or parties unless the
employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such action or the
indemnifying party shall not have employed counsel to have charge of the defense
of such action or
<PAGE>
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to the indemnifying party (in which case the indemnifying party
shall not have the right to direct the defense of such action on behalf of the
indemnified party or parties), in any of which events such fees and expenses
shall be borne by the indemnifying party. Anything in this paragraph to the
contrary notwithstanding, the Company shall not be liable for any settlement of
any such claim or action effected without its written consent. The Company
agrees promptly to notify the Underwriter of the commencement of any litigation
or proceeding against the Company or any of its officers or directors in
connection with the sale of the Shares or in connection with such Registration
Statement or Prospectus. With respect to any untrue statement or alleged untrue
statement made in, or omission or alleged omission from, any Preliminary
Prospectus, the indemnity agreement contained in this Paragraph 6 (a) with
respect to such Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person asserting the claim with respect to such
indemnification is sought hereunder purchased Shares if the Prospectus (or the
Prospectus as amended or supplemented if the Company shall have made any
amendments thereof or supplements thereto which shall have been furnished to
such Underwriter prior to the time of the confirmation of such sale) does not
contain such statement, alleged statement, omission or alleged omission and a
copy of such Prospectus shall not have been sent or given to such person at or
prior to the written confirmation of such sale to such person.
(b) The Underwriter agrees to indemnify and hold harmless the Company, each of
the directors of the Company, each of the officers of the Company who shall have
signed the Registration Statement and each other person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, to the same extent as the foregoing indemnity including any notice
requirement from the Company to the Underwriter, but only with respect to
statements or omissions, if any, made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereof or
in any application in reliance upon and in conformity with, written information
furnished to the Company with respect to the Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus or any amendment or supplement thereof or in any
application, as the case may be. In case any action shall be brought against the
Company, or any other person so indemnified based on any Preliminary Prospectus,
the Registration Statement or Prospectus or any amendment or supplement thereof
or any application, and in respect of which indemnity may be sought against the
Underwriter, the Underwriter shall have the rights and duties given to the
Company, and the Company, and each other person so indemnified shall have the
rights and duties given to the Underwriter by the provisions of subparagraph (a)
above.
7. Contribution. (a) In order to provide for just and suitable
contribution under the Act in any case in which (i)the Underwriter, its
officers, directors, employees and
<PAGE>
agents and each person who controls the Underwriter within the meaning of the
Act or the Exchange Act makes claim for indemnification pursuant to Paragraph 6
(a) hereof but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that Paragraph 6 (b) provides for
indemnification in such case or (ii) contribution under the Act may be required
on the part of the Underwriter or any such controlling person in circumstances
for which indemnification is provided under Paragraph 6 (a), then, in each such
case, the Company and the Underwriter shall contribute to the aggregate losses,
claims, damages or liabilities to which they may be subject (after contribution
from others) in such proportion so that the Underwriter is responsible for an
aggregate of 10% (being the percentage of the initial public offering price of
the Shares represented by the Underwriter's commission and discount) and the
Company is responsible for the remaining portion; provided, however, that, in
any such case, no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(b) Promptly after receipt by any party to this Agreement of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof; but the failure to so notify the contributing party will not relieve it
from any liability which it may have to any other party other than for
contribution under the Act. In case any such action, suit or proceeding is
brought against any party, and such party notifies a contributing party of the
commencement thereof, the contributing party will be entitled to participate
therein with the notifying party and any other contributing party similarly
notified.
8. Termination. (a) This Agreement shall become effective at 9:30 A.M., New York
time, on the first full business day following the day on which the Registration
Statement becomes effective or at the time of the initial public offering by the
Underwriter of the Shares, whichever is earlier. The time of the initial public
offering, for the purpose of this Paragraph 8, shall mean the time, after the
Registration Statement becomes effective, of the release by the Underwriter for
publication of the first newspaper advertisement which is subsequently published
relating to the Shares or the time, after the Registration Statement becomes
effective, when the Shares are first released by the Underwriter for offering by
the Underwriter or Selected Dealers by letter or telegram, whichever shall first
occur. The Underwriter or the Company may prevent this Agreement from becoming
effective by giving the notice indicated below in this Paragraph 8 before the
time this Agreement becomes effective.
