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 June 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 (IRS 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)
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 - 7,137,197 shares
Transitional Small Business Disclosure Format (check one):
Yes ______ No _______
1
<PAGE>
PART I.
Item 1. Financial Statements
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998
(Unaudited)
ASSETS
CURRENT ASSETS
<TABLE>
<CAPTION>
<S> <C>
Cash and cash equivalents $ 1,041,805
Certificates of deposit 518,480
Accounts receivable, less allowances for doubtful accounts of $90,000 292,236
Prepaid expenses and other current assets 32,279
Due from boxers and other related parties, net of allowances of $225,580 307,464
Inventory of memorabilia 327,415
-------------
Total Current Assets 2,519,679
PROPERTY AND EQUIPMENT-AT COST, net of accumulated
depreciation 48,885
OTHER ASSETS
Due from related party 49,531
Security deposit and other assets 13,950
63,481
Total assets $ 2,632,046
------------
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
2
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998
(Unaudited)
LIABILITIES
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Accounts payable $ 72,957
Accrued expenses 170,164
Escrow funds and amounts due boxers 155,344
Income taxes payable 600
-----------------
Total Current Liabilities 399,065
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized 20,000,000 shares;
shares issued 7,137,197 71,372
Additional paid-in capital 10,018,231
Accumulated deficit (7,844,272)
Demand note receivable on private issuance of Common Stock (12,350)
2,232,981
-----------------
Total Liabilities and Stockholders' Equity $ 2,632,046
-----------------
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
3
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
<S> <C> <C> <C> <C>
1998 1997 1998 1997
---- ---- ---- ----
Purse income $ 17,774 $ 5,451 $ 604,512 $ 27,201
Commission income 4,125 11,994 47,292
Contract and agency fees 12,070 1,283 49,570
Marketing fees 28,500 - 64,025
Television income 87,500 87,500
Endorsement income 23,825 38,825
Ticket revenues 31,105 31,105
Merchandise revenues 143,474 157,616 27,108
-------------- --------------- ---------------- --------------
205,943 149,164 923,015 211,739
-------------- --------------- ---------------- --------------
Training and related expenses 147,871 301,682 438,597 330,733
Promotion and other 1,371,184 876,837 2,132,960 1,657,477
operating expenses
1,519,055 1,178,519 2,571,557 1,988,210
-------------- --------------- ---------------- --------------
Loss from operations (1,313,112) (1,029,355) (1,648,542) (1,776,471)
-------------- --------------- ---------------- --------------
Other income and (expenses):
Interest and dividend income 40,645 35,393 50,793 68,748
Interest expense
Other 1,377 (4,513) 2,172 (10,792)
42,022 30,880 52,965 57,956
-------------- --------------- ---------------- --------------
Loss before income taxes (1,271,090) (998,475) (1,595,577) (1,718,515)
Income taxes 1,376 2,169 3,230 6,489
NET LOSS $ (1,272,466) $ (1,000,644) $ (1,598,807) $ (1,725,004)
============== =============== ================ ==============
LOSS PER SHARE $ (0.18) $ (0.19) $ (0.24) $ (0.33)
============= =============== =============== ===============
WEIGHTED AVERAGE 6,999,697 5,153,255 6,672,554 5,153,255
============= ============== =============== ===============
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
4
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1998 and 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
---- ----
Cash Flow from Operating Activities $ (1,669,056) $ 613,418
Cash Flows from Investing Activities ( 498,413) (1,383,525)
Cash Flows from Financing Activities 1,467,311 1,500
----------------- ----------------
Net Increase (Decrease) in Cash and Cash Equivalents 296,668 (768,607)
Cash and Cash Equivalents at Beginning of Period 745,137 1,091,505
----------------- ----------------
Cash and Cash Equivalents at End of Period $ 1,041,805 $ 322,898
================= =================
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Year for:
Income Taxes $ 1,703 $ 6,489
==================== ==================
</TABLE>
See notes to Unaudited Condensed Consolidated Financial Statements.
5
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - NATURE OF ORGANIZATION AND BASIS OF PRESENTATION:
1. Nature of Organization:
Worldwide Entertainment & Sports Corp. (the "Company") was
incorporated in Delaware on August 15, 1995, for the purpose of
providing management, agency, and marketing services to professional
athletes, artists and entertainers, principally to boxers, football and
basketball players.
