U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Fiscal Year Ended December 31, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT TO 1934
For the transition period from ___ to___
Commission File Number 0-21585
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
(Name of Small Business Issuer in its charter)
Delaware 22-3393152
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
29 Northfield Avenue, West Orange, NJ 07052
(Address of Principal Executive Offices) (Zip Code)
(973) 325-3244
Issuer's Telephone Number, Including Area Code
Securities registered pursuant to Section 12(b) of the Exchange Act:
(none)
Securities registered pursuant to Section 12(g) of the Exchange Act:
Title of Each class
Common Stock, $ .01 par value
Redeemable Warrants
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
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or
<PAGE>
information statements incorporated by reference in Part III of this form 10-KSB
or any amendment to this Form 10-KSB. (X)
State issuer's revenues for its most recent fiscal year. $590,227
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the last 60
days. $13,363,339, based upon a closing price of $2.75 on March 31, 1998
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each issuer's classes of common
equity, as of the latest practicable date. 6,922,197 shares as of March 27, 1998
Transitional Small Business Disclosure Format (check one):
Yes No X
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of 10-KSB in which incorporated
<PAGE>
PART I
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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.
<PAGE>
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 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.
The contract agency fees in the 1997 fiscal year include approximately $175,000
and $33,000 generated by the Company's football and basketball operations,
respectively, as compared to revenues of approximately $22,000 and $8,000
generated by its football and basketball operations, respectively, in the 1996
fiscal year. 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.
<PAGE>
Total expenses for the year ended December 31, 1997 increased to
$3,879,442, as compared to $2,368,763 in fiscal year 1996. Boxing, training and
related expenses decreased slightly to $228,088 for the 1997 fiscal year from
$232,549 for the 1996 fiscal year. Although training expenses for the 1997
fiscal year decreased significantly as a result of the decrease in the number of
bouts, the 1997 fiscal year also included approximately $83,000 of expenses
relating to the promotion by the Company of a boxing event in 1997. Promotion
and other operating expenses increased to $3,651,354 for the 1997 fiscal year as
compared to $2,036,214 for the 1996 fiscal year. Such increase is primarily as a
result of the increase in total salaries from approximately $685,000 in fiscal
1996 to approximately $1,266,000, due to the hiring of additional contract
advisors and marketing personnel for the football and team sports divisions,
which increased such salaries from approximately $109,000 in 1996 to $300,000 in
1997 thereby accounting for approximately $181,000 of such increase, additional
salary expense in the Company's basketball operations as a result of a full year
of operations in 1997, which increased such salaries from approximately $186,000
in 1996 to $284,000 in 1997 thereby accounting for approximately $98,000 of such
increase, as well as increased administrative salaries in 1997 from
approximately $200,000 in 1996 to $445,000 in 1997 thereby accounting for
approximately $245,000 of such increase. In addition, promotional and recruiting
expenses, consisting largely of travel and entertainment expenses, increased
from approximately $316,000 in fiscal 1996 to approximately $540,000 in fiscal
1997 in conjunction with the Company's increased level of activities in the
player agency and marketing areas. Of such increase, approximately 48% is
attributable to the Company's basketball operations which increased from
approximately $47,000 in 1996 to $157,000 in 1997, approximately 38% is
attributable to its football and marketing operations which increased from
approximately $67,000 in 1996 to $152,000 in 1997, and the balance is
attributable to its boxing operations which increased from approximately
$202,000 in 1996 to $225,000 in 1997. In addition, professional and consulting
fees in 1997 aggregated approximately $796,000, as compared to approximately
$162,000 in 1996, as a result of the Company's increased legal and financial
consulting fees incurred as a public company and as a result of incurring
additional expenses in 1997 in connection with pursuing several potential
acquisitions and business transactions which ultimately were not consummated. In
addition, in 1997, the Company increased its use of outside consultants in
connection with its increased level of activity in the areas of player agency
and marketing. General and administrative expenses represent the final
significant component of other operating expenses, which similarly increased as
a result of an increase in overall operations.
