<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM:
COMMISSION FILE NUMBER: 001-13217
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
FLORIDA 91-1796903
- ------------------------------- --------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
20 NORTH ORANGE AVENUE, SUITE 101
ORLANDO, FLORIDA 32801
----------------------------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (407) 648-4444
Check whether the Registrant (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 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: As of May 14, 1998, 2,480,000 shares
of the Registrant's no par value Class A Common Stock and 1,000 shares of no par
value Class B Common Stock were outstanding.
Transitional Small Business Disclosure format: Yes[ ] No [X]
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
1998 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 2,313,858 $ 2,255,678
Accounts receivable, sponsorships 595,207 --
Accounts receivable, sponsorships, related parties 50,000 --
Inventory 16,079 14,659
Receivable from employees 72,788 51,717
Prepaid expenses 459,817 94,134
----------- -----------
Total Current Assets 3,507,749 2,416,188
PROPERTY AND EQUIPMENT, at cost, net 259,458 262,397
ACQUISITION COSTS 3,060 --
DEFERRED OFFERING COSTS 25,000 --
MEMBERSHIP COST, net 1,931,823 1,944,259
OTHER INTANGIBLES, net 54,988 55,159
RESTRICTED INVESTMENT 100,000 100,000
OTHER ASSETS 3,144 908
----------- -----------
$ 5,885,222 $ 4,778,911
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 63,107 $ 167,355
Accounts payable, related parties 49,942 80,108
Due to AFL 11,250 --
Bridge loans 150,000 --
Accrued interest, stockholders -- 99,083
Deferred revenue 1,840,316 457,643
----------- -----------
Total Current Liabilities 2,114,615 804,189
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, 1,500,000 shares authorized; none -- --
issued or outstanding
Class A Common stock, 15,000,000 shares authorized; 4,861,707 4,861,707
2,480,000 issued and outstanding
Class B Common Stock, 1,000 shares authorized; 5,000 5,000
1,000 issued and outstanding
Accumulated (deficit) (1,096,100) (891,985)
----------- -----------
Total Stockholders' Equity 3,770,607 3,974,722
----------- -----------
$ 5,885,222 $ 4,778,911
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
2
<PAGE> 3
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE FOR THE PERIOD
MONTHS FEBRUARY 14,
ENDED TO
MARCH 31, MARCH 31,
1998 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Ticket revenues $ -- $ --
Play-off game ticket revenues -- --
Play-off game revenue sharing -- --
Local television and radio broadcast rights -- --
Advertising and promotions 2,792 --
Advertising and promotions, related party -- --
League revenue -- --
Other -- --
----------- -----------
Total Revenues 2,792 --
----------- -----------
COSTS AND EXPENSES:
Operations 1,911 --
Operations, related party -- --
Selling and promotional expenses -- 3,140
League assessments -- --
General and administrative 208,048 68,054
Amortization 17,608 6,193
Depreciation 3,876 837
----------- -----------
Total Costs and Expenses 231,443 78,224
----------- -----------
OPERATING (LOSS) (228,651) (78,224)
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (400) (1,023)
Interest expense, related party -- --
Interest income 24,484 1,725
Gain on sale of asset 452 --
----------- -----------
Net Other Income (Expense) 24,536 702
----------- -----------
NET (LOSS) $ (204,115) $ (77,522)
=========== ===========
NET (LOSS) PER SHARE - BASIC $ (.08) $ (.06)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 2,480,000 1,380,000
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 4
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE FOR THE PERIOD
MONTHS FEBRUARY 14,
ENDED TO
MARCH 31, MARCH 31,
1998 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net (loss) $ (204,115) $ (77,522)
Adjustments to reconcile net (loss) to net cash
from operating activities:
Depreciation and amortization 21,484 7,030
Changes in assets and liabilities:
Accounts receivable (645,207) --
Employee receivables (21,071) (1,637)
Inventory (1,420) --
Prepaid expenses (365,683) (241,540)
Other assets (2,236) (1,700)
Accounts payable and accrued expenses (222,248) 102,789
Deferred revenue 1,382,673 570,562
----------- -----------
Net Cash Provided (Used) by Operating Activities (57,823) 357,982
----------- -----------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Purchase of equipment (1,485) --
Sale of equipment 548 --
Investment in certificate of deposit -- (100,000)
----------- -----------
Net Cash (Used) by Investing Activities (937) (100,000)
----------- -----------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Loans from stockholders -- 100,000
Bridge loans 150,000 --
Payment of loan fees (5,000) --
Payment of offering costs (25,000) --
Payment of acquisition costs (3,060) --
----------- -----------
Net Cash Provided by Financing Activities 116,940 100,000
----------- -----------
INCREASE IN CASH 58,180 357,982
CASH, beginning of period 2,255,678 --
----------- -----------
CASH, end of period $ 2,313,858 $ 357,982
=========== ===========
Supplementary information:
CASH PAID FOR INTEREST $ 99,083 $ --
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements include the accounts of The
Orlando Predators Entertainment, Inc. (the "Company"). The financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and in accordance with the instructions for
Form 10-QSB. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles.