(b) In addition to the provisions of Paragraph 5 and 8 hereof, this Agreement
shall be subject to termination in the absolute discretion of the Underwriter,
by notice given to the Company prior to the Closing Date, if prior to such time,
(i) the Company
<PAGE>
sustains a loss, whether or not insured, by reason of fire, flood, accident or
other calamity, which, in the opinion of the Underwriter, substantially affects
the value of the property of the Company or materially interferes with the
operation of the business of the Company, (ii) trading in securities on the New
York Stock Exchange, Inc. or the American Stock Exchange, Inc. has been
suspended or limited or minimum prices have been established on either such
exchange, (iii) a banking moratorium shall have been declared, either by Federal
or state authorities, (iv) any new restriction materially adversely affecting
the distribution of the Shares shall have become effective, (v) trading in any
securities of the Company shall have been suspended or halted by any national
securities exchange or the Commission, (vi) the market value of securities in
general or political, financial or economic conditions shall have so materially
changed as, in the judgment of the Underwriter, shall render it impracticable to
offer for sale the Shares agreed to be sold hereunder, (vii) in the reasonable
opinion of the Underwriter, there exists materially adverse market conditions in
the over-the-counter market as in the judgment of the Underwriter makes it
unadvisable to proceed with the delivery of the Shares or (viii) in the sole
discretion of the Underwriter, any material adverse change has occurred since
the dates as of which information is given in the Registration Statement or
Prospectus, in the earnings, business, condition of the Company or any
subsidiary (financial or otherwise), net worth, results of operations, key
personnel or assets of the Company or any subsidiary, whether or not arising in
the ordinary course of business; provided, however, that the provisions of
Paragraphs 4, 6 and 7 hereof shall survive such termination.
(c) If the Underwriter elects to prevent this Agreement from becoming effective
or to terminate this Agreement as provided in this Paragraph 8, the Company
shall be notified promptly by the Underwriter by telephone or telegram,
confirmed by letter. If the Company elects to prevent this Agreement from
becoming effective the Underwriter shall be notified promptly by the Company by
telephone or telegram, confirmed by letter.
9. Underwriters Warrants. The Company agrees to sell to Underwriter its officers
or directors an aggregate of up to __________ Underwriter's Warrants at a price
of $.001 per Underwriters Warrant. Each Underwriters Warrant shall represent the
right to purchase one Underwriters Share over a period of four years, commencing
one year from the effective date of the offering, at 120% of the offering price
per share.
The Underwriter's Warrants shall be evidenced by certificates in the form and
containing the terms and conditions as set forth in the exhibits to the
Registration Statement, which provide among other things that the Underwriter's
Warrants will be restricted from sale, transfer, assignment or hypothecation for
a period of one year from the effective date of the offering except to officers
or directors of the Underwriter and members of the selling group and/or their
officers or partners. The Underwriter's Warrant certificates shall be delivered
in such denominations and in such names as may be requested by Underwriter or in
the absence of such request, then in denominations of 1,000 Warrants per
Underwriter's Warrant certificate. In addition,
<PAGE>
the Company agrees to reserve against the exercise of the Underwriter's Warrants
the number of shares of its authorized but unissued shares of Common Stock equal
to the number of shares purchasable upon the exercise of the Underwriter's
Warrants and upon the exercise of the warrants included in the Warrant Shares.
Neither the Underwriters Warrant nor the Warrant Shares will be redeemable by
the Company.
10. Finders. (a) Except as set forth in the Prospectus, the Company knows of no
claims for services in the nature of a finder's fee or origination fee with
respect to this financing resulting from the respective acts of its officers,
directors or employees, for which the Underwriter may be responsible, and the
Company agrees to indemnify and hold the Underwriter free and harmless from any
claims for any services of such nature arising from any act of the Company or
its officers or employees, and will reimburse the Underwriter for any counsel
fees, legal or other expenses reasonably incurred by the Underwriter in
investigating or defending against any such claim.
(b) The Underwriter knows of no claims for services in the nature of a finder's
fee or origination fee with respect to this financing resulting from the
respective acts of their officers, directors, or employees, for which the
Company may be responsible, and the Underwriter agrees to indemnify and hold the
Company free and harmless from any claims for any services of such nature
arising from any act of the Underwriter or its officers or employees, and will
reimburse the Company for any legal or other expenses reasonably incurred by t
he Company in investigating and defending against any such claim.
