U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the quarterly period ended September 30, 1998.
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________ to _______________
Commission file number 000-21585
Worldwide Entertainment & Sports Corp.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 22-3393152
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
Incorporation or Organization)
29 Northfield Avenue, West Orange, New Jersey 07052
(Address of Principal Executive Offices)
(973) 325-3244
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former
Fiscal Year, if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
Common Stock, $.01 par value - 7,337,197 shares as of November 13, 1998
- - - -------------------------------------------------------------------------
Transitional Small Business Disclosure Format (check one):
Yes No
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PART I.
Item 1. Financial Statements
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
CURRENT ASSETS
<S> <C>
Cash and cash equivalents $ 27,670
Certificates of deposit 532,813
Accounts receivable, less allowances for doubtful accounts of $77,400 576,239
Prepaid expenses and other current assets 30,031
Due from boxers and other related parties, net of allowances of $225,581 346,438
Inventory of memorabilia 263,070
-------------
Total Current Assets 1,776,261
PROPERTY AND EQUIPMENT-AT COST, net of accumulated
depreciation 58,299
OTHER ASSETS
Due from related party 58,564
Security deposit and other assets 13,950
Total assets $ 1,907,074
===========
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
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WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(Unaudited)
LIABILITIES
<TABLE>
<CAPTION>
<S> <C>
CURRENT LIABILITIES:
Accounts payable $ 22,682
Accrued expenses 108,457
Escrow funds and amounts due boxers 135,451
Income taxes payable 600
-----------------
Total Current Liabilities 267,190
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized 20,000,000 shares;
issued 7,137,197 shares 71,372
Additional paid-in capital 10,166,349
Accumulated deficit (8,597,837)
Demand note receivable on private issuance of Common Stock (12,350)
-----------------
1,639,884
-----------------
Total Liabilities and Stockholders' Equity $ 1,907,074
-----------------
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
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WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
<S> <C> <C> <C> <C>
1998 1997 1998 1997
-------------- -------------- --------------- --------------
Purse income $ - $ 12,094 $ 588,188 $ 39,295
Commission income 771 - 48,063 -
Contract agency fees 195,435 69,733 245,005 82,496
Marketing fees 161,439 27,593 225,464 80,763
Television income - - - 87,500
Ticket revenues - 248 - 31,353
Merchandise revenues 68,470 - 226,086 -
-------------- -------------- ---------------- --------------
426,115 109,668 1,349,130 321,407
-------------- -------------- ---------------- --------------
Costs of products sold 68,132 - 180,918 -
Boxing, training and related expenses 33,774 41,518 436,446 192,251
Promotion and other 1,080,729 724,514 3,136,828 2,561,991
operating expenses -------------- -------------- ---------------- --------------
1,182,635 766,032 3,754,192 2,754,242
-------------- -------------- ---------------- --------------
Loss from operations (756,520) (656,364) (2,405,062) (2,432,835)
-------------- -------------- ---------------- --------------
Other income and (expenses):
Interest and dividend income 13,000 14,844 63,793 83,591
Other 2,049 (9,520) 4,221 (10,862)
15,049 5,324 68,014 72,729
-------------- -------------- ---------------- --------------
Loss before income taxes (741,471) (651,040) (2,337,048) (2,360,106)
Income taxes (credit) (256) - 2,974 6,488
NET LOSS $ (741,215) $ (651,040) $ (2,340,022) $ (2,366,594)
============== ============== ================ ==============
LOSS PER SHARE $ (0.10) $ (0.12) $ (0.34) $ (0.45)
=============== ============== =============== ===============
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING 7,137,197 5,317,755 6,827,435 5,206,970
=============== =============== ============== ================
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
3
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WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
-------------- ---------------
Cash Flows from Operating Activities $ (2,931,477) $ (2,372,994)
Cash Flows from Investing Activities 479,815 1,404,479
Cash Flows from Financing Activities 1,734,194 216,750
-------------- ---------------
Net Increase (Decrease) in Cash (717,468) (751,765)
Cash and Cash Equivalents at Beginning of Period 745,138 1,091,505
-------------- ---------------
Cash and Cash Equivalents at End of Period $ 27,670 $ 339,740
============== ==============
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.
4
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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 nine months
ended September 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). In October 1998, WWFM became a wholly-owned subsidiary
of the Company as a result of the exchange of the 20% minority interest
previously held by WWFM's President for 200,000 shares of Common Stock.
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 $8,600,000, and other
differences for tax purposes amounting to approximately $20,000. No
deferred tax asset is shown on the
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WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
accompanying condensed consolidated balance sheet due to a related
valuation allowance equal to the balance of the deferred tax asset.
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 up to $100,000 for each bank. At September 30, 1998, the
Company's uninsured cash balances amounted to approximately $142,500.
6. Inventory is stated at cost or market, whichever is lower. Cost is
determined by the first-in, first-out method.
7. Certain reclassifications have been made to the prior period
financial statements to conform to the current period presentation.
NOTE C - SALES 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 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.
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 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.
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<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE D - STOCK OPTION PLAN
On July 1, 1996, WWES adopted the 1966 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 435,000 qualifying options outstanding at prices
ranging from $2.00 to $2.875, per share. Nonqualifying options
outstanding amounted to 423,500 shares at $2.875, per share.
On January 28, 1998, the Board of Directors of WWES authorized the
issuance of 320,000 nonqualifying options, exercisable at $1.50 a share.
On September 10, 1998, the Board of Directors of WWES approved the
issuance of 1,083,000 nonqualifying options, exercisable at $1.438 to
$2.875, a share. In addition, warrants to purchase 225,000 shares of
Common Stock were issued at a price of $2.00, 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.
