U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934
--
For the quarterly period ended March 31, 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 2-3393152
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
29 Northfield Avenue, West Orange, New Jersey 07052
(Address of Principal Executive Offices)
(973) 325-3244
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and 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 - 6,922,197 shares
Transitional Small Business Disclosure Format (check one):
Yes ______ No ______
<PAGE>
PART I.
Item 1. Financial Statements
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,409,222
Certificates of deposit (at fair market value) 407,091
Accounts receivable 150,879
Prepaid expenses 43,054
Due from boxers and other related parties, net of reserve of $202,680 474,513
Other current assets 58,657
--------------
Total Current Assets 4,543,416
PROPERTY AND EQUIPMENT-at cost, net of accumulated
depreciation 49,021
OTHER ASSETS
Cash surrender value of life insurance 4,861
Other assets 100
4,961
Total assets $ 4,597,398
------------
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(Unaudited)
LIABILITIES
<TABLE>
<CAPTION>
<S> <C>
CURRENT LIABILITIES:
Accounts payable $ 203,527
Accrued expenses 77,157
Escrow funds and amounts due boxers 930,863
Income taxes payable 19,178
-----------------
Total Current Liabilities 1,230,725
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized 20,000,000 shares;
6,922,197 shares issued 69,222
Additional paid-in capital 9,881,407
Accumulated deficit (6,571,606)
Demand note receivable on private issuance of Common Stock (12,350)
3,366,673
-----------------
Total Liabilities and Stockholders' Equity $ 4,597,398
-----------------
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997
-------------------- --------------------
Purse income $ 586,738 $ 21,750
Commission income 43,167
Endorsement income 15,000
Marketing fees 35,525
Contract and agency fees 37,500 25,825
Merchandise revenues 14,142
Total revenues 717,072 62,575
------------------- --------------------
Training and related expenses 290,726 29,051
Promotion and other operating expenses 761,776 780,640
------------------- --------------------
1,052,502 809,691
------------------- --------------------
Loss from operations (335,430) (747,116)
Other income and (expenses):
Interest and dividend income 10,148 33,355
Other 795 ( 6,279)
-------------------- --------------------
10,943 ( 27,076)
-------------------- --------------------
Loss before income taxes (324,487) (720,040)
Income taxes 1,854 4,320
NET LOSS $ (326,341) $ (724,360)
-------------------- --------------------
Basic Loss per share $ (.05) $ (.14)
-------------------- --------------------
Weighted average common shares outstanding 6,439,635 5,153,255
-------------------- --------------------
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
-------------- ---------------
Cash Flows from Operating Activities $ 474,954 $ (194,018)
Cash Flows from Investing Activities 619,907 (527,359)
Cash Flows from Financing Activities 1,569,223 1,500
-------------- ---------------
Net Increase (Decrease) in Cash and Cash Equivalents 2,664,084 (719,877)
Cash and Cash Equivalents at Beginning of Period 745,138 1,091,505
-------------- ---------------
Cash and Cash Equivalents at End of Period $ 3,409,222 $ 371,628
============== ===============
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Income Taxes $ 800 $ 4,320
============== ===============
Interest $ - $ -
============== ===============
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - NATURE OF ORGANIZATION AND BASIS OF PRESENTATION:
1. Nature of Organization:
Worldwide Entertainment & Sports Corp. (the "Company") was incorporated
in Delaware on August 15, 1995, for the purpose of providing management,
agency, and marketing services to professional athletes, artists and
entertainers, 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 three months
ended March 31, 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.
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.
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.
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 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.
In August 1997, issued 11,000 shares of restricted common stock for
services rendered having a fair value of $6,749.
On August 15, 1997, issued 5,000 shares of restricted common stock
in a claim settlement.
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 664,000 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.
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 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.
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.
<PAGE>
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.