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.
<PAGE>
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 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.
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. 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>
This Annual Report on Form 10-KSB for the fiscal year ended December 31,
1997, is being amended by this Form 10-KSB/A to add certain discussion and
analysis to Item 6 of the Annual Report and to revise certain line items of
the Company's financial statements.
SIGNATURES
In accordance with Section 13 or 15(d) 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.
By: /s/ Marc Roberts
Name: Marc Roberts
Title: President and Chief Executive Officer
Date: November 18, 1998
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Report 1
Consolidated Balance Sheet as of December 31, 1997 and 1996 2
Consolidated Statement of Operations
Years Ended December 31, 1997 and 1996 3
Consolidated Statement of Cash Flows
Years Ended December 31, 1997 and 1996 4
Consolidated Statement of Changes in Stockholders' Equity
Years Ended December 31, 1997 and 1996 5
Notes to Consolidated Financial Statements 6-16
<PAGE>
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
Notes 11 and 12, as to which
the dates are March 27, 1998
and November 17, 1998, respectively
<PAGE>
Rosenberg Rich
Baker Berman
& C O M P A N Y
A PROFESSIONAL ASSOCIATION OF
CERTIFIED PUBLIC ACCOUNTANTS
195 Maplewood Avenue o Maplewood, NJ 07040
201-763-6363 o FAX: 201-763-4430
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Worldwide Entertainment
& Sports Corp. and Subsidiaries
29 Northfield Avenue
West Orange, NJ 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 flows for the year then ended in conformity with
generally accepted accounting principles.
ROSENBERG RICH BAKER BERMAN & COMPANY
Maplewood, New Jersey
February 18, 1997
<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.
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
<S><C> <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 (Reclassified)
Boxing, training and related expenses 228,088 232,549
Promotion and other operating expenses 3,651,354 2,036,214
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.
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
<S><C> <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.
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
<S><C> <C> <C> <C> <C> <C>
Demand Note Unrealized
Additional Receivable Gain on
Common Stock Paid-in Accumulated for Common Marketable
Shares Amount Capital Deficit Stock Securities
Balance, January 1, 1996 3,719,921 $ 37,200 $ 78,803 $ (904,109) $ (12,350) $ -
Issuance of common stock 33,334 333 199,667 - - -
Proceeds from stock offering 1,400,000 14,000 6,485,091 - - -
Net loss - - - (2,156,198) - -
Unrealized gain on
securities available for sale - - - - - 9,217
Balance, December 31, 1996 5,153,255 51,533 6,763,561 (3,060,307) (12,350) 9,217
Issuance of common stock
Claim settlement 11,000 110 6,620 - - -
Consulting services 325,000 3,250 262,250 - - -
Trainer's services 8,500 85 12,155 - - -
Private placement 764,442 7,644 1,612,350 - - -
Net loss - - - (3,184,957) - -
Change in unrealized gain on marketable
securities - - - - - (9,217)
Stock-based compensation - options - - 26,338 - - -
Cost of private placement - - ( 287,027) - - -
Balance, December 31, 1997 6,262,197 $ 62,622 $ 8,396,247 $( 6,245,264) $ (12,350) $ -0-
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<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.
<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.
<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.
<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.
<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.
<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.
<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.
<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.
<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.
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11 - SUBSEQUENT EVENTS
From January 1, 1998 through March 27, 1998, the Company issued 660,000
restricted shares of Common Stock in connection with several private placement
transactions for an aggregate amount of $1,485,000. The costs for the issuance
of these shares were approximately $60,000 in cash commission and legal fees,
and 50,000 restricted shares which will be issued by the Company in lieu of
commissions.
12 - Reclassifications
The Company has reclassified certain expenses presented in the Consolidated
Statement of Operations for the years ended December 31, 1997 and 1996. Such
reclassifications of expense were made to more closely reflect the nature of
the Company's operations and did not result in any changes to the reported net
loss for each year.