2. Basis of Presentation:
The Condensed Financial Statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations.
The Condensed Financial Statements included herein reflect, in the
opinion of management, all adjustments (consisting primarily only of
normal recurring adjustments) necessary to present fairly the results
for the interim periods. The results of operations for the six months
ended June 30, 1998, are not necessarily indicative of results to be
expected for the entire year ending December 31, 1998.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1. The condensed consolidated financial statements include the accounts
of the Company and all of its subsidiaries, all of which are wholly
owned, except for Worldwide Basketball Management, Inc. and Worldwide
Football Management, Inc., which companies are 80% owned. The excess of
the accumulated deficits of these 80% owned subsidiaries over the equity
capital thereof has been included in the operations of the Parent
Company (WWES).
2. Purse revenue is recognized upon completion of a fight, as a
percentage of the boxer's purse. Ticket and commission revenues are
recognized at the time of the fight. Contract and agency fee revenues
are recognized ratably over the various athletic seasons. Merchandise
revenue is recognized upon the sale of memorabilia merchandise.
3. Basic net loss per share is computed by dividing net loss by the
weighted average number of shares of Common Stock outstanding during the
year. Diluted EPS has not been presented because its effect would be
anti-dilutive.
4. The Company files a consolidated federal income tax return and has
net operating loss carryforwards for Federal income tax purposes,
expiring in 2018 amounting to approximately $8,000,000, and other
differences for tax purposes amounting to approximately $20,000. No
deferred tax asset is shown on the accompanying condensed consolidated
balance sheet due to a related valuation allowance equal to the balance
of the deferred tax asset.
5. For purposes of the statement of cash flows, all highly liquid
investments with original maturities of three months or less are
considered to be cash equivalents. Cash balances are maintained in
several financial institutions insured by the Federal Deposit Insurance
Corporation. At June 30, 1998, the Company's uninsured cash balances
amounted to approximately $320,300.
6
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-CONTINUED
6. Inventory is stated at cost or market, which ever is lower. Cost is
determined by the first-in, first-out method.
NOTE C - SALE OF COMMON STOCK
On October 22, 1996, the Company sold 1,400,000 Units (the Units). Net
proceeds were $6,499,091. Each Unit consisted of one share of common
stock, $.01 par value, of WWES, and one redeemable common stock
purchase warrant to purchase one share of common stock at $7.20 during
the period October 22, 1996 to October 21, 2001.
Additional shares have been sold or issued by WWES as follows:
On July 15, 1997, sold 100,000 shares of restricted common stock in a
private offering for $125,000.
On August 19, 1997, issued 250,000 shares of restricted common stock,
with a fair value of $157,500, for consulting services rendered by a
consulting firm.
On September 16, 1997, issued a total of 83,500 shares of restricted
common stock, with a fair value of $120,240, to seven individuals for
consulting and other services.
In November and December 1997, sold 664,442 shares of restricted common
stock in a private placement at $2.25 a share, for a total of
$1,494,994.
During the first quarter of 1998, the Company sold 722,315 restricted
shares of common stock in connection with several private placement
transactions for an aggregate amount of $1,625,209. The costs in
connection with these sales amounted to approximately $ 50,000.
During the second quarter of 1998, the Company issued 215,000
restricted shares of common stock, with a fair value of $194,000, in
connection with legal, consulting and other services rendered on behalf
of the Company.
NOTE D - STOCK OPTION PLAN
July 1, 1996, WWES adopted the 1996 Stock Option Plan (the Plan), which
provides for the issuance of qualifying options to purchase 500,000
shares. Nonqualified options may also be granted. At December 31, 1997,
there were 485,000 qualifying options outstanding at prices ranging
from $2.00 to $2.875, per share. Nonqualifying options outstanding
amounted to 273,500 shares at $2.875, per share.
On January 28, 1998, the Board of Directors of WWES authorized the
issuance of 320,000 nonqualifying options, exercisable at $1.50 a
share.
7
<PAGE>
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.
