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
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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
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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.
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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.
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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.
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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 December 31, 1997, the Company had working
capital of $2,126,717, which amount was primarily the remaining net proceeds
from the Company's initial public offering in October 1996 as supplemented by
proceeds of a private placement in the fourth quarter of 1997.
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 $200,000, depending upon
the number of bouts as well. 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.
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.
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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 revise the Liquidity and Capital
Resources section of Item 6.
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 19, 1998