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.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
General
Worldwide Entertainment & Sports Corp. was organized in August 1995, and
since such date has succeeded to the business operations of various entities
engaged in the management of professional boxers, each 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 mediums 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)
require 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
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<PAGE>
to 3% or 4%, respectively, for professional football and basketball player
contracts (although occasionally 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 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 NFL and NBA seasons.
If the Company were to expand into the representation of baseball players (or
other professional athletes with a spring/summer season), of which there can be
no assurance, the effects of such seasonality would be diminished. In August
1998, the Company severed its relationship with its only NBA player's agent. Two
of the Company's NFL Players' 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 period as
compared to $2,381,991 for the 1997 nine months. The principal increase in these
expenses relates to the opening of the memorabilia division and additional
personnel costs.
Nine Months Ended September 30, 1998 Compared with Nine Months Ended September
30, 1997
Net revenues for the nine months ended September 30, 1998 were
$1,349,130, as compared to $321,407 for the nine months ended September 30,
1997. Purse income increased to $588,188 for the 1998 period, as compared to
$39,295 for the 1997 period, as a result of the size of the purse for a Shannon
Briggs heavyweight championship fight. In addition, during the nine months ended
September 30, 1998, the Company recognized merchandise revenues from the sale of
memorabilia amounting to $226,086, which operation was started in March 1998.
The nine months ended September 30, 1998 reflect an increase in contract agency
fees to $245,005, as compared to $82,496 in the comparable 1997 period, as a
result of the receipt in 1998 of additional revenues from players signed in 1997
by the Company's WWFM and WWBM subsidiaries. The contract agency fees in the
1998 period include approximately $240,000 and $5,000 generated by the Company's
football and basketball operations, respectively, as compared to revenues of
approximately $68,000 and $13,000 generated by its football and basketball
operations, respectively, in the 1996 period. In addition, during the 1998
period, marketing fee income increased to $225,000, as compared to $81,000 for
the 1996 period, as a result of increased activities by the Marketing Division
of WWTS. Television revenue of $87,500 in the 1997 period was from the receipts
from a televised boxing card promoted and managed by the Company. No such
revenue was received during the 1998 period, as the Company ceased its boxing
promotion activities.
Total expenses for the nine months ended September 30, 1998 increased to
$3,754,192, as compared to $2,754,242. Boxing, training and related expenses
amounted to $436,446 for the nine months ended September 30,1998 compared to
$205,892 for the 1997 period. The principal reason for the increase was
preparation for the Briggs championship fight. Promotion and other operating
expenses increased to $3,136,828 for the 1998 nine-month period as compared to
$2,548,350 for the corresponding 1997 nine-month period. Such increase was
contributed to by the increase in total salaries from approximately $941,000
during the 1997 period to approximately $973,500 during the 1998 period, due to
the hiring of additional marketing personnel for the team sports divisions,
which increased such division's salaries from approximately $155,000 to
$194,000, as well as increased administrative salaries in 1998 from
approximately $240,000 in 1997 to $288,000 in 1998. Included in the expenses for
the nine months ended September 30, 1998 is $181,000 of costs of products sold
9
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relating to sports memorabilia sold by the Company during this period. No sales
of memorabilia were made during the 1997 period. In addition, promotional and
recruiting expenses, consisting largely of travel and entertainment expenses,
increased from approximately $386,083 in the 1997 nine-month period to
approximately $830,559 in the 1998 nine-month period in conjunction with the
Company's increased level of activities in the player agency and marketing
areas. Of such increase, approximately $37,000 is attributable to the Company's
basketball operations which increased from approximately $172,000 in 1997 to
$209,000 in 1998, approximately $101,000 is attributable to its football
operations which increased from approximately $22,000 in 1997 to $128,000 in
1998, and approximately $121,000 is attributable to its boxing operations which
increased from approximately $322,000 in 1997 to $443,000 in 1998. In addition,
professional and consulting fees in 1998 aggregated approximately $521,000, as
compared to approximately $355,000 in 1997, as a result of the Company's
increased legal and financial consulting fees incurred in 1998 due to incurring
additional expenses in connection with pursuing several business transactions
which ultimately were not consummated. In addition, in 1998, the Company
continued its use of outside consultants in connection with its increased level
of activity in the areas of player agency and marketing.
As a result of the foregoing, net loss for the nine months ended
September 30, 1998 decreased to $2,340,022 as compared to $2,366,594 for the
comparable September 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 September 30, 1998, the Company had working
capital of $1,590,071, 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 $825,000 per annum, which could increase if the
Company develops a need for additional executive management. Training expenses
for the year are estimated at approximately $600,000, depending upon the number
of bouts for which the Company's boxers must train. 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. The Company believes that its current cash and cash equivalents
will be sufficient to fund its operations over the next six months or longer.
However there can be no assurance that the Company will have sufficient revenues
after such time to fund its operating requirements. Accordingly, the Company may
be required to seek additional financing through bank borrowings, private or
public debt or equity financing or otherwise. The Company has filed a
registration statement relating to an underwritten public offering of its common
stock, on a best efforts basis, to raise gross proceeds of a minimum of
$4,500,000 and a maximum of $6,500,000. There can be no assurance that such
offering will be completed or that any other source of financing will be
available to the Company on favorable terms, if at all, particularly if the
Company does not maintain its continued quotation on the SmallCap Stock Market.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Worldwide Entertainment & Sports Corp.
(Registrant)
Date: December 11, 1998 /s/ Marc Roberts
---------------------- -----------------------
Marc Roberts, President