8
<PAGE>
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE E - COMMITMENTS AND OTHER MATTERS-CONTINUED
The Company has entered into employment agreements with key executives
which are for five year terms from inception, and include, among other
things, signing bonuses, automobile allowances and additional bonuses
based upon agreed upon circumstances.
The minority stockholders of WWBM and WWFM have entered into stockholder
agreements with WWES, providing that, in the event WWES desires to sell
all of its shares in these subsidiaries to an unrelated third party,
then the minority stockholders are required to sell all of their shares
to the purchaser to effectuate a share exchange. Other provisions are
included in the agreements governing termination of employment and loans
and exchanges with the minority stockholders.
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"), 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
9
<PAGE>
division must develop a roster of clients, establish relationships within their
prospective sports and develop support services to provide to the athletes. Only
a portion of such expenses incurred by the Company will result in the engagement
by a client of the Company's services, and it is often uncertain the extent to
which, even if retained, a target client will generate significant revenues to
the Company. In addition, the Company incurs significant training expenses for
the boxers under the Company's management, not all of which are directly
reimbursed pursuant to bout agreements for such boxers. In the development of a
boxer, particularly a young amateur boxer, into a professional boxer who can
command significant purses, such expenses can be incurred over a period of years
and constitute hundreds of thousands of dollars or more. The Company must
continuously incur such expenses in contemplation of future revenues, the
receipt of which is uncertain.
The Company's revenues are directly related to the earnings of its
clients. The Company derives revenues based upon a percentage, currently ranging
from 15% to 27-1/2%, of the boxers' purses from professional bouts. The Company
also derives revenues based upon a percentage of salaries and other income
received from contracts, endorsement arrangements and other income producing
activities of athletes for whom the Company or its management acts as agent or
representative. These percentages currently range from up 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 the bouts. In addition, the magnitude
of the Company's revenues can be expected to experience wide fluctuations based
upon the success or failure of the Company's boxers or the negotiation of player
contracts with significant bonus provisions. The Company's WWTS subsidiary can
be expected to incur significant expenditures during the first eight months of
each calendar year (particularly March through July) for recruitment and related
expenses, and to receive its revenues during the last four and first three
months of the year during the NFL and NBA seasons. If the Company were to expand
into the representation of baseball players (or other professional athletes with
a spring/summer season), of which there can be no assurance, the effects of such
seasonality would be diminished.
Six Months Ended June 30, 1998 Compared with Six Months Ended June 30,
1997
Net revenues for the six months ended June 30, 1998 were $923,015, as
compared to $211,739 for the six months ended June 30, 1997. Purse income
increased to $604,512 for the 1998 period, as compared to $27,201 for the 1997
period as a result of the size of the purse for a Shannon Briggs heavyweight
championship fight. In addition, during the six months ended June 30, 1998, the
Company recognized merchandise revenues from the sale of memorabilia, which
operation was started in March 1998. Television revenue in 1997 was from the
receipts from a televised boxing card promoted and managed by the Company.
No similar operations were undertaken by the Company in 1998.
Total expenses for the six months ended June 30, 1998 increased to
$2,571,557, as compared to $1,988,210. Training and related expenses increased
to $438,597 for the six months ended June 30,1998 from $330,733 for the 1997
period, as a result of the preparation for the Briggs championship bout.
Promotion and other operating expenses increased to $2,132,960 for the 1998
six-month period as compared to $1,657,477 for the 1997 six months. The
principal increase in these expenses relates to the opening of the memorabilia
division.
As a result of the foregoing, net loss for the six months ended June
30, 1998 decreased to $1,598,807 as compared to $1,725,004 for the comparable
June 30, 1997 period.
10
<PAGE>
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 $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. 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.
11
<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
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Worldwide Entertainment & Sports Corp.
(Registrant)
Date: August 14, 1998 /s/ Marc Roberts, President
__________________________________
Marc Roberts, President
(Principal Executive Officer)
Date: August 14, 1998 /s/ Roy Roberts, Chief Financial Officer
___________________________________
Roy Roberts, Chief Financial Officer
(Principal Financial Officer)
13
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Worldwide Entertainment & Sports Corp.
</LEGEND>
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<PERIOD-END> JUN-30-1998
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<CURRENT-ASSETS> 2,519
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0
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