In the opinion of management, the unaudited interim financial statements for the
period ended March 31, 1998 are presented on a basis consistent with the audited
financial statements and reflect all adjustments, consisting only of normal
recurring accruals, necessary for fair presentation of the results of such
period.
Audited financial statements for Orlando Predators, a division of Orlando
Predators, Ltd., the predecessor owner, for the period prior to acquisition,
January 1, 1997 through February 13, 1997, are not presented since no
substantial activities took place during that period.
The results for the three months ended March 31, 1998 are not necessarily
indicative of the results of operations for the full year. These financial
statements and related footnotes should be read in conjunction with the
financial statements and footnotes thereto included in the Company's Form 10-KSB
filed with the Securities and Exchange Commission for the period ended December
31, 1997.
Certain amounts in the prior period's financial statements have been
reclassified for comparative purposes to conform to the current year.
NOTE 2 - LETTER OF INTENT TO PURCHASE EQUITY INTERESTS IN THE AFL
On March 17, 1998, the Company signed a letter of intent to acquire two,
non-voting, equity interests in the Arena Football League, Inc. (AFL) for
$6,000,000. Each similar equity interest will entitle the Company to share
equally with each other member in AFL revenues. The AFL guarantees in the letter
of intent to pay the Company at least $480,000 per year until the Company
receives an aggregate of $6,000,000 through League distribution. If the Company
receives $6,000,000 within one year from the closing of the sale, one equity
interest returns to the League and one equity interest remains with the Company
without any guaranteed rate of return. Once the Company receives an aggregate of
$6,000,000, the Company will participate in all League revenues, expenses and
liabilities with respect to the two equity interests.
The $6,000,000 is payable as follows: $3,500,000 with the executed contract and
$2,500,000 within 60 days of the contract. The Company intends to raise bridge
and equity financing for the payments.
The purchase of the interests will require that two, non-voting, equity
interests in the League will be subject to the equity method of accounting, and
an unsecured, note receivable from the League, imputed interest and principal
due annually.
NOTE 3 - CONTINGENCIES
The AFL is party to a number of lawsuits arising in the normal course of
business. The Company is contingently liable for its share of the outcomes. In
the opinion of management, the resolution of these matters will not have a
material effect on the Company's financial position.
5
<PAGE> 6
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - PROPOSED OFFERING
On March 28, 1998 the Company has an agreement with an underwriter to offer to
the public 800,000 shares of the Company's 12% Cumulative Convertible Preferred
Stock, valued at $10 per share. The Preferred Shares will convert into shares of
the Company's Class A Common Stock at a price equal to 115% to 120% of the
closing price of the Class A Common Stock on the date immediately preceding
effectiveness of the Preferred Shares.
NOTE 5 - NOTES PAYABLE - BRIDGE LOANS
During April 1998, the Company completed an offering of 40 units in a Private
Placement. Each unit consisted of one $50,000 promissory note (totaling
$2,000,000) bearing interest at 7% per annum and 4,000 warrants to purchase the
Company's Class A Common Stock expiring December 31, 2001. The notes are payable
the earlier of December 31, 2001 or on the closing date of the Company's
anticipated public offering of preferred stock. Underwriters were paid a
commission of $95,000. Of the $2,000,000 promissory notes, $1,050,000 were sold
to current stockholders or directors, including $850,000 to Monolith. As of
March 31, 1998, 3 units were sold of $150,000 and a commission of $5,000 was
paid.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company derives substantially all of its revenue from the arena football
operations of the Predators. This revenue is primarily generated from (i) the
sale of tickets to the Predators' home games, (ii) the sale of advertising and
promotions to Predator sponsors, (iii) the sale of local and regional broadcast
rights to Predators' games, (iv) the Predators' share of League contracts with
national broadcast organizations and expansion team fees paid through the AFL,
(v) the sale of merchandise carrying the Predators' logos and (vi) concession
sales at Predators' home games. A large portion of the Company's annual revenue
is determinable at the commencement of each football season based on season
ticket sales and contracts with broadcast organizations and team sponsors.
The operations of the team are year-round; however, the majority of revenues and
expenses are recognized during the AFL playing season, from April through August
of each year. The team begins to receive deposits in late September for season
tickets during the upcoming season. From September through April, the team sells
season tickets and collects revenue from all such sales. Selling, advertising
and promotions also take place from September through April, although these
revenues are not realized until after the season begins. Single game tickets and
partial advertising sponsorships are also sold during the season, primarily from
April to July.
Additional revenues are recognized in August from playoff games, if any.