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
Team 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"), a corporation 80% owned by the
Company and 20% owned by WWBM's President and Vice President. In March 1997, the
Company established Worldwide Football Management, Inc. ("WWFM"), a corporation
80% owned by WWES and 20% owned by its President, as a separate entity to
continue its agency, marketing and management services to professional football
players. While the Company has succeeded to the operations of these businesses,
the prior operating results of such separate businesses should not be viewed as
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 owned by the division's president, pursuant to which the
Company receives a fixed commission on sales. In addition, the Company is
seeking to accumulate a catalog of professional 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. To date,
revenues from operations have been limited.
Establishing and maintaining a presence in each of the Company's areas
of concentration, (i.e., boxing management and team sports player agency)
require significant expenditures. Each sports specific division must develop a
roster of clients, establish relationships within their prospective sports and
develop support services to provide to the athletes. Only a portion of such
expenses incurred by the Company will result in the engagement by a client of
the Company's services, and it is often uncertain the extent to which, even if
retained, a target client will generate significant revenues to the Company. In
addition, the Company incurs significant training expenses for the boxers under
the Company's management, not all of which are directly reimbursed pursuant to
bout agreements for such boxers. In the development of a boxer, particularly a
young amateur boxer, into a professional boxer who can command significant
purses, such expenses can be incurred over a period of years and constitute
hundreds of thousands of dollars or more. The Company must
<PAGE>
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 4% and 3%, respectively,
for professional basketball and football 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 the bouts. In addition, the magnitude
of the Company's revenues can be expected to experience wide fluctuations based
upon the success or failure of the Company's boxers or the negotiation of player
contracts with significant bonus provisions. The Company's WWBN and WWFM
divisions can be expected to incur significant expenditures during the first
eight months of each calendar year (particularly March through July) for
recruitment and related expenses, and to receive its revenues during the last
four and first three months of the year during the NFL and NBA seasons. If the
Company were to expand into the representation of baseball players (or other
professional athletes with a spring/summer season), of which there can be no
assurance, the effects of such seasonality would be diminished.
Three months Ended March 31, 1998 Compared with Three months Ended March
31, 1997
Net revenues for the three months ended March 31, 1998 were $717,072, as
compared to $62,575 for the three months ended March 31, 1996. Purse income
increased to $586,738 for the 1998 period, as compared to $21,750 for the 1997
period as a result of the size of the purse for a Shannon Briggs heavyweight
championship fight. In addition, during the quarter ended March 31, 1998, the
Company recognized contract agency fees of $37,500, commission income of
$43,167, and Marketing fees of $35,525, from representation of team sports
athletes. In the same period in 1997, these sources of income aggregated $40,828
Total expenses for the three months ended March 31, 1998 increased to
$1,052,502, as compared to $809,691. Training and related expenses increased to
$290,726 for the three months ended March 31,1998 from $29,051 for the 1997
quarter, as a result of the preparation for the Briggs championship bout.
Promotion and other operating expenses decreased to $761,776 for the 1998
quarter as compared to $780,640 for the 1997 quarter.
As a result of the foregoing, net loss for the three months
ended March 31, 1997 decreased to $326,341 as compared to $724,360 for the March
31, 1997 quarter.
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 March 31, 1998, the
<PAGE>
Company had working capital of $3,312,691, which amount was primarily the
remaining net proceeds from the Company's initial public offering in October
1996 as supplemented by proceeds of 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 $400,000, 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. Accordingly, 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.
<PAGE>
PART II.
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities
(a) None
(b) None
(c) None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Worldwide Entertainment & Sports Corp.
(Registrant)
/s/ Marc Roberts
Date May 15, 1998 ___________________________________
-------------------------
Marc Roberts, President
/s/ Roy Roberts
Date May 15, 1998 ___________________________________
________________________ Roy Roberts, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Worldwide Entertainment & Sports Corp. Quarterly Report on Form 10QSB
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,409
<SECURITIES> 407
<RECEIVABLES> 150
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,534
<PP&E> 49
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,597
<CURRENT-LIABILITIES> 1,231
<BONDS> 0
0
0
<COMMON> 69
<OTHER-SE> 9,881
<TOTAL-LIABILITY-AND-EQUITY> 4,597
<SALES> 0
<TOTAL-REVENUES> 717
<CGS> 0
<TOTAL-COSTS> 1,051
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (325)
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<NET-INCOME> (326)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