11. Future Sales. The Company agrees and shall deliver at the Closing Date the
agreements of the Company, its subsidiaries, that for a period of two (2) years
after the Closing Date, Underwriter or its successors, shall have the right of
first refusal to purchase for their account or to sell for the account of the
Company or its subsidiaries, any debt or equity securities of the Company or any
subsidiary now existing as hereafter organized or acquired with respect to which
the Company, its subsidiaries, as the case may be, may seek a public or private
offering to the extent that the proceeds of such offering exceeds $1,000,000 and
is not more than 120% of the aggregate offering price. The Company, its
subsidiaries, and its officers and directors, further agree to consult with
Underwriter with regard to any such offering and to offer the Underwriter the
opportunity to purchase or sell any such securities on terms as favorable to the
Company, its subsidiaries, or such officers and directors, as the case may be,
as they or it can secure elsewhere as evidenced by written commitments with
respect thereto. If either the Underwriter or other persons fail to accept in
writing the proposal for financing submitted by the Company or its subsidiaries
or other persons, within five (5) business days from the mailing of such
proposal by registered mail addressed to it, or if the Underwriter is unable to
commence or complete the sale of any such securities, then Underwriter shall
have no further claim or right with respect to the financing proposals contained
in said notice or any future financing proposals. If, thereafter, the initial
proposal is modified, the Company or its subsidiaries, shall adopt the same
procedure with respect to such modified proposal as is provided hereinabove with
<PAGE>
respect to the original proposal. Excluded from the foregoing right of first
refusal shall be private sales of the Company's or any subsidiaries securities
where no commissions are paid; provided, that the transferee agrees to be bound
by such transferor's agreements made hereunder. The right of first refusal
granted in this Article 11 shall only apply as to the Company's or its
subsidiaries' next public offering during the two (2) year period commencing on
the effective date of this offering.
12. Representations, etc. to Survive Delivery. The respective representations,
warranties, agreements, covenants, indemnities and statements of, and on behalf
of, the Company and its officers, and the Underwriter, respectively, set forth
in or made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of the Underwriter, and
will survive delivery of and payment for the Shares. A successor to the
Underwriter shall be entitled to the indemnity, contribution and reimbursement
agreements contained in this Agreement.
Benefit. This Agreement has been and is made solely for the benefit of and shall
be binding upon the Underwriter, the Company and, to the extent expressed, any
person controlling the Company, the Underwriter and the officers and directors
of the Company, and their respective legal representatives, successors and
assigns, all as and to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. The term "legal
representatives, successors and assigns" shall not include any purchaser of any
of the Shares, from the Underwriter merely because of such purchase, and except
further that in the event that any of the persons who shall have purchased any
of the Underwriter's Warrants pursuant to Paragraph 9 hereof which are
registered in the Registration Statement relating to the Shares shall be alleged
to be or held to be, an Underwriter, as that term is defined in the Act, with
respect to any part of any of the securities registered in the Registration
Statement; then and in such event the warranties, indemnities and agreement of
the Company contained in this Agreement shall also be for the benefit of any
person or persons, if any, who control such persons within the meaning of
Section 15 of the Act. All of the obligations of the Underwriters hereunder are
several and not joint.
14. New York Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflict of laws.
15. Notices. All communications hereunder shall be in writing and, if to the
Underwriter, will be mailed, delivered, telegraphed or telexed to the
Underwriter at 75 Maiden Lane - 10th Floor, New York, NY 10038 Attention:
President; or if sent to the Company will be mailed, delivered, telegraphed or
telexed to, Worldwide Entertainment & Sports Corp. Attention: Marc Roberts,
President, 29 Northfield Avenue, West Orange, NJ 07052. Copies of such notice
should also be sent to counsel to such parties named in the Prospectus.
If the foregoing is in accordance with your understanding of our agreement,
please
<PAGE>
sign and return to us the enclosed duplicate hereof, whereupon this letter and
Your acceptance shall represent a binding agreement among the Company and the
Underwriter.
Very truly yours,
By:
Marc Roberts
President, Worldwide Entertainment
& Sports Corp.
The foregoing Agreement is hereby
confirmed and accepted as of
the date first above written
By:
Michael P. Cilmi
President, Bell Investment Group, Inc.
EXHIBIT 23.01
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this
Registration Statement on Form SB-2 of our report dated February 19, 1998,
included in the annual report on Form 10-KSB of the Worldwide Entertainment &
Sports Corp. for the year ended December 31, 1997 and to the reference to our
firm under the caption "Experts" in the prospectus.
Friedman Alpren & Green LLP
New York, New York
October 13, 1998
EXHIBIT 23.02
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this
Registration Statement on Form SB-2 of our report dated February 18, 1997,
included in the annual report on Form 10-KSB of the Worldwide Entertainment &
Sports Corp. for the year ended December 31, 1996 and to the reference to our
firm under the caption "Experts" in the prospectus.
Rosenberg Rich Baker Berman & Company PA
Maplewood, New Jersey
October 13, 1998