Except for the historical information contained herein, certain matters set
forth in this report are forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially. These risks are detailed
from time to time in the Company's periodic reports filed with the Securities
and Exchange Commission. These forward-looking statements speak only as of the
date hereof. The Company disclaims any intent or obligation to update these
forward-looking statements.
RESULTS OF OPERATIONS
Quarter ended March 31, 1998 compared to period ended March 31, 1997:
The Company recognizes game revenue and expenses over the course of the season
(April through August). Revenues for the 1998 and 1997 periods were
insignificant and were comprised primarily of interest income. Interest income
for the 1998 period was $24,484 compared to $1,725 for the 1997 period. The
increase in interest income is attributable to the increase in investable funds
resulting from the initial public offering that closed in December 1997.
The net loss for the period ended March 31, 1997 was $77,522 ($.06 per share)
compared to a $204,115 loss ($.08 per share) for the 1998 quarter. Consistent
with the Company accounting policies, insignificant operating revenue and
operating expenses have been reported during the first quarters of calendar 1998
and 1997.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
General and administrative expenses were $208,048 for the quarter ended March
31, 1998 and $68,054 for the period February 14 through March 31, 1997. The
increase of approximately $140,000 is primarily due to legal and accounting fees
of $33,600 and staff salaries of approximately $92,400. In addition, the 1998
period represents a full quarter, whereas the 1997 period was substantially
shorter; therefore, certain expenses in 1998 were greater than in 1997, such as
office expense, telephone and depreciation and amortization expense.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company financed net operating losses primarily with loans
from the team's former managing general partners.
Through December 10, 1997, the Company had issued an aggregate of $2,342,970 of
promissory notes (together with interest thereon) to its two stockholders most
of which were repaid from proceeds of the IPO. During April 1998, the Company
completed an offering of 40 units in a Private Placement. Each unit consisted of
one $50,000 promissory note (totaling $2,000,000) bearing interest at 7% per
annum and 4,000 warrants to purchase the Company's Class A Common Stock expiring
December 31, 2001. The notes are payable the earlier of December 31, 2001 or on
the closing date of the Company's anticipated public offering of preferred
stock. Underwriters were paid a commission of $95,000. Of the $2,000,000
promissory notes, $1,050,000 were sold to current stockholders or directors,
including $850,000 to Monolith. As of March 31, 1998, 3 units were sold of
$150,000 and a commission of $5,000 was paid.
The reduction of indebtedness using proceeds of the IPO improved the Company's
liquidity by reducing indebtedness required to be repaid in the future. The
Company believes that cash flows from operations along with the net proceeds of
the IPO will be sufficient to satisfy the Company's anticipated working capital
requirements for at least the next 12 months.
8
<PAGE> 9
PART II. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
CHANGES IN SECURITIES:
None
USE OF PROCEEDS:
<TABLE>
<CAPTION>
% OF PROCEEDS AMOUNT TOTAL
------------- ------------ ------------
<S> <C> <C> <C>
Gross Proceeds 100.0% $ 5,500,000
- --------------
Less:
Underwriters' expenses 10.0% 550,000
Other costs and expenses 10.5% 576,089
---------- ------------
Total Expenses 20.5% 1,126,089
---------- ------------
Net proceeds 79.5% 4,373,911
Use of Proceeds
Repayment of debts 42.1% 2,317,828
Payment of accounts payable 2.7% 150,000
Payment of marketing expenses 4.6% 250,000
---------- ------------
Total Use of Proceeds 49.4% 2,717,828
---------- ------------
REMAINING PROCEEDS 30.1% $ 1,656,083
========== ============
</TABLE>
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
Exhibits: Financial Data Schedule
9
<PAGE> 10
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Date: May 14, 1998 THE ORLANDO PREDATORS ENTERTAINMENT, INC.
-----------------------------------------
Registrant
/s/ ALEX NARUSHKA
-----------------------------------------
Alex Narushka
Chief Financial Officer
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,313,858
<SECURITIES> 0
<RECEIVABLES> 645,207
<ALLOWANCES> 0
<INVENTORY> 16,079
<CURRENT-ASSETS> 3,507,749
<PP&E> 295,584
<DEPRECIATION> 36,126
<TOTAL-ASSETS> 5,885,222
<CURRENT-LIABILITIES> 2,114,615
<BONDS> 0
0
0
<COMMON> 4,866,707
<OTHER-SE> (1,096,100)
<TOTAL-LIABILITY-AND-EQUITY> 5,885,222
<SALES> 0
<TOTAL-REVENUES> 2,792
<CGS> 0
<TOTAL-COSTS> 1,911
<OTHER-EXPENSES> 24,536
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (400)
<INCOME-PRETAX> (204,115)
<INCOME-TAX> 0
<INCOME-CONTINUING> (204,115)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (204,115)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
